A boost for the Karnataka workforce

IIn May, the Karnataka government issued the notification on minimum wages, which equalizes wages across 81 sectors of employment and provides an average wage increase of 60% from current levels. According to the notification, the minimum wage for unskilled workers will be ₹23,376 per month in Bengaluru and ₹19,318 per month in small towns and rural areas. This gap of over ₹4,000 between wages in Bengaluru and wages in small towns is a reflection of runaway inflation in metros. This move is laudable, recognizing the high cost of living in urban metropolises.

In media interviews, the Karnataka Labor Minister said that the minimum wage revision was carried out as per the directions of the Supreme Court. This highlights a fact that is often overlooked in the jurisprudence on minimum wage in India: the fact that the method of determining minimum wage is laid out in detail and applied uniformly across the country. Despite such a formula, large variations in prevailing minimum wages across states reflect the power of employers and the complicity of labor departments in keeping wages below the legally mandated level.

Employers argue that higher wages increase product costs and increase demand for products, increasing inflation. However, reducing the wages of people in the bottom percentile of India’s population to reduce their consumption cannot be the way to control inflation. Moreover, government statistics show that average household consumption levels have not yet reached pre-COVID levels. There are other mechanisms the Government can use to control inflation, including adjusting the GST structure to control product costs.

Employers also argue that rising wages will crowd out industry. This is not necessarily true. In most sectors, the contribution of wages to total costs is decreasing. Fees are not the only determinant of investment decisions. Many other factors such as infrastructure, economic environment, availability of skilled labor and industrial peace are equally important. Recent protests by garment and other factory workers for higher wages in the National Capital Territory region and in Uttar Pradesh were a stark reminder of workers’ poverty and helplessness. The importance of decent wages to ensure industrial peace was emphasized.

shortcomings

But there are still significant gaps in the notification. First, it leaves out four important sectors: the garment business, beedi roll, agarbati construction and planting works. A large number of workers, mostly women, are employed in all four sectors. With the implementation of this communiqué, the wages of workers in these four sectors will be approximately half of the wages of workers with similar skill levels in the other 81 sectors covered by the communiqué. Beedi Essentially home-based work, the study highlights the intergenerational dangers of low-wage employment. Children share space with their rolling mothers beedis, This often leads them to turn to helping their mothers, limiting their ability to escape the poverty trap. Piece rate based on an appropriate minimum wage beedi Rolling can increase these children’s options.

Another issue relates to Variable Valuation Allowance (VDA). The aim of the VDA is to protect real wages against inflation in the period between two wage stabilizations, which must occur every five years. The points-based wage neutralization system in Karnataka unfortunately fully protects real wages only in the lowest unskilled categories. For semi-skilled and skilled workers in higher categories such protection is only partial. Moreover, with each wage revision, the old VDA formula is insufficient to protect real wages and the scores need to be revised. In the past, union-led lawsuits have been filed for VDA revision as well as salary revisions. The current notification should also address this gap.

Minimum wage notification is still a positive step and demonstrates the potential for equitable growth in the state. It can also serve as an example to other States. It highlights an alternative paradigm that is important in this time of growing wealth inequality: profits without overexploitation should be the path to “ease of doing business.”

Mohan Mani is a Visiting Fellow at the National Law School, India University, Bengaluru.