Doubling the minimum wages

Rather than trying to curry favour with workers by raising wages, the government would do better to help industry grow to create more jobs.

It is common sense that only when number of jobs exceed the number of workers that salaries can rise substantially. The government’s proposal to double the minimum wages to bring it in good books of the workers is going to be a tough ride.

The move will be met with a tough resistance from the industry.

It will also be a difficult if possible implementation where a majority of workforce is employed in informal sector. Enforcement of higher wages will mean employment of a large number of inspectors to monitor the change. In a country like India where labour is surplus the workers accept jobs even at less than minimum wages.

Also, if wages increase without subsequent increase in productivity, it is the employment rate which suffers the most as the economy becomes uncompetitive and loses their export potential. This is known as middle-income trap.