 "Arvind Kejriwal")
On August 15, Delhi Chief Minister Arvind Kejriwal announced his government's decision to increase minimum wages by 46 per cent for the workers in the national capital. This announcement has come in the wake of a Central government decision to pay 24 per cent more in salaries and pension to its employees, following the recommendations of the Seventh Pay Commission.
Experts and industry captains argue that though it's a noble thought to increase the wages of workers, the mammoth rise in wages will create an imbalance and can be counterproductive.
"I will either move my factory to the neighbouring states or will shut the operations completely if these wages are enforced. Kejriwal's argument that we earn Rs 10 lakh a month and can afford increased salaries is absurd," says Delhi-based businessman Raghuvansh Arora, who currently employs 14 people. Delhi mostly relies on medium and small scale enterprises, as most of his big industries have shifted to states such as Haryana, Uttar Pradesh and Rajasthan because of space and expensive work force.
Industrialists say wage rates and availability of skilled labour are crucial factor in setting up a factory and Delhi's rate are exceptionally high.
For instance, the current wage rate in the national capital for an unskilled worker is Rs 9,568, which is higher than the neighbouring states of Haryana (Rs 7,976), Punjab (Rs 7,221), Uttar Pradesh (Rs 7,108) and Rajasthan (Rs 5,486). The Delhi government has now proposed to increase this to Rs 14,052. Similarly, for semi-skilled the wage will be revised from Rs 10,582 to Rs 15,471, and for skilled workers it will be increased from Rs 11,622 to Rs 17,033.
Once the revised wages are implemented, the difference will grow to more than 150 per cent in minimum wages paid by Delhi and Rajasthan. For Uttar Pradesh and Punjab, it will be nearly 100 per cent and in case of Haryana, the difference in the wage will be 76.2 per cent. Sanjeev Ahluwalia, an advisor with the Observer Research Foundation, says the hike by the Delhi government could have been incremental and methodical.
"The hike will force the small industrialists to be more innovative and use technology for work. This will results in job cuts. The move appears more populist than rational. The corrupt government inspectors will harass the small industrialists in the name of inspections. The workers are unlikely to benefit much," Ahluwalia says.
"Also, people or consumers might end up paying more to avail services such as security guard, cooks and drivers," he adds.
In Delhi, the unemployment is already a problem and flight of small scale industries will further accentuate the problem. According to the Sixth Economic Census conducted in 2013, there were 893,000 establishments in the national capital. Though the number of establishments grew 18.35 per cent since 2005, the employment declined 12.22 per cent during 2005-2013.
According to the Delhi Economic Survey (2014-15), the total number of employed persons in the establishments was 29.8 million as per the Sixth Economic Census against 34 million according to the Fifth Economic Census. "During 2012-13, average annual Index of Industrial Production (IIP) was 115.94, which decreased to 102.29 in 2013-14. There is a decline in the IIP of 11.77 per cent in 2013-14 over the previous year," the survey reads.
At the same time, the number of factories in Delhi didn't register much growth between 2005 and 2013. The number of working factories in Delhi went up from 7,793 in 2007 to 8,821 in 2013. "Likewise, the estimated workers employed in these factories increased from 359,126 in 2007 to 403,270 in 2013. On an average, 46 persons were working in each factory in Delhi," the economic survey says.
An expert with the Federation of Indian Chambers and Commerce & Industry says the EFPO (Employees Provident Fund Organisation) board will have to revise it norms, as only workers earning less than Rs 15,000 basic salary per month are entitled to medical facilities under the Employee State Insurance and employee provident fund.
