Enlightened self-interest, the living wage

Extracts from a Huffington Post article by Jehangir S. Pocha, editor-in-chief of NewsX and former editor of Businessworld.

Even when India was in the midst of a general election, no party was pushing for the one thing that would combat poverty without bankrupting the exchequer — getting businesses to pay workers a living wage . . .

Apologists for the status quo can justly claim India has had a Minimum Wages Act since 1948 and that it establishes a national floor wage and mandates states set minimum wages in different industries. But the law is among India’s most complicated and worst implemented. India’s official minimum wages are among the lowest in the world, even lower than Afghanistan’s. The amounts range from a shameful Rs. 38 ($.63) a day for tea planters in northeastern Tripura state to Rs. 215 ($3.60) a day in northwestern Haryana:

minimum wages world graph

Many workers do not even get these puny amounts because businesses routinely flout minimum wages with impunity. Most workers do not even know minimum wages laws exist, and local governments that spend huge amounts on ads asking people to keep cities clean make no effort to educate workers about them . . .

A social assumption that “they” are inherently different from ‘us’ and do not have to have access to things like decent housing, clothes, food, leisure, education and health care is etched into the Indian psyche . . .

From time immemorial, exploitation has been the basis of the Indian economy as evidenced by the caste system, landlordism, and the feudal structures India’s successive rulers embraced. Even today, from the top 1 percent to the lower middle-class, almost every Indian home and business depends on underpaid labor, whether a factory worker or a housemaid, for their comfort . . .

Reich and other economists argue that radically underpaying workers kills the incentive to work, keeping workers away from jobs and dependent on government handouts — and leads them towards petty crime.

By paying those same workers better, they can be turned into real consumers whose spending will boost GDP. This is something that has already been evidenced when India experiences good rainfall and harvests and rural incomes rise. Rural spending also rises, pushing up GDP and company profits. The government’s creation of a rural job guarantee scheme has also done wonders to increase rural incomes and bolster the rural economy.

President Barack Obama recently made this case by quoting Henry Ford, who paid his workers well so they “could afford to buy the cars they were building.”

This is a far cry from India where even middle-class people can afford a chauffeur because he earns less than the monthly cost of his car’s petrol or its monthly payment.

Setting minimum wages at about Rs 7,000 ($116) a month for workers in rural areas and Rs. 10,000 ($166) a month in cities, and actually implementing them, is the easiest way to further this without bankrupting the nation with more leaky anti-poverty schemes. In fact, raising and enforcing decent minimum wages could help the government cut back on several of its existing anti-poverty schemes.

While these new minimum wages will not apply to many of India’s rural poor who toil on their own tiny parcels of land, they must apply to all India’s 200 million workers. Currently, India’s labor laws only apply the 20-25 million workers in what is called the “organized sector,” which includes registered corporations and businesses.

It is time to replace exploitative selfishness with enlightened self-interest. India will only ascend to true democracy and development when all citizens have the right to the same quality of life and to work and live with dignity.

Follow Jehangir S. Pocha on Twitter: www.twitter.com/@jehangirpocha

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