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Re: Min Wage Question

Let us not jump to conclusions on this issue yet.

Charu's argument that minimum subsistence costs should  be the benchmark

for setting the minimum wages, may sound fair (emotionally fulfilling!)
is it practical?

Let us try a simple example. Somewhere in Bihar the subsistence cost
be less than Rs.6 a day, in Madras Rs.30 and in Bangalore Rs.40. So
is the bench mark?  If we adopt the higher figure,  jobs would go out of

Bihar and if adopt the lower one, God bless the Tamils and the

Again, Kerala is a state where  minimum wages have been enforced   by
strong,militant unions.  When I was there last, the average unskilled
worker used to cost Rs.50 per day! (Charu, you should be thrilled!)
Kerala, the  costs from this  has been crippling. Industrial growth has
been stagnant at approximately 0%, ( this means nobody, not even a
passionate Mallu like me, in his right mind, will ever think of  seting
business in Kerala!) resulting in  unemployment and underemployment.
everyone like me, who get  subsidised Univ. education courtsey the Govt,

move  out of the state seeking opportunities else where - Bangalore,
East, Asia and America....  (I doubt if there is any other state in
where braindrain is so prevalent - currently 40% of the guys who went to

high school with me live abroad and less than 20% live in Kerala).

What has happened in Kerala is not a freak economic phenomenon . Those
have read enough economics ( I wish all those politicians and union
in Kerala did!)  would see that this is just   a corrective mechanism
the market - When cost of labour is artificially propped up,  jobs move
other  areas where labour is cheaper.   Charu, are you suggesting that
apply the Kerala model across the whole of India?

IMO, Before we examine the need for a minimum wage legislation, we
examine why we have a wage problem in the first place.

For countries that have a reasonably  high employment rate, the minimum
wage issue is more academic rather than a life and death issue as in
India.So, is it fair to apply their models to our problems?

My opinion is that we should focus on creating more jobs. If the  gap
between  jobs and jobseekers is reduced, the market will correct the
minimum wage level to a  more acceptable level.  If not, we will be
to 'cure gangrine with bandaid'.


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