R Jagannathan
Firstpost.com
If the recent jobs report put out by the National Sample Survey Office (NSSO) is any guide, the last thing the UPA government should be thinking of is tinkering with the labour market and damaging the remaining job prospects of young people.
The NSSO survey shows that
unemployment rose more than 10 percent between 2010 and 2012, among other things.
Unfortunately, under trade union pressure, the government is planning one more piece of legislation to ensure that jobs don't grow: it is preparing to legislate a National Minimum Wage - which will ensure that even states with competitive wage rates will now become more employment-resistant.
Speaking at the
45th session of the Indian Labour Conference in Delhi last month (17 May, to be exact), Prime Minister Manmohan Singh said many union demands were "under an advanced stage of consideration by the government. These include issues like universal social security cover for workers in both the organised and unorganised sectors and creation of a National Social Security Fund, fixing a National Floor Level Minimum Wage and provision of minimum pension of Rs 1,000 per month under the Employees' Pension Scheme. In fact, the Cabinet has already approved amendments to the Minimum Wages Act, 1948, to provide for a statutory National Floor Level Minimum Wage."
This is a big turnaround for even changeable Manmohan Singh, who fought a
big battle with Rural Development Minister Jairam Ramesh over whether wages under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA, or NREGA) should be raised to the level of state minimum wages after the Karnataka High Court held NREGA wages invalid if found lower than the state minimum wage.
The PM wanted NREGA wages - already indexed to inflation and rising every year - to be separate from state minimum wages. Now he seems to be saying that there will be a national minimum wage that all states have to follow.
In short, even while Finance Minister P Chidambaram has been promising tonnes of reform, his boss is pandering to union bosses and
creating hurdles in the way of labour reform.
Legislating a national minimum wage is an open invitation to all employers to substitute labour with capital, even though the actual impact will be lesser, given our poor implementation capabilities on any legislation.
Manish Sabharwal, Chairman of temping services pioneer TeamLease, writing in
The Indian Express, has dubbed the proposed minimum wage law "the Youth Unemployment Bill". Calling the government's acceptance of trade union demands as "unfair, delusional and economically stupid" he points out that the law will cover only organised labour - already a pampered lot.
He calls the idea economically stupid "because the cost of living varies greatly nationally and a single rate hurts young job seekers more than old ones. Legislating a national minimum wage is like trying to treat obesity by mandating small sizes; it doesn't work."
For a government which has not managed to create too many new jobs -just 2.5 million in 2004-09 compared to over 60 million in the NDA period - this is hara kiri. What we need is easier laws, and incentivisation to employ more people, not more laws to discourage employment.
In case the government is not convinced by Sabharwal's argument, it should read its own Economic Survey 2012-13 prepared under the supervision of Chief Economic Advisor Raghuram Rajan this year. Quoting various studies, the Survey notes that "there are 45 different national and state-level labour legislations in India (according to a 2008 study by Arvind Panagariya), and, more importantly "industrial performance has been weaker in states with pro-worker laws."
The Survey, quoting the experiences of China, Korea and Indonesia notes that incomes rise when total labour productivity rises - not because of any other reason. Though it does not mention minimum wages, clearly wage rises are not greatly impacted by tinkering with labour law.
It notes: "One way to increase labour productivity, therefore, is to increase investment (and thus capital per employee) across all sectors, including agriculture."
Translated, this means that labour will earn more if capital is incentivised. Raising the minimum wage - which means raising costs without increasing productivity – is thus a recipe for reducing jobs.
The NREGA scheme, by ensuring wage contestability, has already raised real wages in rural and urban areas. It has speeded up the process of farm mechanisation and reduced job options, with women
in particular being pushed out of jobs.
If the UPA is keen on jobless growth, it is doing all the right things. But if it wants to create more jobs, the National Minimum Wage, even if fixed at Rs 115 per manday, is a sure way to destroy them.
The writer is editor-in-chief, digital and publishing, Network18 Group 
