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Urban minimum wage as election promise?

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Governance

Cities are not just about rich or middle classes. It is estimated that majority of residents (> 60%) in our cities belong in poor or lower middle income groups. I was wondering if Lok Sabha 2009 has seen any promises that would influence the votes of this sizeable group?

Leaving aside the 2 Rs/Kg rice promises, how does a "minimum wage" implementation for urban areas look? Unorganized labour literally runs our cities. A lot of "goodies" of Indian urban living are argubaly built on the back of (sorry to use an old fashioned word) exploitation of low-skill workers. Urban middle class has unreasonable demands, like wanting to have a "clean, well bathed maid" every morning in the middle of central business district. How many of these unorganized sector workers have access to health benefits, or education assistance, or just working conditions (like say, leave on national holidays!?), leave aside access to clean water for taking bath everyday!?

A lot of above is justified today using the demand supply argument - working conditions, and the wages are determined by the market and supply conditions. But, are there are any bars and standards for the unreasonable competition for limited urban space and low cost resources that happens within this group? Programs like housing for economically weak sections (EWS) are launched only to be "misused" (because the EWS beneficiary sells his benefit at market price, and moves on to a newer hut).

What will provide equal opportunities to the workers within this group? That thing called BSUP (basic supplies to urban poor) ? More reliance on government's direct-delivery mechanisms, like those run-down government schools and hospitals? Or more money directly in their pockets?

Why not develop a system of "minimum wages in urban area" determined by certain acceptable set of living and affordability standards in a city?

Too drastic a thought? Or dangerous (because it will destroy the cost structure of our cities)? Or simply a stupid idea (too leftist, hard to implement and measure)? If I hire a domestic worker, maid, gardener, driver, security or whatever, should the state fix certain responsibilities on me? These could be in the form of mandatory health, education assisances, or simpler, just a "minimum wage".

Just testing this out here. And before you picture only your domestic helps, remember that Bangalore has about 2 lakh "security" guards, many of them making pittances (source: a TOI or DH article 3 months ago), and (my estimate) 50000+ "drivers" employed by residents, and 1 lakh+ domestic workers (another estimate).

Comments

idontspam's picture

Socialist tilt

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Why are we becoming more socialist in our thinking these days? Is it the water (or the lack of it)? If all the socialists started small businesses we would have provided enough jobs to stop worrying about this.

kbsyed61's picture

IDS, even so called capitalist economies also practice socialism

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IDS,

 Seems we are ignorant about capitalist economies practicing socialist policies. Don't believe it? In US, the both state and Federal has stipulated minimum wages. Even though it is very low, but still families can survive on low wages with little support from govt with low cost rent, low cost medicare etc. One of the reason US can afford low wages (in dollar terms) is, its subsidizes food products like wheat, rice, milk, poultry etc. This subsidy makes sure that the essential items are available at low cost and hence can afford to keep the wages. The funda here is if essential items are low, wages would be minimum.

Even it controls the number of private players operating in many sectors like Taxi/Cab services etc.

 

s_yajaman's picture

Urban minimum wage is not "socialist"

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IDS and I can hardly agree on anything of late :)

What is wrong with a socialist  approach to many of these problems.  It is not as if capitalists have managed to create any paradise on earth. 

Look around where you live of late - probably one of the most socialist countries.  Socialism has its place in the grand scheme of things.  It does not only mean state ownership of the means of producton.  It means that the government protects the interests of the not so fortunate, at least to me.  

Srivathsa

 

 

 

 

Drive safe.  It is not just the car maker which can recall its product.

navshot's picture

This ones for long term

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I support this one in principle and it would fetch benefits in the long term. As with any idea, even this has its share of positives and negatives.

Positives (most of them in long term): This would help flatten the society (atleast in the urban areas) - would ensure better living standards in the urban areas. Would provide more self-respect amongst lower income groups. Would reduce social unrest - theft, crime, etc. Would reduce school dropouts, etc...

Negatives (many of them in short term): There would be a major restructuring of society - if not handled well, can result in unrest. There would be jobloss due to reduced demand for labour. Skill would become more important. More machinery to replace labour, so more energy consumption and related drawbacks. Possibly further widening of gap between urban and rural? etc...

-- navshot

-- navshot
idontspam's picture

Socialism sucks

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Look around where you live of late - probably one of the most socialist countries

I had a deep discussion on the labour laws of this northern european socialist country with a colleague. It sucks. Business have it difficult here. It can drain developing economies which need more businesses to grow. Every body here agrees there should be some loosening.

But, one good thing I want to campain for in India is severance pay to be mandatorily enforced. It could be as simple as 6 months basic. Like Syed says even the capitalist USA has minimum wages and severance pay.

idontspam's picture

Higher minimum wage

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I know there is already minimum wage, what SB iscalling for is higher minimum wage for urban areas. I dont necessarily disagree but I would hope minimum wage calliberation law should take care of cost of living. I dont know if that is pratcised anywhere? Can somebody enlighten if it is a state subject at all?

We are all Keynesians now

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IDS,

If the events of the past year have not been any indicator for you, or if you did not read Alan Greenspan's declaration that he put too much faith in the self correctional mechanism of the market, then god save you.

We are all Keynesians now. We will be for a long time to come. 

s_yajaman's picture

IDS - disagree on "socialism sucks"

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IDS and I just not agreeing.  MCadambi and I agreeing. Strange things happen on our site :)

IDS - Socialism for me does not mean high taxes and big government.  It means an active role for government and to ensure that everyone gets a chance to compete before the meritocracy talk starts.

Much better than the American version of capitalism where profits are private and losses go the tax payer.

SY

Drive safe.  It is not just the car maker which can recall its product.

Naveen's picture

Proletariats Have Minimum Wages

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We do have minimum wages recommended for Industrial workers. The ILO (International labor Organization) also recommends minimum workers wages, based on nations & nationality.

I believe that no society can work without some form of protection for the less priviliged, as quoted above with an example by syed.

If a Laissez Faire approach is taken with regards to this, market forces will crush them & the rich will get richer even faster & there will be unrest & class action akin to the French revolution. Thus, socialist trends are here to stay & cannot be wished away.

What SB has suggested is an extension of this to the "urban" poor, to include domestic helps & the newer forms of informal jobs held by people with unstable jobs.

I think this is a new subject that demands more attention now & I agree with Navshot here - there are many long-term positives & probably short-term negatives, but one has to always look at the long-term in such matters.

idontspam's picture

Keynesian itch

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The financial market would have self corrected if the keynesian urge had not struck. It is the itch to intervene that gets us in trouble. The market correction would have permenantly wiped off unsustainable businesses. Now we have to live with these companies and bail them out every so often. Urge to be keynesian comes from the pressures of socialistic thinking that still exists around the world.

s_yajaman's picture

Hardly socialist / Keynesian

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And who were out there lobbying for TARP money and CRAP money?  AIG, Citi and the other great bastions of free market capitalism.  

WHo lobbied for the removal of the Glass Steagal act.  Our very own Henry Paulson actively supported by Alan Greenspan.  Both said the free market would take care of everything.   And now HP comes with trillion dollar requests for bail outs, etc.

Does that capitalism is bad?  No - but it needs to be reined in every now and then.  Else Blue Line/Red Line will be the rule

Very easy to crib about socialism after reaping all its benefits :).  Think how much you paid for your engineering degree and for your schooling. 

SY

 

 

Drive safe.  It is not just the car maker which can recall its product.

idontspam's picture

TARP

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Make no mistake once you make money available as a structured program and taken the Keynesian dip, people have the right to stake claim to it. If Fannie and Freddie were left alone to fend for themselves everybody following would have shut their TARP.

Rithesh's picture

IDS - i disagree

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I had a deep discussion on the labour laws of this northern european socialist country with a colleague. It sucks. Business have it difficult here.

Probably you should ask your colleague to stay in a country like in India or even in US for that matter. Then i am sure he would appreciate these laws.

Business sucks there because there are sweat shops in countries like ours where labor laws are nearly absent or favor the employer. I am surprised how people go around bashing these ideas.

silkboard's picture

tricky one

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thanks for the comments, navshot - agree with your long term/short term effects.

I had more thoughts around this, I was not very comfortable posting those. What is the difference between urban and rural area? How does the difference emerge, and the two "areas" pull away from each other?

If the difference is infrastructure (infra first jobs later), then do we not have to "pay the price" for living in the cities?

If the difference is concetration of mid and high-skilled jobs (jobs first, infra later), then do we work to retain this concentration, or work on "dilution" to move at least mid-skilled jobs out to the rural areas?

Promoting low-skilled jobs in cities - does it help?

Is there a thing like "keeping cities competititve" by not making them too expensive?

idontspam - I got what your first comment meant. The solution for  urban rural divide, migration etc, and for prosperity in general is to create more mid-skilled jobs in the semi-urban and rural areas.

nl.srinivas's picture

tricky one indeed

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SB, this is exactly what was going on my my. How do you differentiate between urban and rural areas? Do you say which ever areas come under the district headquarter's municipality/corporation those arears are considered urban areas? Also when you fix minimum wages it comes with the rider of "quality of service". If I am paying somebody minimum wage am I entitled for a minimum quality of service and how do you measure that?



idontspam's picture

Disincentivisation

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Is there a thing like "keeping cities competititve" by not making them too expensive?

By paying higher minimum wages in the city for same jobs you encourage migration and disincentivise the rural regions

Srivatsava's picture

As a election promise?? May not be useful!!

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    As per my knowledge, the minimum wages are not uniform across the country. I am certain the states have the power to determine the minimum wages for their wage, but this should be over the centrally prescibed value.

    I am not sure if under the present laws, a 'separate' level of minimum wages can be specified for urban areas. Further, there is a issue of practicality.

  1. What are the targeted 'urban areas? Can the same 'minimum wage' be specified for tier1 cities (eg: Bangalore, Chennai), tier 2 cities (mysore, Coimbatore) or the small towns (eg: Sagar or Sirsi).
  2. How do you define the boundaries of such 'urban areas'. There are so many villages, mainly based on agriculture, even around these cities, but within the same district. Dont you think that the cost of agro-labour will increase to levels that will greatly affect the inflation, and possibly exports (eg: flowers grown in the outskirts of bangalore are mostly exported).

      Further, such a scheme will make urban living much more attractive for a 'hopeful' villager, while in reality it could lead to lower employment opportunities in cities and hence increase the number of unemployed unban youth. Can our cities handle the 'excessive' migration?

-Srivatsava V

-Srivatsava V

jennypinto's picture

 

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lightness of being
idontspam's picture

We have to discuss

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i think we should stop having intellectual discussions about this because we dont even begin to understand whats happening outside our tiny little world

We should have our discussions. We need to share ideas. We cant stop doing that. It may get macro and intellectual at times but we have to fight for issues of PLU. We cant let our authorities do what they want and get away with it. If the comments are too intellectual the threads have a way of self correcting. Its election time now so some of the topics sound less local but I am sure we will be back to our mains and cross issues. There are a lot of knowledgeable people in here that I bounce ideas off.

The rest of your experience makes interesting reading. I am reading a lot into it and drawing inferences and not even sure where we are going wrong and if we should lose hope. How many more years before we get it right?

nl.srinivas's picture

The real problem

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So does that mean since we don't understand the "other" india we should forget about our immediate problems , however insignificant compared to the problems of other india, and start worrying about understanding the other india.
  The reason I say this is, the root cause for our problems are the same for the problems in the other india. Lack of awareness among the masses, lack of accountability, exploitation and greed.
 It is not a simplistic view of things. It is just not that just because you solve these everything will be hunkydory. The general mass has to be economically empowered. This is not making everyone rich. Any skilled labour should get his due(I am a leftist). Agriculture is also a highly skilled labour. It is just that we or at lease the most of usdon't give it's due.  Another important thing is everyone should have access to quality health and education.
People before have been involved in the nobel cause of achieve these things, are involved in this and will be involved. The reason, I feel, that it has not bore the result in commessurrate with the effort is that our administration or governance is not participative.  The administration takes dicisions almost unilaterally without even bothering to consult the public in any manner. That's why an "upper house" is indeed a great idea.  S M Krishna's grameen abhivriddhi yojana where the gram panjayath takes the decision on how it should spend the money for the development of the villages was the best idea to be implemented. But it was hijacked by the political parties is another matter. And now RTI is the best thing to happen though it is a watered down version of the recommendation.
  Why am I saying all this? If we do not discuss, talk about various thing and ACT, things will never change. An idea has to be discussed, fine tuned and implemented. The results have to be evaluated. At least then we have some hope of creating a more flatter society.
  Praja.in is a great initiative and I very honestly believe that things will get better.
Srinivas.

 




jennypinto's picture

i joined in the discussion,

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lightness of being
silkboard's picture

Urban "prosperity" and responsibility

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We can't deny that our cozy urban lives sit on the foundation of low waged low-skilled workers.

  • 5000 Rs a month for a driver who works 8-10 hours a day for you, and 20-25 days a month is getting about Rs 20-30 an hour.
  • Some keep full day baby sitters, who get paid anything from Rs 1500-3000 per month. Assuming 8 hours, 25 days a month, that would be Rs 8 to 20 an hour.
  • You pay your domestic help anything between Rs 400 - 1500 from 2-4 hours of work, all 30 days a month. That would be about Rs 6 to 15 an hour.
  • A security guard standing outside a tech park, or a person cleaning offices, gets Rs 2000-4000 from his "agency". Rs 10-20 per hour perhaps.

I recall this number from minimum wage notices in my offices in California, $7.14 per hour. Thats Rs 350 per hour on straight conversion, About Rs 70 per hour on a purchasing power parity (PPP) conversion (take PPP conversion factor of about 10).

Rs 70 an hour - what would this do to some of the numbers above? 60 hours of your maid = Rs 4200. 400 hours of your driver = Rs 28000!. 120 hours for your baby sitter = Rs 8400 a month.

What would such numbers do? Put more money in the pockets of those who do get hired. But then, a lot of jobs will disappear, as some of middle and rich class' laziness will go away :) We'd buy more machines, and hire less.

So then. What's better - less money in more pockets, or more money in lesser number of pockets?

What's better - lazy middle class content with consuming cheap manual labor, creating local low-skilled jobs, or more efficient middle class consuming more automation and creating mid and high-sklled jobs anywhere away from the city.

May be you and me will move away from the city looking for some cheap manual labour (and "better" life!?).

May be that the city will see less migrations.

Or will it be that the folks who migrate to the city will end up with better quality jobs, as they'd be fixing your washing machines, driving the buses (which we'd be forced to use as we wont be able to afford drivers), running day cares for your children etc etc. Our need for services wont go away, but things may organize themselves in such a way that we consume better quality services offered to us in better organized ways.

Money could make everyone work harder, those who hire, as well as those who get hired, and hard work, or efficiency is what our economy needs.

[I don't have an opinion this way or that way, just putting my thoughts out, and reading everyone else's ideas. Certainly, all of above is debatable]

Ravi_D's picture

Re: Urban "prosperity"

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So then. What's better - less money in more pockets, or more money in lesser number of pockets?

I agree that economic activity comes with its pluses and minuses. But a better paying job doesn't necessarily have to wipe out a guy who gets lower pay now. That might be true in the short run. Think of our tanga wallahs leaving space for auto ricks, and possibly owning them now.

In contrast, I have been on cycle rickshaws struggling it out in economically stagnated Rangoon (Yongon / Burma / Myanmar). Why go that far, I'm sure you have seen them here in India. On the other extreme, you see Taxi drivers doing pretty much the same thing (ferrying passengers) in air conditioned SUVs in the US. Though I'm not saying we need such 6 km/l monsters here.

If the IT industry never happened to Bangalore, we would have a nostaligically 'better' city. But could it have fed the millions more who work here now without such growth?

It is not less money in more pockets v/s more in less number of pockets. It is not rates in urban areas v/s rates in rural areas. Answer lies in growth. A bigger economy means more oppurtunities and more money in everyones pockets.

Yes, how we manage the transition to such largerer sums, and ensure every one gets their share is a much bigger debate (even the necessity of such a 'fair distribution' is argued both ways). There is no easy way. Countries (incl our own) have tried this for centuries. Fortunately we have a large set of examples to learn from, to avoid reinventing the wheel, to avoid falling into the same trap others did....

Like it or not, inspite of all our issues, we are on a growth path, and hopefully, will continue decades into the future. Pie is getting larger. Problems are getting bigger too. Question is, are we upto the task? Do we have it in us to think big, look out, learn from others, plan, execute/regulate, and correct course as needed? Can we and our leaders think beyong our own kitty and selfish motto?

Ravi

idontspam's picture

The spread of DIY

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 We'd buy more machines, and hire less

Evidence of this exists in countries where labour is expensive. DIY will be preferred. It is not required in labour surplus countries like India & China. The amounts you have mentioned for the different unorganized services are pretty much standard and there is an informal cartelization which ensures equity across the town. In tier 2 cities the same labour will recaliberate their price to suit the place. If the buses and trains are expensive the cost of labour gets priced in. Drivers demand to and fro bus passes, House maids price cost of transport into their charges. It is all factored even now. If there is pricing below standard wage it is usually to enter the job market, we all use that tactic to break in and once established it is quickly normalized. We need to offer market that lever. 

Equal distribution of wealth is the foundation of socialist and communist ideology and I am not a supporter of either. High quality humane urban infrastructure is a must for all regardless of ideology. Regardless of how much a labourer is earning he would love to walk down a good quality sidewalk, cross roads in zebra crossing, ride a cycle in cycle paths, relax in the parks and urban jungles and ride quality trains and buses.

This issue is like quotas in higher education when basic primary education is lacking for most people in this country. Wrong place to start solving prolems.

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