Minimum wage panel may opt for multiple criteria model to set an amount

Moving away from nutritional requirement as a criteria to fix minimum wages, the newly reconstituted expert committee, may opt for Multi Criteria Decision Making method to fix the amount. The MCDM will also address employers’ views while suggesting the minimum wage.

The new chairman of the panel, statistician and economist SP Mukherjee, told BusinessLine that most of the examples of minimum wages practices in various countries, found in International Labour Organisation’s (ILO) compendium, have not adopted a scientific approach.

The latest report on the matter, submitted by Anoop Satpathy also used a tool based on “demographic structure, consumption pattern and nutritional intakes, the composition of food baskets and the relative importance of non-food consumption items to address the realities in the Indian context by using official data made available by the National Sample Survey Office (NSSO)”.

“I have also looked at the ILO Compendium on practices of minimum wages in about 129 countries. There are variations, no doubt. In terms of scientific approach, I could not find many examples in this compendium. They have based their minimum wages on demands of people, trade unions etc. We met recently in Chandigarh. In our first meeting, we discussed a using scientific approach called MCDM,” he said.

‘Not just a number’

The question before the expert group is not just fixing an amount. “They expect us to frame a policy whether we need a national minimum single wage rate or should it be left to the States or should it be left to the States with a certain role being played by the Centre. We have also been asked to see if the minimum wage should be fixed for a certain time period or should it be linked up, for example, with the wage rate index, to go up as and when CPI-based wage rate index also goes up,” Mukherjee said.

The panel will also see whether the minimum wage should vary from one level of occupation to another and from one region to another. “If somebody tries to understand the level of living in terms of a balanced diet as one component, there is scope to understand it from a non-diet component as well. All these issues have to be addressed,” Mukherjee said.

“The policy that the Government should expect from this expert group should be in terms of certain qualitative questions or decisions to be taken coupled with certain amounts to be fixed. It has to be based on an analysis of data which is not existing. It has to be compiled. So it has to be multi criteria, at least three,” he said.

Impacting livelihood

The three criteria, Mukherjee explained, include how the policy and the amount will impact the living quality of workers. “How it will improve their standard of living is the question. Secondly, if we increase the minimum wages substantially, what is going to be the impact on employment. If the owner of a small establishment has to pay higher than what he is paying now, he may have to minimise his profit or close down the business which will impact the employee too. So the impact of any policy on employment has to be studied,” Mukherjee said.

The third criteria will be the impact of minimum wage on industrial disputes. “Will disputes get easily resolved or will it reach higher in numbers? Will it become more complicated? This is related again on enterprises and establishments operating in various States. The policy has to be scientific,” Mukherjee added.

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