March 12, 2023

Workers and the Poor under Neoliberalism

Sanjay Roy

THESE days talking about rights of people as individuals or as groups defined by specific identities, marginalised due to cultural and reasons other than that related to work is acceptable and seems fashionable but raising issues of workers is something which is considered to be dangerous! All oppressed people can legitimately raise their voice for their right and dignity but not workers who are exploited by capital, an impersonal systemic class rule. Workers are not supposed to talk about their wages and entitlements because these add to the cost of production and make the capitalist uncompetitive in global markets. Poor is a relatively benign word amenable to individual negotiations but when the largest chunk of the poor come together on the basis of their shared experience of exploitation and expropriation, they are workers who emerge as a formidable collective force, a class and attain the courage to raise their claims in exchange of their contribution to production and not as a favour invoking sympathy.

This is what is really dangerous for neoliberalism that relies on surplus by combining technology of the north and the cheap labour and natural resources of the south. The low wage sink as if has become the moment of pride in the ‘race to the bottom’. In fact, competitiveness in a capitalist market is not determined by wages alone. Even if wages in China are more than double that of India they account for about one-fourth of global manufacturing value added while India accounts roughly close to 2.8 per cent of the same. Needless to say that seven out of the ten biggest exporters of labour intensive goods in the world are advanced economies where wages are much higher than that of India. What matters more is the growth of productivity with respect to wages and if economies rely more on lower wages they tend to employ contract, casual and different forms of informal workers and gradually slip towards low productivity activities.


India was one of the countries that thought of implementing minimum wages as early in the 1920s when the Boards of Determination of Minimum Wages was set up. ILO adopted Convention No. 26 (1928) and Recommendation No. 30 to fix wages for workers involved in trades and parts of trades. Subsequently in 1943, the Standing Labour Committee and the Indian Labour Conference appointed a committee to investigate the condition of wages of workers, their social conditions and housing and later on a separate legislation for workers working in unorganised sectors. This was the backdrop of the Minimum Wages Act 1948 which invoked Article 43 and 39 of the Directive Principles of the Constitution of India and instituted a law to ensure adequate livelihood for workers and also to guarantee equal pay for equal work. The Minimum Wages Act covered about 45 scheduled employment recognised at the centre and more than 1900 state level laws involving activities that engaged at least thousand workers specific to the particular state. Recently the government proposed the Code on Wages Bill that actually repeals The Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976. It has been applauded in the media as the national minimum floor wage will be applicable to all workers and no one can be paid less than the national minimum floor wage. Hence vast majority of the informal workers will be covered under the said code.

An expert committee was constituted by the ministry of labour and employment in 2018 to recommend a national minimum floor level wage and the committee submitted its report in 2019. The expert committee suggested a minimum wage of Rs 375 per consumption unit or person per day. Considering inflation this comes out to be Rs 432 per person per day in 2020. After all these exercises by the expert committee, the labour minister announced a national minimum floor wage of Rs 178 which was only two rupees higher than the floor wage declared in 2017.

International Labour Organisation conducted a study in 2019 to define minimum wages in India from a need based approach. Instead of minimum calorie requirements, this study proposes a balanced diet approach and takes note of the changing composition of food and non-food consumption expenditure that evolved over time. It refers to the recommendations of the Indian Council for Medical Research (ICMR) that instead of the minimum calorie requirement considered in poverty line measurement, of 2250 Kcal per day per person, an adult worker of age between 15-59 years would require 3490 Kcal per day. ICMR also defines the nutritional requirements for an adult according to the types of work undertaken: sedentary, moderate, heavy and non-worker and updated nutritional requirement norms using evidence from Periodic Labour Force Survey (2017-18). As per the verdict of the Supreme Court in 1992 minimum wage should include costs of children’s education, medical requirement, minimum recreation including festivals/ceremonies and provisions for old age. Combining expenditure on food and non-food, the study proposes a minimum wage at the range of Rs 371-432 per person per day. In addition to that, it also proposed a monthly housing allowance of Rs 1430 for all urban workers. Surprisingly what the government declared as the floor wage is even less than half of what is being proposed by its own appointed expert committee and far less than the figures suggested by the ILO study. The trade unions demanded that the minimum wage should be at par with the recommendations of the Seventh Pay Commission where the fourth grade employee is supposed to receive a daily wage of Rs 600 per day. There was hardly any furore or sensation in public discourse particularly in news channels on this loud denial of the recommendations of the government appointed expert committee.


Reluctance in the implementation of minimum wages law has never been considered by the mainstream media as a serious governance issue because the violation of regulation in this case is validation of the requirements of neoliberal accumulation that is under-reproduction of labour and nature. Governments are reluctant to implement even the abysmally low national minimum floor wage. On the other hand, governments seem to be keen to announce micro welfare schemes targeting various segments of the poor and the underprivileged.

There are important political economy dimensions for such a stance adopted by most of the state governments and particularly the central government. Firstly, had the governments implemented the recommendations of the expert committee every worker in India be it in agriculture, non-agriculture, formal, informal, could not be paid a monthly wage below Rs 11,300 to 14,500 depending on rural and urban segments respectively. The current national floor level of minimum wage declared by the central government turns out to be a monthly wage as low as Rs 5,340 per person. If the minimum wage suggested by the expert committee or that of the ILO could have been executed, the average income of the Indian household consisting of 3.5 adults would have been much higher than the transfers received through various schemes.

Secondly, this is implicitly allowing the employers to pay a low wage and reduce their burden of maintaining the cost of reproduction of their own workers by partially shifting the responsibility of providing food, nutrition, and some other entitlements to the State.  Transfers through various schemes are paid out of revenue that includes indirect tax realised from the poor and the under privileged as well.  Hence, the corporates have to pay lower corporate tax, they are free to pay low wage to their workers, and deny social security by partially shifting the cost of reproducing the labour force to the State. But these entitlements are delinked from work and offered as transfers to the poor ‘citizens’ or ‘households’. These welfare schemes however fragmented could be of much help to the poor households and should continue but cannot compensate the denial of the minimum wage that workers deserve.

Thirdly, the crucial advantage of these consumption related schemes to the ruling class is that they appear to be favours out of sympathy rather than a claim against contribution to productive activity. And a favour can hardly be increased on the basis of increased needs as intrinsically they are seen as transfers and not in exchange of some contribution. It is assumed that these transfers give larger political pay offs to ruling parties than any sort of universal rights. Rights related to contribution in productive activity, on the contrary, are a claim against individual’s contribution to society. As a result, rights related to the realm of production assume a transformative character rather than being confined to negotiations based on obligatory reciprocity. In the long run, therefore, diverting attention from work based rights to consumption based transfers helps the ruling class in containing entitlements of the working people to a low level. This is why many media commentators and governments can afford to be sympathetic to the ‘poor’ but stubbornly insensitive to the demands of ‘workers’.