Worker protests: Enforce India’s minimum wage policy for the sake of faster economic expansion

News reports suggest that the protestors draw extremely low wages, some as low as ₹10,000 a month. With this money, workers are expected to not just pay for food, clothing and shelter, but also educate their children and tide over health emergencies.

Clearly, they lead lives of much misery, with the cost burden of a war making it even harder to get by; and if they hear that wages have been hiked by the government in a close-by state, and that workers there earn significantly more, they would surely demand pay hikes for themselves.

The wage-bill pressure this would put on their employers is a worry; their finances may already be stretched. Yet, we should worry even more about the macro implications of such low wages for India’s economy.

The payroll sum of every enterprise represents a chunk of buying power that feeds the country’s economic output. If every business minimizes its wage bill to the very lowest level enabled by an oversupply of labour, overall demand for goods and services would be compressed to a bare minimum needed for the economy to function.

Those who live off capital, unlike the salaried, would suffer weaker returns than need be if a big demographic bulge can hardly make ends meet.

Anaemic growth marks our recent record on consumption. According to fresh GDP data with 2022-23 as its base year, over the fiscal years since then till 2025-26, our GDP has grown over 23.5% in real terms, while private final consumption expenditure has lagged at 20.5%. The latter’s shrinking share of output would be fine if it were being lost to capital formation, which helps GDP grow faster. But that, alas, is not the case.

Over the same period, inventories have grown by a whopping 144%, while readings of capacity utilization hover around 75%, which partially explains slouchy private investment. India’s gross fixed capital formation as a share of GDP is higher in the new series than in the old, but still pegged below 32%. This is significantly below what we need for a sustainable GDP path uplift.

The cost-of-living, meanwhile, can rise in ways that price indices cannot fully capture. Urban workers complain of shanty dwellings going out of reach. Haphazard urbanization has spelt a housing crunch at almost every income level, with family budgets stretched by rising rents.

Unfortunately, as artificial intelligence (AI) casts its long shadow on jobs, hardships could easily worsen. Since future careers are likely to depend on the use of AI tools, be it on the shopfloor or in the cubicle, we must ensure that our education system is designed for such a shift.

If tomorrow’s workers are to be more than just tool users, they will need mental agility as well as mastery over skills that help them outperform AI—both of which call for sharp faculties of critical thinking and imagination. AI might also have led some employers to keep wage bills in tighter control than usual, if only to avoid recruiter’s remorse in case of a market-driven cycle of layoffs.

With risks high and business costs under watch, this may seem like an odd time for enterprises to start paying their workers more. Salaries, however, need a floor set by policy exactly for such times, when the state must intervene in the country’s collective self-interest. For it to work, though, minimum wages need to be paid, not just notified.