Exporters Pragmatic of Hike in Minimum Wages in Delhi; UP and Haryana to Follow Competitiveness to be hit by 5%

The Government of Delhi has agreed upon giving a 33% hike in minimum wages for workers in the city with effect from February 1, 2010. This move will surely bring smiles all around… not only for the workers but also for the NGO bodies working to get ‘living wages’ for garment workers, which is being mooted at Rs. 6,000 per month. Whereas the Government of Delhi has initiated the increase of wages keeping in mind inflation, the positive outcome for the export community is that India has come across as a concerned country which cares for its workers, unlike many other manufacturing bases in the region, which should translate into more business for the country. It is now for the apparel and textile associations to position India as a compliant, worker-friendly manufacturing base and seek support from retailers and brands that have been promoting the concept of living wages for more orders.

Indeed, the move is a milestone and the industry too has taken the rise in wages positively though there are some concerns which the Government needs to address without diluting the edge that it has created for the apparel export industry. …Deepak Mohindra, Editor-in-Chief
 

With the increase in minimum wages in Delhi, the wages here are now the highest in the country. From immediate reactions it is expected that other States will also follow suit. The hike will take the wages of unskilled workers to at least Rs. 203 per day from the earlier Rs. 163, while for semi-skilled labourers, it will be Rs. 225 per day and for skilled labourers it will be Rs. 248 per day. So on a monthly basis, an unskilled labourer will get Rs. 5,272, a semi-skilled worker in construction will get Rs. 5,850 and a skilled labourer will be entitled to Rs. 6,448 per month. 

No wonder, the garment export industry, though in agreement with the increase in wages is apprehensive of the crippling effect it will have on their overall costings. Further, as the implementation is backdated, there are concerns of meeting price points for orders-in-hand. “The 33% hike in minimum wages is just a basic rise in wages, in manufacturing for export we have further commitments like PF, ESI, etc. which will take the increase in labour cost for us to nearly 50%,” says Praveen Nayyar, MD, Dimple Creations. In an industry where wages to the labour constitute 20% of total cost, a 50% rise in wages will adversely affect total costs by 5%. In today’s market scenario, the margins have squeezed to around 10% and losing 5% in production cost will prove to be heavy on margins. Nayyar however is quick to add, “With the increase in cost of living this was bound to happen, and there is certainly no chance for a roll back in this decision and so, we should now learn to live with it.
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While most exporters think that increment is a good idea, they feel the Government should also addresses the problems that the exporters face so they do not lose further competitiveness. According to Pali Singh, Owner, Nancy Krafts, “The hike in minimum wages is justified as the consumer cost is going up but the Government should not only look at the problems faced by the poor workers and think that the exporter has got lot of money to vent out. The Government should also look at the problems that exporters face. I am not pointing towards the incentives rather I would like to put forward that the Government should try and eliminate the touts and unions that play a miscreant role in the process of hiring as well as firing labour. The Government should also look at the losses that we exporters face with the strikes that happen every now and then with no prior notice, affecting our business badly. I am completely in favour of increment but only when the system is cleaned up.”

Animesh Saxena, MD, Neetee Clothing, sums up the discussion when he says, “Socially I welcome this step since in today’s cost of living it is just not possible to survive for a family in current minimum wages. We need to provide salary at least to meet basic cost of living. But this increased cost will hit the industry very badly which is already under pressure from high cost due to increased cotton prices. Unfortunately, our industry is an international trade which has competition from other Asian countries which are much more competitive due to lower wages and high productivity. Now the time has come when Government and other stake holders have to seriously consider and work out productivity linked wages. This will be a win-win situation for workers as well as employers.”