The Inhumanity of Minimum Wage Law

“Concentrated power is not rendered harmless by the good intentions of those who create
it.” -Milton Friedman

One may wonder what the great economist Milton Friedman was thinking while he
uttered those words. May be he was thinking of the ill-effects of price controls and how
does price control[1] causes shortage and hence excruciating conditions for the most poor
men of society. He might be thinking of the ill-effects of socialized medicines[2], or may
be he was thinking about the irrationality of minimum wage law and the manner that the
very intention of improving the living conditions of poor workers actually condemns
many to acute poverty and unemployment.

Minimum Wage Law in India

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In 1920, Mr. K.G.R Chaudhary took the initiative by setting up boards in different
industries to determine the minimum wages [3] . It must be recognized that in those days,
the British government held total control over all of the Indian industries and law bodies
and Mr. Chaudhary was an agent of British Government. The idea clearly was not at all
to improve the living conditions of Indian workers whom the British government
considered as slave; rather it was to pacify any possible insurgencies. It was a British
government’s vicious trap to divide and rule the Indian youth and workers for their own
profits. At one hand, they were luring the industrial workers by the assumingly better
living conditions they were promising to provide; on the other hand, they were simply
crushing out any chance by native businessmen and entrepreneurs of British India to be a
successful. That initiative also created a rift between those Indians who were engaged in
the British government controlled industries as they were being lured for a better life and
the other portion of youth that was not working for the benefits of British government.
This political step obviously divided the Indian youth and workers and hence decreased
strength for struggle of freedom.

After Independence, the new democratic government of India set-up a “Committee for
Fair Wage” in 1948 to provide guidelines for wage structure through out the country, it
was the beginning of Minimum wage law in India. Were Indian leaders, who are
assumed to be the fathers of Independent India such fools that they failed to realize the
vicious trap of British Government and hence established the poisonous minimum wage
law, or were they simply following the steps of British government (being the new rulers
of India) to keep the policy of Divide and Rule?.

Consequences of Minimum Wage Law

The rate of unemployment is directly proportional to the overload of labour cost over
productivity. Minimum wage law that forcefully raises the costs of unskilled and
inexperienced labour and thereby increases the labour cost, while decreasing the
productivity, certainly raises unemployment, also as no one can employ a worker at a
wage below the minimum wage forced by the law, the unemployed youth fails to get any
chance for employment (as it would be illegal) and hence suffers extreme poverty. Often
economists ignore the fact that minimum wage law actually causes unemployment and
poverty because of the shear fear of politicians and rulers, who just for making their vote
bank keep exploiting the poor lot.

Consider a case of a private primary school engaged in providing elementary education to

the poor kids of a society. The owner of the school is obviously not a rich person, he is
managing the school to earn a living and in return, he is providing job for teachers he
employs and a well-managed system of education to the kids of the society at affordable
student’s fees. He cannot increase the student fees to that level at which parents would
find it difficult to send their children to his school. Initially, he engages 10 teachers, 2
clerks and 4 menial workers at an average salary of Rs 1000-Rs 1500 per month. In
September 2007, the national minimum floor wage was increased to Rs 80 per day (that
is Rs 2400 per month) for all scheduled employments from Rs66 in 2004, to Rs 45 in
1999, Rs40 in 1998 and Rs 35 in 1996[3] .

That is, the school owner is actually doing an illegal act by giving lesser salary to the ten
teachers he has employed than the salary, which government has admonished to be given
to the teachers (workers). Obviously, the teachers would be happy if their salary were
increased from Rs1000-Rs1500 to Rs2400 per month, it would almost be double. If
government forces the school owner to give the dictated salary to all his employees, he
will certainly find himself unable to give that amount to his employees and hence he will
be forced to trim the number of teachers, clerks and helpers to half. That is, if
government forces the minimal wage law on the school owner, he will simply remove 5
of his teachers, 1 of the clerk and 2 of the menial workers.

That would increase the salary of remaining 8 employees but will certainly throw the
unfortunate other 8 people in poverty and unemployment. They will hardly find any other
job because all other employers will also suffer the similar inhuman conditions of lack of
money to employ the job-seekers.

In case of teachers, the school manager has option to choose the best of the teachers and
remove the average or below average teachers. In case of the clerk and the menial
workers, he simply does not have such a choice because almost each of his employees is
similarly skilled and efficient in those works. So how would he decide whom to remove
and whom to keep as his employee? He may choose to employ those, who agrees to sign
at the pay slim as admonished by the government, while taking lesser salary in turn of his
favor to keep them at job, that is, he would be tempted to promote corruption. Otherwise,
he may keep the workers of his caste or religion while removing the workers of other
caste or religion. That is, the minimal wage law will force the employer to cause hatred
based on religion or caste.

Were the Indian politicians fool enough to be unaware of vicious nature of Minimum
Wage, or were they following the footsteps of British dictators to Divide and Rule and
exploit the poor Indian?
On the other hand, because of lesser teachers, the burden on each to teach the students
appropriately will be increased, their working hours may increase. Government can
certainly admonish another law to restrict the maximum working hours for employees. In
that case, either the teachers will start ignoring the students, or the school owner will
have to remove some of the students to balance the workload of teachers. The owner of
the school will also suffer losses because he simply cannot increase student’s fees
(government can admonish against that) because if he does so, the parents by themselves
will feel to remove their children from school and hence stopping their education. At any
further increase of minimum wage of the workers, the poor section will suffer further.
Thus, the final sufferers of the inhumanity of minimum wage law are always the poor, the
workers, the consumers and the producer.

Conclusion
Minimum wage law not only increases unemployment and extreme poverty but also, it
increases tensions anger in between the various sects of the society based on religion and
castes or race. It promotes racism, poverty and shortage.

It would be wrong even to think that the founders of India were fool enough to miss the
true nature of minimum wage law, yet they kept following the British policy of divide
and rule just to keep their political vote bank strong enough while the poor public is
bound to suffer. Such inhuman policies are necessities of government to exist, hence
government and politicians often lure the poor public by misguiding them and pretending
that the politicians are with good intentions and want to help the poor, the reality is,
government exists on the principle of violence, exploitation and robbery and enslavement
of poor citizens.