Karnataka workforce boost

Workers at a factory on the outskirts of Bengaluru. File | Photo credit: AP

IIn May, the Karnataka government issued a minimum wage notification that equalizes wages in 81 employment sectors with an average wage increase of 60% over existing levels. According to the notification, the minimum wage for unskilled workers will be ₹23,376 per month in Bengaluru and ₹19,318 per month in small towns and rural areas. This gap of more than ₹4,000 between wages in Bengaluru and small towns is a reflection of rampant inflation in metros. Acknowledging the high cost of living in the metro city, this move is commendable.

Speaking to the media, the Karnataka Labor Minister said that the revision of the minimum wage was done as per the directions of the Supreme Court. This highlights an often-ignored fact of the minimum wage jurisprudence in India – that the method for determining the minimum wage is elaborate and uniformly applicable across the country. Despite this pattern, the wide variation in prevailing minimum wages across states reflects the power of employers and the complicity of labor authorities in keeping wages below the statutory threshold.

Employers argue that higher wages increase product costs and increase demand for products, thereby fueling inflation. However, reducing the wages of people in the lowest deciles of the Indian population to curb their consumption cannot be the way to control inflation. In addition, government statistics indicate that the consumption level of the average household has not yet reached pre-COVID levels. The government has other mechanisms at its disposal to control inflation, including adjusting the GST structure to control product costs.

Employers further argue that raising wages will drive the industry out of business. This is not necessarily true. The share of wages in total costs is falling in most industries. Wages are not the only determinants of investment decisions. Several other factors such as infrastructure, economic climate, availability of skilled labor and industrial peace are equally important. The recent protests by garment and other factory workers in the National Capital Region and Uttar Pradesh for higher wages was a stark reminder of the poverty and desperation of the workers. He emphasized the importance of decent wages to ensure industrial peace.

Missing aspects

However, important gaps remain in the notification. First, it leaves out four important industries: garment work, beedi rolling, agarbathi making, and plantation work. All four sectors employ a large number of workers, with the majority being women. Following the implementation of this notification, the wages of workers in these four industries would become approximately half of those of workers of comparable skill levels in the other 81 industries covered by the notification. Beedi rolling, which is primarily work from home, highlights the intergenerational dangers of low-paid employment. Children share the same space as their beedis-rolling mothers, which often leads to them being dragged into helping mothers, which limits their ability to break out of the poverty trap. A decent minimum wage coupled with a piece rate for beedi rolling could expand the options for these children.

Another issue concerns the variable allowance (VDA). The VDA is supposed to protect real wages from inflation for the period between the two wage fixations, which are to be carried out once every five years. Unfortunately, Karnataka’s point system of wage neutralization only protects fully real wages in the lowest unskilled categories. For higher categories of semi-skilled and skilled workers, this protection is only partial. Moreover, with each wage revision, the old VDA formula becomes inadequate to protect real wages and the points need to be revised. In the past, there have been lawsuits led by unions over the revision of the VDA along with wage revisions. This notice should also address this gap.

The minimum wage announcement is still a positive step that provides the potential for equitable growth in the state. It can also serve as an example for other states. It emphasizes an alternative paradigm, important in this age of rising wealth inequality — that profits without over-exploitation should be the path to “ease of doing business”.

Mohan Mani is Visiting Fellow, National Law School of India University, Bengaluru

Published – 09 Jun 2026 0:23 IST