The organised manufacturing sector in Tamil Nadu, the largest employment generator in the country, may be worst affected by the proposed move to increase minimum wages to Rs. 18,000 per month per worker, according to a report.
Brokerage firm Motilal Oswal used the data from the Annual Survey of Industries available till the financial year 2015 and analysed the impact of doubling of minimum wages in the organised manufacturing sector. According to the report, Tamil Nadu is the biggest employer housing 17 lakh people out of the total 1.1 crore people employed in the organised manufacturing sector in the country. The State houses leading car makers and also other major industries.
Nikhil Gupta and Rahul Agrawal, analysts at Motilal Oswal, estimate that the average monthly wages would be Rs. 12,672 per worker in the State’s organised manufacturing sector. They estimate that the sector in the State would incur an additional cost of Rs. 1,300 crore. Overall, the move would cost at least Rs. 4,700 crore for the organised manufacturing sector in India, according to the firm.
Traditional labour-intensive industries such as ‘tobacco products,’ ‘wearing apparels,’ ‘leather products,’ ‘textiles’ and ‘food products & beverages’ would be worst affected, as the average wages were very low in these industries, Motital Oswal said.
The research firm also warned that the proposed move could potentially restrict employment growth in the manufacturing sector and hurt the government’s plan to create 100 million manufacturing jobs by 2022.
Merchandise exports
Expensive labour would hurt labour-intensive export-oriented sectors such as textiles, which account for more than 15% of total merchandise exports, it added. The analysts also noted that the move may result in shift from the organised to unorganised sector – in complete contrast to the government’s intention.