Minimum wage laws impact skilled workers negatively

LAHORE: Skilled workers suffer because of minimum wages and are paid the same amount as the unskilled labour due to the high cost of doing business in Pakistan.

Manufacturers point out that thrust on minimum wages accelerated in the last 10 years as during this period, the minimum wage increased fivefold from Rs2,800 to Rs15,000 per month.

This in fact is the period when the share of manufacturing in the GDP declined sharply due to deindustrialisation.

The minimum wage would not have hurt the businesses had some unnecessary costs been curbed.

These include power and energy cost, which kept increasing because institutions failed to curb theft.

In fact for many industries, the cost of theft charged from them by power suppliers was higher than their total wage bill.

If this cost is eliminated the manufacturers can reward their productive workers more, besides complying with the minimum wage condition.

A skilled worker Abdul Hayee said, “I joined as an apprentice worker in an auto part making factory eight years ago at the minimum wage of Rs7,000 and now my monthly salary is Rs15,000.”

After working and gaining experience of eight years, Hayee still earns the same salary as is provided to a fresh-unskilled worker.

“I attained skills in eight years and my productivity is much higher than the new unskilled workers,” he said, regretting that no premium was given to higher productivity and experience.

Hayee has trouble making ends meet and said with a wife and two children, it was not possible for him to keep things intact.

“How can I make both ends meet with the same salary that a novice bachelor earns with no skills?” he questioned.

The government increases Rs1,000 on minimum wage annually, however the dilemma is that the minimum wage mantra deprives millions of workers from an advantage that they ought to enjoy after years of work.

Manufacturers admit that experienced workers are suffering because of standard Rs1,000 increase in minimum wage every year. What also worries manufacturers is that there is acute shortage of required skills in many sectors.

Decades back they used to train workers within their manufacturing facility. Now, they claim that the regular increase in minimum wage has forced them to pass this benefit only to their experienced employees.

However, since a same minimum wage is paid to an unskilled worker, it agitates experienced workers, which impacts their productivity.

The planners should have come up with a better option.

For instance, the minimum wage should have been increased by say Rs600 but there should be an increase of Rs12,000 for workers who have completed service of one year or more.

This way, the wage difference between the more experienced would have continued to widen, giving them an incentive to produce more.

According to all creditable reports, the productivity of workers in Pakistan is on decline.

The garment and knitwear producers have addressed this issue by hiring workers on contract and paying them on per piece basis.

Thus, the group of workers that produce more get much more than the minimum wage and those that produce less might get less than even the minimum wage.

Since they are hired through a contractor they cannot claim minimum wage.

This however has only partly resolved the problem of the manufacturers as they now hire experience contract workers and have stopped in-house skill training.

The productivity problem cannot be resolved in industries when efficient machine operators are required. Here both experience and inexperienced workers get the same minimum wage.