Close on the heels of protests by industrial workers in the NCR region, a Delhi-based think tank sought the dismantling of the statutory minimum wage regime. The Foundation for Economic Development (FED), which has Arvind Panagariya, Gurcharan Das, Jaithirth Rao and Naushad Forbes in its board of advisors, said that minimum wages “reduces employment opportunities, especially for the least-skilled workers” and that a revised national floor rate under the Wage Code of 2019 will “compound this effect”.

The FED report, “A choice between protection in name – and jobs in reality,” argued that India's current minimum wage framework acts as a barrier to formal employment and global trade.

The report first highlights international studies suggesting that higher wage mandates can lead to increased poverty and job scarcity. This is compounded by the fact that India’s minimum wage, when measured against monthly per capita GDP, is 1.5 times higher than that of major competitors such as China, Vietnam, and Mexico.

The FED also noted that 88% of the workforce lacked legal contracts or social security, a level of informality that exceeded that of rival nations. Because 64% of workers in 14 key states currently earn less than the legal minimum, they are effectively excluded from the formal sector. Consequently, the report estimated that India loses $60 billion annually in labour-intensive exports to China due to a lack of price competitiveness.

To address these issues, the FED proposed a fundamental shift in India’s labour policy. It advised that the government move away from a rigid minimum wage regime, instead allowing employers and workers to freely negotiate wages, and suggested implementing a fixed per-worker subsidy paid directly to industries.

This approach is intended to lower the cost of business and artificially boost the demand for labour, ultimately pulling more workers into the formal economy.

The timing is important. The Centre is poised to release new rules to operationalise four new labour codes, re-notified on November 21, 2025. This would set into motion a “technical committee” to fix work standards and a “Central Advisory Board” to fix the national floor wage rate.

The Centre last set the national floor rate at Rs 176 per day or Rs 4,576 per month in 2017; states declare “scheduled employment” wages, keeping the floor rate in mind.

Given that Haryana and Uttar Pradesh raised their minimum wages for unskilled industrial workers to Rs 13,690 and Rs 15,220 per month, respectively, after the workers’ protests, it is reasonable to expect a substantial hike in the national floor rate.

Why The FED Findings Are Questionable

Firstly, none of the foreign studies the FED cites is based on an economy-wide survey/data to provide a comprehensive picture, nor do they resemble India’s abysmally low wages and extremely high informal workers (89.9% as per the PLFS 2023-24). Of the five, four studies are from the US and one from Denmark.

The average wages in the US and Denmark are $6,127 and $6,761 per month in 2025, respectively, against Haryana’s $165 per month, for example, which was raised to $120 from April 1, 2026.

Four of these studies are pitted against one that dismissed the argument that raising minimum wages leads to job loss or poverty.

That one study was by Nobel laureate David Card, who received the Nobel prize for economics in 2021; his Nobel citation reads: “Using natural experiments, David Card has analysed the labour market effects of minimum wages, immigration and education. The results showed, among other things, that increasing the minimum wage does not necessarily lead to fewer jobs, as was previously thought.”

Economist Pronab Sen told The Core that the studies linking wage hike with job loss “will be true if minimum wage is taken to an irrational or absurd level”, adding that “if minimum wage is fixed sensibly, it will lead to better distribution of income, higher demand and higher growth.”

Second, Sen also dismissed the comparison of India’s minimum wage relative to “monthly” per capita GDP (1.5 times that of its major export competitors) as “absurd”. He explained that a worker may be supporting four or more family members; the more dependents, the worse the ratio. “So, wages relative to per capita GDP (GDP divided by population) are not a fair comparison.”

Third, that “high” minimum wage led to 88% workers being deprived of contract, PF, or legal protection flies in the face of national policies and steps to formalise the workforce. Both the Wage Code of 2019 and the Social Security Code of 2020 promise a universal minimum wage and social security. The Centre has taken several other steps to formalise and raise wages, from demonetisation of 2016 to GST of 2017, PM-Rozgar Protsahan Yojana (PM-RPY) of 2018, Atmanirbhar Bharat Rozgar Yojana (ABRY) of 2021, PM Viksit Bharat Rozgar Yojana (PM-VBRY) or ELI of 2025 and setting up the 8th Pay Commission of 2025.

Panagariya and his colleagues may be surprised that both Left and RSS-affiliated trade unions, CITU and BMS, are strong votaries of revision in minimum wages and national floor rate. They have sought to expand the standard family count from the current three units (under the Minimum Wage Act of 1948) to five units to ensure that old parents are taken care of, as the Maintenance and Welfare of Parents and Senior Citizens Act of 2007 mandates.

In fact, they are seeking a switch to “living wage” that the Directive Principles (Article 43) provides to ensure “a decent standard of life”. KN Umesh, CITU national secretary, says this should mean providing for food, housing, health and education at market rates, not government-determined rates. Surendra Kumar Pandey, BMS national general secretary, says his union will develop its own formula, taking debates at the ILO and other fora into consideration.

Fourth, the argument that “high minimum wages “locked out” 64% workers from formal employment amounts to celebrating violation of the law, something no government or economist has supported. If successive governments have failed, it is because most workers are in the informal sector and are difficult to reach.

Fifth, linking the $60 billion shortfall in exports of low-skill goods compared to China ignores several other factors at play. PC Mohanan, former acting chairman of the National Statistical Commission, said, “The labour force characteristics like education and skill are essential for inter-country comparisons; comparisons without taking into account the purchasing power can also be misleading.” He raises several flaws in the FED’s statistical analysis to call it “rather amateurish”.

What’s The Main Problem?

Economist Arun Kumar drew attention to an issue that Panagariya and his colleagues ignored. “The main problem of the Indian economy is a lack of demand. If minimum wages go up, demand will revive,” Kumar told The Core.

The FinMin had admitted, for the first time in recent memory, in the March report of 2019, that the main growth engine, private consumption (PFCE), had sputtered. It refuses to gallop since then, pulling down private capex and GDP growth, notwithstanding cuts in corporate and income taxes and GST over the years. The latest GDP series of 2022-23 shows that PFCE weakened from 61% of GDP (current prices) in the 2011-12 series to 57% during FY23-FY25 (constant prices).

Panagariya and his colleagues would do well to remember:

• Chief Economic Advisor Anantha V Nageswaran and his economic surveys have blasted India Inc. for wage stagnation and “creeping informalisation” even as it is “swimming in excess profits”
• Millions of ASHA/ANM, Anganwadi workers/helpers, MGNREGS and gig workers, ad hoc teachers are not treated as “worker” or “employee” and receive honorarium or below minimum wages for decades, despite the new labour codes being notified first in 2019 and 2020
• Subsidies to industry have neither raised the shares of manufacturing nor job
• Collective bargaining is virtually non-existent, and minimum wages have not been revised for long
• The average Indian is among the poorest in the world; at a per capita GDP of $2,813 (current USD) in 2026, it is way below the global average of $15,679, China’s $14,874 and Bangladesh’s $2,911

Depriving workers of fair wages and social security hurts the economy and will stop India from turning into a “developed nation” that Viksit Bharat@2047 aims to be.