The consultant from the international agency was very emphatic. “The country’s labour doesn’t get a fair deal. Employers exploit workers and don’t pay a wage sufficient for them to meet their basic requirements,” he told us. “The other countries have sorted this issue by fixing a minimum national wage,” he said.

There were four of us: three from my institution and another full timer from his agency. Among my colleagues was a lady officer who took a keen interest in the suggestion. At first, we could not understand him. I thought that he was talking about fixing a minimum wage for the government sector. “What do you mean by a minimum national wage?” I asked him.

“The government will fix a minimum national wage. May be a wage level sufficient for a person to have his basic requirements satisfied. Then, employers, both in the public sector and the private sector cannot pay their workers anything less than that. It guarantees that workers get at least what they need for their basic needs. So, people would get a minimum income across the board,” he explained.
“Why do you think that we should have a minimum wage fixed?” one of my colleagues asked.
He had a clear answer to that question. “That’s because employers normally exploit the workers by paying them even below the basic requirement needs. So, it’s the responsibility of the government to intervene and bring justice to the workers.”

“I can’t understand it,” my other colleague, the lady officer, said. “Why do you think that workers are being exploited by employers? I know many employers who pay good wages to their employees.”
“That’s the issue,” the consultant said, continuing: “Some employers pay higher and some lower. Across the economy, equal work should be paid equally. When you’ve wage anomalies, people don’t have incentives to work harder. So, you should have a fixed minimum wage across the economy.”
“How do you detect whether employers have flouted the rule? You must have a mechanism to catch the transgressors,” I intervened.

“The detection takes place at two levels. First at a self policing level, workers themselves can report on that. Then, the relevant governmental agency can bring the culprits to the book. The other is getting public servants to raid work places and bring the transgressors to the book. The second method requires the government to recruit a large number of enforcement officers.”

“So, whether it’s self-policing or raid-policing, you got to establish a powerful bureaucracy to enforce the national minimum wage rules?” My lady-officer colleague inquired. “Precisely,” The consultant said. “Unless we put a few violators behind the bars, we would not be able to enforce the rules.”

“A bureaucracy means that they’ve immense discretionary powers. How do we prevent them from abusing their powers? It’s practically impossible for a government to prevent the enforcement officers from misusing their powers, especially, the power to catch the violators and the power to prosecute them,” I said, trying to demonstrate my probing-type inquiring skills.“For that we must tighten the corruption laws and strengthen the corruption fighting agencies,” the consultant responded. “It means we need to have an army of enforcement officers and an army of corruption combatants. Who would pay their salaries? Possibly the government. In other words, we over-burden the government with an additional cost, when it can’t perform even its normal duties due to lack of funds. When both apparatuses become weaker, there isn’t any effect on the minimum wages,” I said. The consultant did not have a response to that comment.

“That’s not the greatest damage done to the economy,” my female colleague said. “The greatest damage is the drying up of future employment opportunities for those who join the work force annually.”
“How can that happen?” the full-timer from the agency’s local office inquired.

“When the employers find that they’ve to pay a minimum wage irrespective of the productivity and value addition by the workers, they would come up with ingenious schemes to thwart the rules. One such method is getting the existing workers to work longer, perhaps by paying overtime and avoid hiring new workers. So, the national minimum wage may be beneficial to existing workers. But it’s very much harmful to those who plan to join the workforce in the future. So, it’s a sure way of creating a huge unemployment problem in the economy,” she clarified.

“But, the workers need protection,” the consultant tried his last trump card. “The protection doesn’t come from the government. It comes from the profitability of the enterprises and the ability of employers to continue to hire workers. Even if the government has minimum wage rules, if enterprises become bankrupt, workers would lose jobs and would not get even the minimum wages,” the lady colleague explained.

“Yes,” my other colleague also intervened. “What’s necessary to protect the workers is not a minimum wage rule, but a flexible labour market. Employers should be able to freely hire and fire workers and workers should be able to move from one employer to another freely. That flexibility will ensure job creation in the economy and eventually full employment for all those desiring jobs. At that level, the shortage of workers and competition among employers will ensure a fair deal for workers.”
“So, have a minimum national wage and live with unemployment as well,” I said. .