Why India’s minimum wage policy may backfire
While higher minimum wages may not reduce overall employment, they can make it difficult for less productive workers to find jobs
Mumbai: The recent clash between the Delhi high court and the state government over the quashing of the government’s notification on minimum wages has reignited the debate on minimum wages in India. Neoclassical economists have long warned against setting a wage floor, arguing that a government regulated price for labour can distort labour markets and have the unintended effect of reducing employment. This consensus has now begun to crack, with a number of empirical studies suggesting that an increase in minimum wages may not actually reduce jobs.