Explained | When an economy built on cheap labour faces higher wages

Key points

• With Karnataka Employers’ Association moving the court and other industry bodies preparing to challenge Karnataka government’s revised minimum wages, arguing that the increase will impose an ‘unsustainable’ burden on businesses and threaten jobs, the argument raises an old and consistent question — do higher minimum wages actually hurt employment and small businesses?
• The argument is not new.
• When Karnataka revised minimum wages in 2016-17, employer associations raised similar concerns, warning of rising costs, loss of competitiveness, and adverse consequences for industry.
• The matter soon reached the Karnataka High Court, which, however, upheld the revision.
• Not static concept The court observed that minimum wages are not a ‘static’ concept, and must evolve in line with changing economic realities.