The minimum wage solution -Rajendran Narayanan & Sakina Dhorajiwala
While indexation of the NREGA wages is critical, lifting them to the minimum wage would help workers and the economy
The government made two recent announcements at two ends of the spectrum to mitigate the economic crisis. One concerns a new indexation of NREGA wages meant to increase rural incomes. The second is a reduction in corporate tax rate.
Prices of commodities increase each year, so it’s important to accurately estimate how much a NREGA labourer should earn in 2020 if she earned Rs. 179 (national daily average NREGA wage) in 2019. For this, we need a good index to benchmark and revise the wages. Indices are (weighted) averages of the prices of a basket of goods consumed and the index must be based on the main items of consumption for rural households. NREGA daily wages are to be indexed with an updated inflation index called the Consumer Price Index-Rural (CPI-R) instead of the older Consumer Price Index-Agricultural Labourers (CPI-AL). The calculation of CPI-AL involved more food items in the consumption basket while the calculation of CPI-R involves more non-food items such as healthcare and education. CPI-R better reflects the rural consumption basket compared to CPI-AL.
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