Geeta Menon's paper on living wages.

1. Introduction
A service industry is an industry which does not by itself add to GDP, but which enables the money-making industries to operate, or to operate more efficiently. Bus drivers, electricians, and Domestic Workers all fall into this category. Their work enables people, and the economy, to work, live and prosper.

In spite of this fact, the persisting relationship between employer and employee is different in Domestic Work than it is in any other service industry: the bond is as between master and servant. Domestic Work is informal, unregulated and neo-feudal in nature with no clear payment structure and no respect for the work that is done.

The government has already taken some steps to address this misconception. We would like them to take further steps. We would like the government to legislate an hourly minimum wage for Domestic Workers, and we would like them to advertise this change in statute. We propose levels for this hourly rate within this paper.

We appreciate that it is extremely difficult for the government to enforce any minimum wage in this sector, owing to the informal nature of the work. It is the culture which needs to change first; we need to dismantle the feudal master-servant relationship and encourage the attitude that Domestic Work is a valuable part of the Service Economy. And in this regard, the government alone can initiate the change.

2. Scope of paper
The paper draws its data from extensive surveys of Domestic Workers and their Employers, carried out in May-June 2005.

The paper argues, first, that the minimum wage must be increased; and, second, that the minimum wage should be determined by hour. In the final section of the paper, our Minimum Wage proposal is detailed.

3. Minimum wage algorithm should be changed
This section describes the current Minimum Wage law, and explains why we believe it to be unworkable; we then suggest a New Minimum Wage Law and explore the pros and cons of our suggestion.
3.1. Current Minimum Wage Notification
The current minimum wage notification makes the following broad specifications:
• 45-minute specified tasks per day, six days a week, should receive 249 Rupees per month, based on an assumption of a 26 day working month, or 6 day working week;
• Domestic Work tasks taking one hour should be paid at the lower rate of 299 Rupees per month, based on an assumption of a 26 day working month, or 6 day working week;
• 8 hours per day (“a day’s work”) should receive the lower rate still of 1699 Rupees per month, for a 26 day month, or 6 day working week;
• Families larger than 4 persons should give 10% more for wages (presumably the assumption is that tasks will take 10% more time);
• Overtime should be paid at double the ordinary rate

There are two implicit assumptions behind these guidelines which we can prove to be false.
First, the guidelines assume that an average employment involves one task which takes 45 minutes; in fact, for an employment of just one task, the average time taken is actually 1 hr 36, over double the 45 minutes stipulated in the guidelines. This is unfair to the worker, as the hourly and daily rates are lower than the 45 minute rate, and it is not feasible to complete the work in half the time.

Second, the assumption of a six-day week is false. In 161 cases out of 162, the worker did not receive a weekly day off, and did not receive overtime in lieu.

As a result of these faulty assumptions, the guidelines are currently very complex and confusing to implement. Let us take a typical employment of 2 hours and 3 tasks. The employer may work out the monies owed in any one of the following ways:

• Three tasks should be paid at three times the rate for one (45 minute) task. Therefore 249 * 3 = 747. The absence of a Weekly Off means that overtime (double rates) should be paid for each task for, on average, 4.5 days in a month. Therefore 249/26 = 9.57. Rounded up to nearest 10 paise = 9.6. Double rates for three tasks, for 4.5 days per month = 9.6 * 2 * 4.5 * 3 = 259.2. So the total wage: 747 + 259.2 = 1006.2.
• The wage should equal the hourly rate, multiplied for two hours. Therefore 299 * 2 = 598. Increased for the overtime of 4.5 days, this figure rises to 805.
• The wage should equal the per day (eight hour) rate, pro rate for two hours. Therefore 1699 increased for the 4.5 days of overtime is 2287. This, divided by 4, is 572.
• Of course, if the family is more than 4 persons, there should also be a 10% surcharge!

If employers are not paying the minimum wage, we can hardly blame them: a spreadsheet is required to calculate it. The method is needlessly confusing. An hourly rate would cover all these issues and have the advantage of being something Domestic Workers can grasp and request. The calculation needs to be simpler before it can become widely used.
3.2. Minimum Wage Law Proposal
• We propose the following Guidelines:
• Domestic Workers involved in Sweeping, Swabbing, Cleaning Clothes, Cleaning Vessels, Dusting and other unspecified items should be paid a minimum of 151 (Basic) + 99 (VDA) = 300 Rupees per month for an hour’s work per day, regardless of the activity or the number of tasks;
• Domestic Work involving cooking and preparing food should be paid 350 Rupees per month for an hour’s work per day;
• Any part-hour or multiple of hours should be calculated pro-rate against the appropriate rate, above;
• Domestic Workers should be given a weekly day off. If this is not given, overtime should be paid: the resulting monthly rates should be 400 Rupees and 475, respectively. This is based on an overtime rate of double the standard rate and 4.5 overtime days per month;
• These rates should be altered each year in line with inflation.

Under these terms, our example of a two-hour, three-task employment with no time off would be paid 400 * 2 = 800 Rupees.

3.3. Advantages of this proposal
1) It is so simple that the law can easily be advertised and understood, increasing the likelihood that it will be followed;
2) An hourly rate will help to change the culture from Master-Servant to Employer-Employee: it is intrinsically more “capitalist” than the current prevalent method of paying a monthly “retainer”;
3) Under these terms, there is no need to make separate measures in case of a high number of members of the family, or a large square footage of work: the hourly rate will cover the excess.
4) Many Domestic Workers are being paid more than this already. The purpose of this proposal is to safeguard the vulnerable few who are being paid below this amount;
5) There is an easy rule to which to refer in cases of dispute.
•
3.4. Possible problems with the proposal
We can see two potential criticisms / issues with this proposal:
• It might incentivise Domestic Workers to dawdle on their chores;
• It might cause Employers to make unreasonable time demands on the Workers.
3.4.1. Domestic Workers might extend their work unnecessarily
We think this is unlikely: first, the Domestic Worker tends to have several consecutive employments lined up and the Employer tends to determine the times at which the Worker can come. There is little leeway on this for the Worker.
Second, the Worker has a family to run, children to look after and chores of her own to complete, and she needs to fit this in to a very small amount of time.
Third, the Domestic Worker already knows how long each task takes her, as evidenced in our survey. Therefore a rate would be renegotiated based on that information, rather than a task being timed each day and paid accordingly. The renegotiation would be a one-off task, and there would therefore be no benefit to the Worker in dawdling.

3.4.2. Employers might make unreasonable time demands
This is possible. However, we are mostly talking about renegotiating rates for existing employments, where the hours worked are already known.
It is possible that in an effort to speed up the Workers, Employers will withdraw privileges such as food. However, this privation is perhaps a necessary part of the transition from a Master-Servant culture to one of Employer-Employee: and the Domestic Workers are happy to accept this eventuality.

4. Minimum wage should be increased
The minimum wage should be increased: it should be a fair wage, relative to other unskilled industries; it should be a Living Wage, able to cover a significant portion of expenditure, and it should be commensurate with the market value of the service provided.
4.1. Minimum wage should be a Living Wage
Our research shows that both the current prevalent wages and the current Minimum Wage are insufficient to allow even the most basic standard of living. Even working for 8 hours a day, every day with no day off, no holiday and no sick pay, a Domestic Worker can bring in just over a third of average family expenditure if she is paid according to the Minimum Wage. Note that this is the average expenditure of families of Domestic Workers, living in slums.
There are two ways in which we can demonstrate that Domestic Workers cannot live on the current Minimum Wage. The first is by considering their expenditure: to what degree can the Domestic Worker support the needs of her family? The second is loans: to what extent are loans being taken for consumption (basic daily needs)?
4.1.1. Insufficient wage to cover expenditure
Below is the average expenditure by category for the Domestic Workers we surveyed. The total average monthly expenditure is 5189 Rupees, including loan repayment and saving.

Please note: school fees are 1221 on average, but 1741 on average for families with children under 12; loans cost 817 per month on average, but among only those with loans, they cost on average 1148.

The average total stated family income per month is 4267 Rupees; a shortfall of over 900 Rupees per month. We can only assume that this shortfall between expenditure and family income is made up through child labour, prostitution and criminal activity.
On average, a Domestic Worker works for 5 hours, performing 3 tasks, every day, with no days off. The average Domestic Worker is one of 3 earners supporting 6 family members. In 5% cases, the Domestic Worker is the only earner, supporting on average 4 family members. In a third of all cases, the Domestic Worker is either the sole provider, or one of two providers, for an average family of over 4 .
The income of the Domestic Worker is therefore pivotal to the survival and wellbeing of the family. But just what can she contribute?
According to current minimum wage legislation, an average Domestic Worker should receive 1514 Rupees , a quarter of the expenditure needs of the family. According to our survey, the average total payment for a Domestic Worker working between 5 hours and 5 hr 30 is 1269, a fifth of the expenditure needs of the family. According to our proposed method of working out the minimum wage, the total payment for a Domestic Worker working 5 hr 17 would be 2118, or a third of the expenditure needs of the family.

The table below shows what proportion of family expenditure a Domestic Worker could support, for different numbers of hours per day for each of the three methods :

Even working a full eight-hour day, every day, every week, with no pay for holiday or illness, a Domestic Worker could only hope to support 39% of the average household expenditure, or 2267 Rs, under the current Minimum Wage, requiring at least one other member of the household to be employed, on a better salary. We should remember that it is rarely feasible for a Domestic Worker to work 8 hours per day because of the other duties on her as wife and mother; we should also remember that the Average Expenditure we are talking about is the average expenditure of the very poorest members of our society; and finally we should remember that the prevalent rates are lower than the current Minimum Wage. 5800 total expenditure represents a meagre and impoverished existence, and the Domestic Worker cannot fund even a third of it.
4.1.2. Taking loans to make ends meet
Further proof, if proof were needed, that Domestic Workers are not able to support themselves and their families on this wage is found in the prevalence of loans for consumption.
Two-thirds of all Domestic Workers surveyed had a loan at the time of questioning. Most are short-term loans owed to slum lords who charge extortionate interest: a typical case is a loan of 6000 Rs over 6 months, paying 1500 per month, or 9000 total. That is a 100% annual interest rate.
Of the loans detailed, 85% were for consumption rather than investment: in the table below only Vehicle and House loans (highlighted) can conceivably be for investment; in all other cases, it is clear that the income is insufficient to cover basic needs such as Health and Education.

4.2. Minimum wage should be a fair wage, relative to other unskilled industries
Compare to agriculture, construction.

4.3. Minimum wage should be Market Value
Domestic Work is a service industry: it doesn’t create GDP by itself, but enables GDP to be made. We surveyed 25 Employers of Domestic Work, and 70% said that they hired help because it enabled them to work. Other reasons were also given, including extra time with the children (20%), and extra time on leisure (25%) (respondents could pick more than one answer).
In a typical Labour Market, Supply and Demand would ensure that employees of a given industry were paid the market value for their services: two mechanisms would ensure this. First, supply and demand: if there was too much supply (too many people for each job), the wages would drop, and if there was too much demand, the wages would rise. Second, collective action. If the wages were not commensurate with the value of the product or service, the union representing the workers would make relevant demands, and back up their demands with collective action if necessary. Thus, the wages would reflect the value of that labour to the economy at that time.
In Domestic Work, neither mechanism is in place. Supply and Demand do not reach an equilibrium because:
• Information about wages and work is not public;
• Workers tend to stay in one household for many years, rather than looking for more work for financial gain;
• The labour “market” doesn’t operate as a market, and the work is not seen as work.
Secondly there are no collective organizations to defend the rights of the workers. This makes it very likely that the wages of the workers do not reflect the value of their work to the economy (i.e. they are undervalued). The opportunity cost of not being able to work to the average employer, earning 30,000 Rs pcm, must be greater than 415 Rs pcm (which is the average monthly pay per employment).
Without forming collective action, and making information public, we shall never know the true value of this work to the economy. But we do know that it must be at least the wages the workers are currently being paid. In Bangalore, it is estimated that there are 400,000 Domestic Workers; according to our survey they have on average 2.8 employments and earn a total of 1167. Thus in Bangalore alone, the economic value of Domestic Work is at a very minimum 467 million Rupees.