Minimum Wage Revision in Karnataka: A Conflict Between Worker Welfare and Industrial Viability

Q: What are the constitutional and legal foundations of minimum wages in India, and how have they evolved with the introduction of the Labour Codes?

Minimum wages in India derive their constitutional legitimacy from the Directive Principles of State Policy, particularly Article 43, which calls for securing a living wage and decent standard of life for workers. Statutorily, the Minimum Wages Act, 1948 empowered State governments to fix and revise wages for scheduled employments at least once every five years. Karnataka’s recent wage revision exercise is rooted in this legal framework, although delayed beyond the mandated cycle.The landscape has evolved with the enactment of the Code on Wages, 2019, which subsumes the Minimum Wages Act, Payment of Wages Act, Equal Remuneration Act, and Payment of Bonus Act. The Code removes the concept of “scheduled employments” and introduces a national floor wage to be set by the Centre. States retain the power to fix wages, provided they are not below the floor wage. This transition has created interpretational disputes in Karnataka regarding whether the ongoing revision under the old Act can continue.Thus, the current impasse reflects not merely administrative delay but a structural shift in India’s labour law regime. The tension between federal autonomy in wage fixation and centralised standard-setting under the Labour Codes is at the heart of the controversy.

How inflation, legal challenges, and Labour Code implementation have complicated wage reforms affecting 1.77 crore workers.

Surya

•February 28, 2026•5 mins read

Workers await long-delayed Karnataka minimum wage revision

Not Started

1. Delay in Minimum Wage Revision: Legal Mandate vs Administrative Dithering

The Minimum Wages Act, 1948 mandates revision of wages at least once every five years. In Karnataka, the current revision cycle due in 2022–23 remains incomplete, with the last full revision having been finalised in 2016–17. As a result, more than 1.77 crore workers covered under the Act continue to await wage correction.

In April 2025, the State government proposed revised minimum wages ranging from ₹25,714 (unskilled) to ₹34,225 (highly skilled) in Zone 1 (Bengaluru), and ₹19,319 (unskilled) to ₹28,285 (highly skilled) in Zone 3. The draft covered 81 scheduled employments, including fixation for 18 new employments.

However, the proposal remains in draft form amid objections from industry bodies, deliberations in the tripartite Minimum Wages Advisory Board, and pending court cases.

Key Statistics:

Workers awaiting revision: 1.77 crore
Proposed wages (Zone 1): ₹25,714 – ₹34,225
Proposed wages (Zone 3): ₹19,319 – ₹28,285
Scheduled employments covered: 81

Delays in statutory wage revision weaken rule-based governance and erode workers’ real incomes. If periodic revisions are not institutionalised, labour protection frameworks lose credibility.

2. Methodology: Adoption of Supreme Court Guidelines (Raptakos Brett Case, 1992)

For the first time in Karnataka, wage calculation followed the Supreme Court’s guidelines in the Raptakos Brett case (1992). The Court had laid down principles for fixing minimum wages based on subsistence needs, including food, clothing, shelter and other essentials.

A significant methodological shift was the inclusion of a non-vegetarian diet (2,700 calories per consumption unit) in calculating food cost. Labour unions had long argued that over 80% of the State’s population consumes meat, making earlier vegetarian-based calculations unrealistic.

Industry bodies termed the proposed revision a “steep hike” and submitted over 150 objections/suggestions, arguing that the increase could hurt competitiveness.

Adhering to judicial guidelines strengthens constitutional compliance. Ignoring realistic consumption patterns in wage fixation risks institutionalising subsistence-level poverty.

3. Erosion of Real Wages: Inflation vs Variable Dearness Allowance (VDA)

Between 2012 and 2024, compounded inflation in Karnataka was calculated at 208.3%. However, wage increases through Variable Dearness Allowance (VDA) during the same period amounted to only about ₹5,814 per month, translating to roughly 58% increase for a worker earning ₹10,000 in 2012.

This indicates that VDA revisions have not kept pace with inflationary trends, resulting in erosion of purchasing power. In many sectors, current wages remain at subsistence levels despite rising living costs, including housing, education, and food.

“Minimum wage is already a subsistence wage.” — Meenakshi Sundaram, CITU

Inflation vs Wage Growth:

Compounded inflation (2012–24): 208.3%
Wage increase through VDA: ₹5,814
Approximate wage rise: 58%

If wages fail to track inflation, real incomes decline even when nominal earnings rise. Sustained erosion of purchasing power weakens domestic demand and social stability.

4. MSME Concerns and Competitive Federalism

Industry bodies argue that the proposed hike could adversely affect the MSME sector, which employs nearly 93% of Karnataka’s workforce. They contend that higher minimum wages compared to neighbouring States may undermine competitiveness.

Suggestions include incentivising enterprises to pay higher wages or exempting micro and small enterprises from uniform wage structures. The concern reflects the tension between labour welfare and industrial viability.

However, trade unions argue that underpaying labour to maintain competitiveness perpetuates exploitation, particularly of contract and casual workers.

Balancing labour protection with industrial growth is central to inclusive development. Excessive cost burdens may affect MSMEs, but inadequate wages undermine human capital formation and productivity.

5. Garment Sector: Gendered Labour and Wage Disparities

The garment sector, employing nearly four lakh women, has been excluded from the current wage revision. Historically, attempts to revise wages in 2009, 2010, and 2018 were delayed due to litigation.

Current monthly wages:

Unskilled: ₹12,818
Semi-skilled: ₹13,085
Highly skilled: ₹13,686

In contrast, highly skilled workers in the automobile sector in Zone 1 earn around ₹19,468 per month, indicating a gap of ₹4,000–₹5,000.

Past revisions show downward adjustments after tripartite decisions:

2018 proposed wage: ₹459.81/day (unskilled, Zone 1)
Revised to: ₹349.44/day (2019)
2023 wage: ₹401.07/day (unskilled); ₹434.48/day (highly skilled)

The garment industry competes in a highly price-sensitive global market, often constraining wage growth.

Persistent wage disparities in female-dominated sectors raise concerns under GS1 (women workers) and GS3 (labour-intensive exports). Ignoring such gaps reinforces gendered economic inequality.

6. Impact of Labour Codes and Legal Ambiguity

The notification of the four Labour Codes in November 2025 has complicated the situation. The Code on Wages, 2019 subsumes the Minimum Wages Act, 1948 and removes the concept of “scheduled employment.”

Industry representatives argue that states can fix minimum wages only after the Centre notifies a national floor wage. Trade unions contend that the Code provides sufficient scope for continuing the revision process already underway.

The Labour Department has sought legal opinion, and the decision is pending at the government level.

Legal transitions without clear operational guidance create administrative paralysis. Ambiguity in Centre–State roles under labour codes may delay welfare-oriented reforms.

7. Broader Governance and Development Implications

The minimum wage debate in Karnataka highlights multiple governance dimensions:

GS2: Federalism, role of judiciary, labour legislation.
GS3: Employment, MSMEs, industrial competitiveness.
GS1: Gender issues in labour markets.
Essay: “Balancing growth with equity.”

At its core, the issue reflects a tension between:

Protecting workers’ real wages
Maintaining industrial competitiveness
Ensuring legal and procedural compliance

The prolonged delay risks labour unrest, litigation, and erosion of trust in state institutions.

Minimum wage policy is not merely a labour issue; it is central to inclusive growth and social justice. Failure to resolve wage disputes in a time-bound manner weakens economic governance.

Conclusion

The Karnataka minimum wage impasse illustrates the complex interplay between labour welfare, industrial competitiveness, judicial guidelines, and evolving labour codes. While industry viability is a legitimate concern, prolonged delays in wage revision erode real incomes and weaken social protection frameworks.

A transparent, legally sound, and time-bound resolution—balancing inflation trends, subsistence norms, and sectoral competitiveness—will be essential to uphold both economic growth and workers’ dignity in a transforming labour market.

Quick Q&A

Everything you need to know

Minimum wages in India derive their constitutional legitimacy from the Directive Principles of State Policy, particularly Article 43, which calls for securing a living wage and decent standard of life for workers. Statutorily, the Minimum Wages Act, 1948 empowered State governments to fix and revise wages for scheduled employments at least once every five years. Karnataka’s recent wage revision exercise is rooted in this legal framework, although delayed beyond the mandated cycle.

The landscape has evolved with the enactment of the Code on Wages, 2019, which subsumes the Minimum Wages Act, Payment of Wages Act, Equal Remuneration Act, and Payment of Bonus Act. The Code removes the concept of “scheduled employments” and introduces a national floor wage to be set by the Centre. States retain the power to fix wages, provided they are not below the floor wage. This transition has created interpretational disputes in Karnataka regarding whether the ongoing revision under the old Act can continue.

Thus, the current impasse reflects not merely administrative delay but a structural shift in India’s labour law regime. The tension between federal autonomy in wage fixation and centralised standard-setting under the Labour Codes is at the heart of the controversy.

The proposed wage revision in Karnataka marked a methodological shift by adhering to the Supreme Court’s guidelines in the Raptakos Brett case (1992). The judgment expanded the concept of minimum wage beyond bare subsistence to include components such as food (2,700 calories per consumption unit), clothing, shelter, fuel, and education, along with a provision for children’s needs and medical expenses. For the first time, Karnataka included a non-vegetarian diet in calculating food costs, reflecting demographic realities.

This approach sought to align wages with real living costs rather than arbitrary percentages. The draft proposed wages ranging from ₹25,714 for unskilled workers in Zone 1 to ₹19,319 in Zone 3. However, industry bodies criticised the hike as “steep,” particularly for MSMEs, leading to legal challenges.

The significance of Raptakos Brett lies in its affirmation that minimum wage must approximate a living wage, not a starvation wage. By following this precedent, Karnataka attempted to ground wage fixation in constitutional morality, though its implementation remains contested.

The erosion of real wages stems from the mismatch between inflation and wage adjustments. Between 2012 and 2024, compounded inflation in Karnataka was estimated at 208.3%, while cumulative wage increases through VDA amounted to only about ₹5,814 per month. For example, a worker earning ₹10,000 in 2012 would earn ₹15,814 today—a 58% rise, far below inflationary growth.

VDA is indexed to the Consumer Price Index (CPI) and revised annually. However, unions argue that CPI calculations understate actual living costs and exclude modern necessities like mobile connectivity and data. Moreover, irregular base wage revisions compound the problem, leaving workers dependent on incremental VDA adjustments.

This gap reduces purchasing power and limits workers’ ability to participate meaningfully in the economy. As trade unions argue, minimum wage is already a subsistence wage; failure to keep pace with inflation transforms it into a poverty wage, undermining social justice objectives.

Industry bodies argue that a steep wage hike threatens the viability of MSMEs, which employ 93% of Karnataka’s workforce. Higher wages may increase production costs, especially in labour-intensive sectors like garments, potentially affecting competitiveness against neighbouring States with lower wage rates. In globally competitive industries, cost escalation could lead to relocation or automation.

However, this argument must be balanced against workers’ welfare. Persistently low wages suppress domestic demand, which is crucial for MSME growth. Higher wages can stimulate consumption, reduce attrition, and improve productivity. Empirical studies suggest that moderate wage increases often have limited impact on employment but positive effects on worker morale and output.

A balanced approach could include:

Targeted incentives or tax relief for MSMEs.
Phased implementation of wage hikes.
Productivity-linked wage frameworks.

Therefore, the debate is not binary but requires reconciling economic competitiveness with social equity.

The garment sector, employing nearly four lakh women, illustrates structural challenges in wage governance. Despite repeated attempts to revise wages (2009, 2010, 2018), litigation and administrative delays have stalled implementation. In 2018, wages were initially increased but later revised downward after tripartite committee decisions, reflecting power asymmetry between industry and workers.

Currently, a highly skilled garment worker earns ₹13,686 per month, significantly lower than ₹19,468 in the automobile sector. The exclusion of garment employment from the latest wage revision exacerbates disparities. Given the sector’s integration into global supply chains, wage suppression is often justified on competitiveness grounds.

However, most garment workers are women with limited bargaining power and weak union representation. Persistent low wages contribute to gendered economic inequality. The case underscores the need for transparent wage-setting, time-bound revisions, and mechanisms to balance export competitiveness with labour dignity.

The notification of the four Labour Codes, particularly the Code on Wages, 2019, has introduced legal ambiguity. The repeal of the Minimum Wages Act and the removal of ‘scheduled employment’ categories have led industry representatives to argue that States cannot fix new wages until the Centre declares a floor wage. This has stalled Karnataka’s near-complete revision process.

Trade unions, however, contend that the Code provides sufficient enabling provisions for States to continue wage revision processes. They argue that the delay reflects political hesitation rather than legal impossibility. The matter has escalated to the High Court, illustrating the tension between statutory transition and labour rights.

This contention highlights broader federal and governance issues: the balance between central uniformity and state autonomy, and the risk that transitional ambiguities may weaken labour protections. Ensuring clarity and time-bound decisions is crucial to prevent further erosion of workers’ rights.