How Lower Minimum Wage Terms May Hurt Indian Workers In The Gulf

Mumbai: Indian migrant workers, hit by the pandemic-led downturn, are confronted with a new challenge--a reduction in the Minimum Referral Wages (MRW) mandated by the government to protect them from exploitative employers abroad. MRW applies to poorly educated, low skilled blue-collar workers who have to produce an Emigration Check Required (ECR) passport when they seek to migrate to 18 countries for work.

The countries seeking ECR clearance include the Gulf Cooperation Council members and others like Sudan, Indonesia, Malaysia and Jordan. But MRW is most critical in the Gulf, a favoured destination for Indian migrants, due to the lack of minimum wage systems in these countries.

In September 2020, the overseas employment division of the Ministry of External Affairs (MEA) issued two circulars fixing the reduced MRWs thus: Bahrain, Oman, Qatar and the UAE at $200 per month, Saudi Arabia at $324 and Kuwait at $245 in the case of work-visa holders and $196 for domestic workers. Implemented across all skill levels and occupations, the reduction in MRW ranged between 30% and 50%.

The government reasoned that this reduction would ensure that Indian workers do not lose out on overseas employment opportunities given the economic conditions due to Covid-19. Indian workers have higher wages than their South Asian counterparts, leading to a decline in recruitment of Indians in the Gulf and an increase in recruitment from other South Asian nations such as Bangladesh and Pakistan, the rationale went. However, civil society organisations and migration experts fear that lowered MRW could actually lead to job losses, exploitation, and, in the long-run, a less competitive Indian migrant workforce.

Migration experts and civil society organisations believe that reducing MRWs could increase employment of Indian workers in the short-term, but these gains will last only until other source countries for migrant workers also do the same. This could hit the competitive edge that Indian workers hold. Migrant unions also point out that workers who signed employment contracts before the reduction of MRWs would now have to either accept lower wages or let go of the employment opportunity.

The reduction in MRWs is uniform, that is it fixes the same wage level across occupations in one country, as shown by the recent data on consolidated MRWs from the eMigrate portal. For example, a cook, a nurse, a domestic worker and a machine operator, all have an MRW of Rs 14,575 in Bahrain. In Saudi Arabia, the MRW across these occupations is fixed at Rs 14,083. The variations depend on the cost of living.

Telangana Protests

Civil society organisations, most notably the Emigrants Welfare Forum of Telangana, a non-profit organisation for migrant communities and migrant rights, have protested. The first organisation in India to raise this concern, the forum wrote to the state's NRI affairs minister who then appealed to the MEA to raise the MRWs and ensure that "migrant workers' interests are protected".

A 10-member delegation of the Telangana Gulf Workers Joint Action Committee (Gulf JAC) organised a 'Chalo Delhi' programme in early March 2021 seeking repeal of the circulars. The Emigrants Welfare Forum has also filed a public interest litigation (PIL) in the Telangana High Court in this regard.

The Union Minister of State for External Affairs, V. Muraleedharan, stated in parliament that there was no proposal to further review the referral wages. In response to a question by Pinaki Mishra in the Lok Sabha, the minister stated that MRWs were reviewed because of the economic crisis following the pandemic.

Protection from exploitation

The Indian migrant population--450 million internal migrants and 18 million emigrants--was heavily impacted by the Covid-19 outbreak and subsequent countrywide lockdown measures. Internally, migrants were locked down in expensive urban areas with limited resources and loss of income and internationally, the Indian government undertook the Vande Bharat Mission to bring home stranded emigrants from various countries. In April 2020, following consultations with the recruiting industry and state-level protectorates, the mission began to repatriate Indians from abroad. As of March 2021, the mission had completed 10 phases, including over 14,000 flights. With their workplaces closing down due to lockdowns, Indian migrants in the Gulf countries found their employment terminated or were placed on forced leave, with no wages or social security benefits.

For emigrants seeking employment in certain countries, including the Gulf, the Indian Emigration Act of 1983 requires those in the ECR category to get clearance from the Protectorate of Emigrants before migrating. (This includes those with low educational qualifications or those who are semi-skilled or unskilled.) It was to protect these workers that the Indian government began the system of MRWs, which evolved from the concept of minimum wages.

For emigration clearance out of India, MRWs prescribe the least wage acceptable to the Indian government. Many key work destinations for Indian emigrants do not have national minimum wage systems, according to a 2018 policy brief from the International Labour Organization on wage systems in Arab states. For example, Qatar is the only GCC country with a statutory minimum wage for all workers, announced via a statement by the Qatar Ministry of Administrative Development, Labour and Social Affairs in 2020.

India's Minimum Wages Act, 1948, provides clear guidelines for the fixing, regulating and revision of domestic minimum wages based on occupation types, schedules and other factors. But MRWs do not have a statutory foundation and are mostly fixed through executive orders from the Ministry of External Affairs. The living costs and recommended wage rates in destination countries are taken into account while fixing the MRW. There seems to be no uniform criteria for the referral wage rates across occupations or skill levels, a 2016 assessment of the MRW System by ILO India noted.

India's referral wages were significantly higher than the prevailing wage rates in Saudi Arabia, UAE and Kuwait, said the 2016 ILO report. But the "reported actual wages''--that is, wages reported by migrant workers on the ground--in low-skilled occupations are lower than the referral wages. This showed that employers' wage preferences in these countries were below India's MRWs, said the report, which also flagged the issue of contract substitution--the practice of duplicate contracts issued at destination, which reflect lower wages than the MRW-compliant contract signed during emigration clearance.

'No consultations'

As per the September 2020 MEA circulars, the MRW for emigrants to the Gulf has been reduced by 30-50%. The previous referral wages were fixed specific to skill levels and occupational categories, but the current slabs apply to all Indian emigrants across skill/occupational levels.

The Telangana government criticised this move on the grounds that it will give destination countries a reason to lower the prevailing wage rates for migrants. "Our major concern is why the government didn't consult any stakeholders before reducing the MRW. What is the reason behind the reduction, did foreign countries ask for it, and also the basis of the reduction to 200 dollars?" said Bheem Reddy, president of the Emigrants Welfare Forum of Telangana.

52% workers in Arab region have no minimum wage cover

Fair and ethical recruitment in the international labour market has become an area of interest for governments, international organisations and other stakeholders. The concept of ethical recruitment does not have a universal definition and various international organisations have interpreted it differently. The International Organisation for Migration's (IOM) International Recruitment Integrity System (IRIS), for instance, consists of seven principles: fundamental worker rights, ethical and professional conduct, respecting freedom of movement, transparency in terms of employment, confidentiality and data protection, access to remedy, and prohibition of recruitment fees for jobseekers.

The 2012 Dhaka Principles for Migration with Dignity, developed by the Institute for Human Rights and Business, also provide a roadmap for ethical overseas recruitment of migrants. The fifth among the Dhaka Principles postulates that "wages are paid regularly, directly and on time", and that employers should pay at least the legal minimum wage to all workers or the appropriate prevailing wage.

The recent ILO Global Wage Report 2020-21 states that 90% of ILO member-states have minimum wages, and the GCC countries implement them the least. Within the GCC, Kuwait and Oman have minimum wage specifications, but only for their nationals. There is no minimum wage system in Saudi Arabia, Bahrain or the UAE. The ILO report also states that the share of wage workers residing in Arab countries with no minimum wage is 52%.

Lower than Nepal's MRWs

Indian migrant workers face direct competition in the job market from two neighbouring countries -- Nepal and Bangladesh. Of them, only Nepal issues MRWs.

The 2020 Nepal Labour Migration Report outlines the process of calculating referral wages based on living costs, prevailing wages and referral wages of other nationals in destination countries. Nepal's MRWs for low-skilled workers were lower than those set by India, as per the 2016 ILO report. But with the recent revisions, Indian MRWs are now below Nepal's as reported by Nepal's Ministry of Labour, Employment & Social Security.

"Industries and trades like construction and facility maintenance are the only ones where MRW is higher than what the overseas market actually pays and these trades are always in high demand," said Amit Saxena, head of Ambe International, one of India's oldest private recruiting agencies, and director at the Federation of Indian Emigrants Management Councils and Associations (FIMCA). "Indian workers were more expensive than workers from other countries for these specific trades. This is reflected in the falling share of Indian workers in the GCC recruitment market, compared to recruitment from Pakistan and Bangladesh."

As Indian migrants lost favour, countries like Bangladesh and Pakistan stepped in--in 2016, the share of migrant workers going to Saudi Arabia from Bangladesh increased from 7% in 2015 to 19%. In the same year, the share of Pakistani workers going to Saudi Arabia increased from 48% in 2014 to 60%, this 2017 article published in Outlook India noted.

A. Didar Singh, former secretary to the government of India (Ministry of Overseas Indian Affairs) and a migration expert, was of the view that the revision in MRW though well-intentioned, may have adverse impacts. workers. "While it is fully appreciated that the reduction in MRW by the government is a move taken in the interest of workers migrating to the Gulf, it actually lowers the Indian brand which has been built over the years," he said. "Indians are preferred as migrant workers in the Gulf due to various reasons and the government needs to nurture and enforce this preference."

'Remittances will fall'

While higher referral wages may reduce the preference for Indian migrant workers, the question is will reduced minimum wages guarantee increased employment opportunities? The decision to reduce MRWs may cause a rise in demand for Indian workers, but this may be temporary, said migration activists.

"The major players in the international labour market, especially the other South Asian countries, would definitely either reduce their minimum referral wages or supply skilled manpower at the same cost. The reduction in the referral wages would add to the existing vulnerabilities of Indian workers," said Rafeek Ravuther, founder of the Centre for Indian Migrant Studies, a Kerala-based civil society organisation working on emigrant welfare.

In the economic crisis created by the Covid-19 pandemic, more migrants may lose their jobs, not have contracts renewed, or may be forced to accept lower wages, said Reddy. "There are two options for the workers--either they sign these contracts or return to India. Remittances are also bound to be affected by this reduction."

In setting the MRW, factors such as sectors, skill levels, market trends and rights of migrant workers must also be considered. "A more scientific MRW would help if it takes into account the concept of cost-to-company of compensation as well -- this would include, along with the salary, the cost of food, accommodation, transport, medical that is provided or paid by the employer," said Saxena. "Right now, the MRW does not incorporate better opportunities for Indians especially where they may get facilities like paid leave, gratuity, accomodation, overtime, travel compensation, paid vacation, etc."

Stakeholders such as civil society organisations and trade unions should have a say in the MRW process in order to keep Indian migrants safe from exploitation, Ravuther said. "Country-specific and sector-specific minimum referral wages can only be developed with the help of non-government actors and grassroot level organisations."