Garment exporters in India say raising the minimum wages for contract labour to Rs 10,000 could result in a sharp drop in exports and lower employment. They say that with the proposed increase in wages, the industry will not be able to exercise its flexibility of engaging more labor to meet its peak-time requirements and will lose to competitors in Bangladesh and China, who already have a cost advantage.

The industry witnesses peak demand between October and February, while orders decline by around 30 per cent in other seasons.

According to exporters the higher wage burden could lead to a 10 per cent decline in export turnover and a proportionate decline in employment. The higher contract wages would also lead to a violation of wage parity norms (vis-à-vis workers on the rolls of a company) and lead to unrest in the industry.

The proposed wage hike is an effort to check exploitation of labor employed by the industry on a contract basis. If the provision is uniformly implemented across all states, the result will be an over 90 per cent increase in wages for contract labor in states such as Orissa and Rajasthan and over 30 per cent in most other states.