The employment-linked incentive schemes proposed in the budget could ease the compliance burden for the private sector but pose a challenge in attracting entry-level jobs with minimum wage “disconnected” from the cost of living.

Three employment-linked incentive schemes were announced in the budget with an outlay of ₹1,07,000 crore covering 290 lakh beneficiaries. The schemes will have an enrolment duration of up to two years and a maximum expenditure duration is six years. With the internship programme and the upgradation of ITIs, the total central outlay across schemes is ₹2 lakh crore covering 410 lakh beneficiaries.

“It was important to incentivise the private sector to create formal jobs. A lot of large private players were not able to compete with unorganised players because of the high cost of compliance in the form of contribution to provident fund, ESI (employees’ state insurance), statutory bonus, gratuity, professional taxes,” said Balasubramanian A., senior vice-president and business head consumer, TeamLease.

“This is a complete savings for the unorganised players. So every time the private sector looks to add workforce in the entry-level, this was emerging as a concern.”

However, the private sector may find it difficult to attract employees, particularly in Tier 1 locations due to wages not commensurate with the living costs.

“A big challenge is in the metro and tier 1 locations where minimum wages are disconnected from the cost of living. So despite incentives, I think it is going to be a challenge attracting 4 crore people,” said Balasubramanian.

“There is a need to consider switching over from minimum wages to living wages,” he said.

“But that can only happen when the productivity levels are raised to justify the upward movement in wages,” he said.

The Centre needs to make significant investments in education, skill development and labour market reforms, among other areas. “That way, the schemes announced in the budget provide a comprehensive framework in the right direction,” he said.

In March, the International Labour Organisation (ILO) reached an agreement on a living wage.

A living wage needs to offer “a decent standard of living for workers and their families, taking into account the country circumstances and calculated for the work performed during the normal hours of work,” it said.

The Indian government is reportedly looking at replacing minimum wages with living wages, with the ILO endorsing the concept.