Indira Rajaraman: Working on the fine print

The incident with the Indian consul in New York should be used to work out the legal minutiae of the mutual diplomatic engagement between India and the US

The December arrest of India's deputy consul general in New York City for not paying minimum wages to her Indian housemaid highlights the critical failure on the part of both countries concerned, in not having worked out the fine print of their mutual diplomatic engagement over more than 60 years.

Domestic helpers for Indian diplomats in the United States had official sanction on both sides. The US has a whole visa category for such employees of foreign missions; and, on the Indian side, domestic staff are actually given an official passport and airfare. That being the case, there was failure on both sides in not having established which law the contract entered into was to be in accordance with, whether with that in the particular location of the diplomat - since labour laws in the US vary by state - or with Indian law, since the contract is between two Indian nationals, performing duties in a primary or secondary capacity for the Indian state, outside the jurisdiction of India. And if the consonance required varied according to whether the officials were posted to a mission, or to a consular office, that too should have been specified in the small print.

Once the formal framework was in place, it would have been a relatively minor matter to design an enforcement mechanism, especially in the US where there is a well-developed banking system. The US could have asked for an annual report on all domestic staff, on the contracted wage in each case, and bank records of wages actually paid. Concern about enforcement of hours worked could have been met through registration with, and periodic reports to, a local social welfare officer.

Even if these details were initially seen as too minor, the Indian diplomatic establishment should have been alerted to the problem by a number of cases in the recent past - involving Indian consular officials in New York, as it happens - where the validity and enforcement of these wage contracts were challenged by a succession of Indian domestic employees wanting to skip out.

More even than these individual incidents, there should have been awareness in the ministry of external affairs of the priorities of the Obama administration, and the implications for immigration and minimum wage requirements in particular. Every diplomatic mission of any size has an economics counsellor. This official in the Indian mission in Washington is given the designation of Economics Minister. Way back after the American elections in November 2008, there should have been a report filed to the external affairs ministry by the Economics Minister in Washington, of the areas where policy in the US was liable to change, and the implications for Indian interests. The push towards minimum wage and immigration reform, and tightening the rules on human trafficking, was inevitable, given the political support base on which President Obama got elected.

As it happened, the economic slowdown following the great crash of September 2008 kept the minimum wage issue on the back burner for a while. But at the start of calendar 2013, when there was the first faint flush of an economic turnaround, President Obama in his State of the Union message pledged to deliver on his promise to raise the minimum wage to $9 an hour. In the March 2013 Budget of New York Governor Andrew Cuomo, a Democrat, there was an announcement of a three-year phased hike in the minimum wage, to $8 an hour starting on January 1, 2014, and going up to $9 an hour by the start of 2016, the year President Obama demits office. Twelve other states announced a hike in minimum wages starting with New Year's Day 2014. These developments should have found a prominent place in the reports of the Economics Minister to the external affairs ministry, with the implications in terms of tighter minimum wage enforcement, particularly in New York state, clearly anticipated and highlighted. A recent (January 2014) letter signed by 75 economists including some marquee names, saying there is no research evidence that a hike in the minimum wage retards the demand for labour, even in a sluggish economy, adds further ballast.

The US Mission in India takes the business of reporting on the Indian economic environment so seriously that in addition to an Economics Counsellor, who is a career diplomat reporting to the State Department, there has in recent years been an additional Financial Attache, deputed from the Treasury Department, who files an independent report on economic developments in India and the region.

With that kind of feedback from our economic observers in the US, this whole unfortunate incident could have been anticipated, and headed off. Now that the damage has already occurred, the opportunity to introduce systemic correctives to the diplomatic relationship between the two countries should not be lost. On the Indian side, there should be total willingness to conform to whatever conditions the US wishes to impose, as a host country. And of course, that has to go with full reciprocity, where India is the host country.

Some Indian-American commentators, acutely embarrassed by the incident, have lambasted the home country for not having minimum wages and enforcement for domestic workers. They are wrong about there being no minimum wages, but are right about the lack of enforcement of working conditions in the entire arena of informal hiring. Within this arena, domestic workers actually have an advantage over other sectors in that they get to negotiate their pay and other conditions directly with their employer. In other intermediated sectors like construction, most notoriously, what workers actually get in hand is much below what contractors make them sign for, and this disparity is very large in the case of female labour in particular. Domestic work agencies that have recently sprung up also engage in this sort of thing, with of course some honourable exceptions. But most domestic hiring is still done in a disintermediated way, with nothing going to a middle agent between employer and employee.

The writer is a retired economics professor