A recent post on social media by a resident of Gurugram, regarding the fixing of domestic wages by a housing society in the city, sparked a much-needed conversation on a practice that is quickly becoming the norm across the country. Similar instances have come to light in Bengaluru and Hyderabad.
In a city of high rises, our humanity keeps sinking lower. A society collectively fixes house helps rates, a mere Rs 1,000 a month to clean utensils twice a day! Accept or be debarred! We preach fairness, but as soon as people get power, we use it to exploit anyone we can! pic.twitter.com/fHg6InIFQR
— Gaurav Gupta | Realtor (@YourRealAsset) November 8, 2024
These conversations on fixing the wages of domestic workers usually begin with complaints on the society’s common chat groups, on apps like Whatsapp or Telegram, by a resident who is of the opinion that the domestic worker who cleans and cooks at their house is demanding a monthly wage that is too steep. Very soon, the conversation on the chat group snowballs into a need for the residents of the society to fix ‘rate cards’ specifying wages per task, so as to prevent the ‘exploitation’ of residents by domestic workers, who tend to be women from marginalised castes and who have no protection under labour laws.
The average resident of these housing societies tends to be a well-heeled employee of a multinational company who, on any other day, would wax eloquent about the virtues of the free market. This enthusiasm for the market economy rarely translates into support for the free market determining the wages of domestic workers. After all, the wage demands by domestic workers will generally be based on her knowledge of the wages being paid by other households in the same housing society as also the supply and demand for labour.
By prescribing ‘rate cards’, these well-heeled residents of housing societies are distorting the labour market in the neighbourhood, opening the door for domestic workers to be underpaid and exploited.
Of course, not all such attempts to fix wages are successful since the success or failure of such schemes depends on the supply of labour in a neighbourhood and the size of the housing society. If there is a scarcity of labour, such wage fixing schemes will likely fail.
However, domestic workers are not the only ones at the receiving end of such price rigging by housing societies. There are some anecdotal accounts of larger housing societies colluding to fix rents. The home owners of the housing society should ideally be competing with each other in the market for rented housing. However, when home owners fix the minimum rent through a common rental office, they are in effect distorting the rental market in the neighbourhood. Demand and supply of houses will no longer determine rents in such scenarios.
Given the size of some of these housing societies, such collusions can have a significant impact on rents in the entire neighbourhood. This collusion generally means that those looking to rent houses will have to cough up larger rents than would have been the case in a competitive rental market, where house owners were competing with each other to attract renters.
Illegal in most countries
Both of the above instances – whether it is collusion to fix wages or rents – are illegal in most Western countries under laws meant to protect competition in the free market. For example, in the United States, wage fixing by employers is considered illegal and can be the subject of both civil and criminal enforcement actions.
There are a series of cases in the US where healthcare companies have been successfully sued under antitrust laws for colluding to fix the wages of nurses. There have been other cases where au pairs (who are typically live-in nannies) have sued employment agencies for colluding to fix their wages at below market rates. One case, which also involved violations of other American labour laws, resulted in a US$65 million settlement in a class action litigation filed on behalf of 90,000 au pairs. Both these examples demonstrate how competition law can protect the working class from economic exploitation.
Similar to the US, competition regulators in many European countries are increasingly turning their attention to wage-fixing by employers, who should be competing with each other for the services of employees.
For a while now, rent fixing too has been considered a violation of competition law in countries like the US. More recently, the American government went a step ahead to restrain rent fixing through algorithms. In a civil suit filed earlier this year, the Department of Justice alleged that Realpages, a company providing property management software, facilitated an unlawful scheme “to decrease competition among landlords in apartment pricing” by using non-public pricing information provided by landlords to train its algorithm, which would then provide suggestions on rental pricing.
Illegal under Indian law?
There is a very strong case to argue that both wage and price fixing by housing societies is illegal under Section 3 of the Competition Act. This provision of the law prohibits any persons or association of persons from entering into an agreement for acquisition of services that may have an appreciable adverse effect on competition in India.
However, there do not appear to be any cases of the Competition Commission of India actually investigating wage fixing in any sector of the economy. This could be for a variety of reasons, including the fact that investigating and unearthing evidence of wage fixing is generally very difficult. But even if a formal investigation is difficult to execute, the CCI should consider studying the issue of both wage fixing and rent fixing by housing societies and conduct advocacy in the press to inform housing societies that their conduct could draw scrutiny under India’s competition law.
An alternate solution, which may be more effective in drawing red lines for housing societies, is for states to amend their legislations on regulating rent, ownership of housing, and management of housing societies to specifically prohibit collusion in the fixing of wages and rents by housing societies.
The ideal long-term solution against wage fixation is strong labour unions for domestic workers. But that appears to be a pipe dream for most domestic workers in urban India.
The writer is co-author of Create, Copy, Disrupt: India’s Intellectual Property Dilemmas.
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