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Economic Survey Calls For A Simpler And More Inclusive Minimum Wage System

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The Economic Survey 2019, released on Thursday, makes a case for a more inclusive and simplified minimum wage system in India that will tackle the problem of low pay and wage inequality.

 

The survey identified that "the present minimum wage system in India is extremely complex with 1,915 minimum wages defined for various scheduled job categories for unskilled workers across various states."

However, despite the complex structure, the Minimum Wages Act,1948 does not cover all wage workers it said. "One in every three wage workers in India has fallen through the crack and is not protected by the minimum wage law."

The problem

The problem

In 1948, India was one of first developing countries to introduce a Minimum Wages Act. Both Central and State government set these rates in 'scheduled' employment according to skill levels, location and occupations.

Over the years, recommendations were made to include household needs, child's education, medical requirements, etc.

The system has now become very complex with nearly 429 scheduled employments and 1,915 scheduled job categories for unskilled workers. There are variations not only across states but also within states in terms of schedules and minimum wage rates.

"The number of scheduled employments varies from 3 in Mizoram to 102 in Assam," while "the notified lowest minimum wage rate (per day) varies from Rs 115 in Nagaland to Rs 538 in Delhi."

Why was national level minimum wage never introduced?
 

Why was national level minimum wage never introduced?

The Economic Survey said that the idea of a national level minimum wage has been debated since the enactment of the Minimum Wages Act due to "wide disparities in economic development and large variations in cost of living between regions and states."

Why is a change required?

Why is a change required?

While minimum wages have had insignificant impact on employment levels, "a well designed minimum wage system can be a potent tool for protecting workers and alleviating poverty, if set at an appropriate level that ensures compliance."

The survey further said, "International experience has shown that relatively simple systems are more effective and usually complex systems are least effective."

Recommendations of the Economic Survey 2019

Recommendations of the Economic Survey 2019

  • It calls for support of rationalisation of minimum wages as proposed under the Code on Wages Bill that amalgamates the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976 into a single piece of legislation.
  • The definition of wage in the new legislation should subsume the present situation of 12 different definitions of wages in different Labour Acts.
  • Central Government should notify a "national floor minimum wage" that can vary across the five geographical regions of the country. Thereafter, states can fix the minimum wages, which shall not be less than the "floor wage" set by the central government, thus bringing some uniformity across the country and making all states almost equally attractive from the point of view of labour cost for investment as well as reduce distress migration.
  • Minimum wage should be based on either of the two factors viz; (i) the skill category i.e unskilled, semi-skilled, skilled and highly skilled; and (ii) the geographical region, or else both.
  • The proposed Code on Wages Bill should extend applicability of minimum wages to all employments/ workers in all sectors and should cover both the organized as well as the unorganized sector.

Read more about: minimum wage economic survey
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