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Statutory national floor level minimum wage for India

, June 3, 2015, 1 Comments

minimum wage india-MarketExpress-inHistorically, determination of wages is one of the most complex issues in economic theory. The complexity primarily arises due to the imperfect labour market conditions and prevalence of structural rigidities such as existence of trade unions and collective bargaining which tends to distort the market wage rate.

The complexity is further compounded in a labour abundant country like India where labour market is characterised by the existence of large-scale disguised unemployment and under employment. Therefore, if left to market forces, there is every possibility of wage rates, particularly in the unorganised sector, falling below subsistence level, notwithstanding the Malthusian hypothesis of wage rates settling at the subsistence level.

There is lot of conceptual ambiguity in defining ‘minimum wage’. Often, concepts such as ‘fair wage’, ‘living wage’ etc. are used to broad base the definition. In the Indian context, for the first time in 1957 the Indian Labour Conference(ILC), the Apex tripartite forum to deal with labour matters ,suggested the norms for fixation of minimum wages which included specific calorie requirements of an average worker, besides clothing , fuel, lighting and rent requirements of an average household defined as consisting of 3 consumption units. Subsequently, the Honorable Supreme Court, in the case of Reptakos & Co.v/s it’s workers (1992) broad-based the norms.

However, the norms suggested by ILC and by the Supreme Court did not have any binding force and were in the nature of broad guidelines and it was left to the Centre and the States to evolve an appropriate mechanism to give effect to these guidelines. However, there is no commonality in the procedure followed and the existing mechanism of fixation of minimum wages is, to say the least, quite unsatisfactory. This, therefore, needs a considered relook by all concerned.

Without getting into the definitional semantics and procedural issues concerning fixation of minimum wages, it would suffice to say that minimum wage is intended to provide for the basic subsistence needs of labour, particularly in the unorganised sector.

The International Labour Organisation (ILO), the Apex International body on labour matters, supports statutory fixation of minimum wages in member countries to protect the interests of vulnerable segments of the workforce.Presently, most of the countries have statutory enabling provisions for fixation of minimum wages, even though there is considerable variation about the methodology adopted, procedures followed and other operational details.

The Indian Scene

In India, the Minimum Wages Act was enacted in 1948 primarily to protect the interest of unorganised labour. As labour is a subject listed in the Concurrent list of the Indian Constitution , under the Act, both Centre and the States are empowered to fix and revise minimum wages and ensure its enforcement.

Presently there are 45 scheduled employments notified in the Central Sphere and as many as 1679 scheduled employments in the State Sphere. The number of notifications issued by both the Centre and the States from time to time under the Act is very large and often difficult to keep track of even by a discerning labour law practitioner. Further, the list of scheduled employments is subject to inclusion/exclusion from time to time making the scene all the more exasperating. Needless to mention, a simplification in this matter is long over due!

There is considerable variation across States on the minimum wages fixed for scheduled employments in the State sphere.

The range of minimum wages for unskilled workers in different States/UTs is very wide creating implementation problems.

Further, the wide variation of minimum wages across States and across different scheduled employments makes enforcement difficult. Besides, it leads to unintended labour migration from one state to another with consequent fall outs.

The Way Out

In view of the wide disparity in minimum wages across states and scheduled employments, the National Commission for Rural Labour (NCRL) in 1991 recommended for a National Floor Level Minimum Wage(NFLMW) as a non-statutary measure. This was to be a single wage rate which will set the bench mark throughout the country and below which there would be no rate .This was fixed at Rs. 35 /per day in 1996.

It was revised from time to time and since July. 2013, it stands at Rs. 137/ per day. Besides, a variable dearness allowance (VDA) was also introduced which sought to neutralise the impact of price rise as reflected in the conumer price index.

As on date, most of the States/UTs have accepted NFLMW and VDA and use them as bench mark for fixation of minimum wages. As per available information, 11 States/UTS are yet to adopt NFLMW and VDA. Since both NFLMW and VDA are non-statutory,Centre is not in a position to force the non-accepting States/UTs into accepting them.

With a view to have uniform applicability of NFLMW across all States/UT, the Central Government has been making efforts to make them statutory. This, however, necessitates an amendment of the MWAct. The proposal to this effect has already been discussed in several fora including the ILC. Following extensive consultations, a Bill has already been drafted for consideration.

Since most of the State /UT Governments have already accepted NFLMW, it is felt that it should not be difficult to take the remaining States/UTs on board with a view to build consensus on this issue. Besides, as market wage rates are in most cases higher than NFLMW, the major employer groups including industry should not be unduly concerned about the financial implications of this.

The measure will have the added advantage of help reducing inequality in wage rates, albeit in a very small way and reduce poverty by ensuring higher wage rates to the marginalized unorganized work force along with protecting their wages from inflation through VDA. Government would do well to bring in this small change at the earliest which will go a long way in promoting harmonious industrial relations.

The views expressed in the article reflect the personal views of the author.

  • PVRajeevS

    NFLMW is perhaps the best solution to the problems on the Minimum Wages front. The suggestions given here needs to be given due consideration for implementation.