Attempt to fix minimum wages faces a roadblock yet again

Worker with cartons of fabric at a textile market in Surat. (PC-NYT) File Photo.

The labour ministry has reconstituted the expert committee tasked with determining minimum wages, stalling the process for the second time in two years, Economic Times reported on September 28.

The move comes three months after the government formed an expert group led by Ajit Mishra, director of the Institute of Economic Growth, to provide technical inputs and recommendations on minimum wages. 

Now, the committee will be headed by S.P. Mukherjee, emeritus professor at the University of Kolkata. Mukherjee also heads committees responsible for conducting labour-related surveys, including the Quarterly Employment Survey released earlier this week.  

This is the second time since Parliament passed the Code on Wages, 2019 that the attempt to fix minimum wages has been stalled. 

“This is the third occasion on which the central government has constituted or reconstituted an expert committee to make recommendations which would help in determination of minimum wages. Such measures by the government do not instill confidence in either the employers or the workers. It creates ambiguity and uncertainty.

At the end of the day, more than 2 years have passed by since the wage code was enacted and the 500 million odd workers have been waiting for statutory minimum wages,”  Sundar added.

This is also a matter of concern that the government has not considered it appropriate to consult the ILO, considering that they have huge expertise in these matters or the law-making process or members associated with the National Commission on Enterprises in Unorganised Sectors (NCEUS), appointed by the UPA govt whose expertise in these matters is impeachable, he noted.

A labour economist who did not wish to be named said, “It is also a concern that the government has not appointed well known labour economists in the committee.”

The wage code introduced the concept of floor wages wherein the rates would be fixed by the central government on the basis of the minimum living standards of workers. Under the code, state governments weren’t allowed to fix wages lower than the national floor determined by the Centre.

In 2019, a committee headed by economist Anoop Satpathy came out with a report titled Determining the Methodology for Fixing the National Minimum Wage. 

The panel recommended that the government increase the national minimum wage to Rs 375 per day. The report called for  "setting the single value of the NMW (National Minimum Wage) for India at Rs 375 per day (or Rs 9,750 per month) irrespective of sectors, skills, occupations and rural-urban locations.”

It also called for an additional house rent allowance (city compensatory allowance), averaging up to Rs. 55 per day i.e., Rs. 1,430 per month for urban workers over and above the minimum wage. 

The government did not accept the recommendations of its own committee because the benchmark of Rs 375 per day was deemed to be too high compared to the existing rate of Rs 176 per day. 

Instead, the government in July 2019 proposed a hike of Rs 2 in the national minimum wage from Rs 176 per day to Rs 178 per day just a few months after the committee's recommendation. 

The Economic Survey of 2018-19, too, advocated a mandatory national-level minimum wage to promote social justice and curb distress migration. 

India has been setting a benchmark on the minimum wage from 1948, when the Minimum Wages Act was passed. 

Yet, state governments kept setting different minimum wages for different categories of jobs and workers (unskilled, semi-skilled, skilled and highly skilled), leading to a wide disparity in the minimum wage across regions. 

To put in place a uniform wage structure and to reduce wage disparities, the government in 1996 introduced the National Floor Level Minimum Wage on the recommendations of the National Commission on Rural Labour (NCRL), 1991. 

The National Floor Level Minimum Wage was fixed at Rs.35 per day in 1996, which was revised periodically. 

After subsequent revisions, the national floor minimum wage was fixed at Rs 100 in 2009 and Rs 176 in 2017. These, however, were not legally binding on the states.