THE TRIPARTITE COMMITTEE ON WAGES appointed in 1948 recommended a framework of three-layered wages — minimum wage at the bottom, living wages at the top and fair wages in between.
“Living wage” was defined as the highest wage level that enables workers to provide for themselves and their families, and include not only the basic essentials of food, clothing and shelter, but also frugal comforts such as children’s education, health protection and essential social requirements. It also included some kind of insurance against contingencies like old age. While determining the living wage, economic conditions in the country and the capacity of the concerned industry to pay were also considered.
In the case of fair wages, we should consider maintaining the same level of employment at that wage and if possible increasing employment. Then the wages should enable the industry to maintain production efficiency. The minimum wage must provide, not merely for the bare sustenance of life, but also for the preservation of the efficiency of the worker by providing for some measure of education, medical support and amenities.
Minimum wages (‘MW’) are usually fixed for occupations in an industry where workers are not protected by collective bargaining or statutory backing in wage fixation. The Minimum Wages Act (‘MWA’) was enacted in 1946 and came into force in 1948. As per the MWA, both Central and State Governments are appropriate Governments to fix, review and revise the MW of workers employed in the scheduled employments in their respective jurisdictions. Schedule-B of the Act concerns minimum wages in the agricultural establishments and Schedule A, the non-agricultural establishments. The appropriate governments could add non-agricultural scheduled employment from time to time.
MW comprises a basic wage rate (to be revised at least every five years) and cost of living allowance (‘COLA’), revised twice a year in consonance with the movements in the Consumer Price Index. In most states the COLA has been revised rather routinely and as a result MW increases; however, the gain is rather meagre for the workers.
It is important to note that many state governments do not revise the basic rates of MW as provided for in the Act. In some states, even the Minimum Wages Advisory Boards are not regularly constituted and/or changed – according to the Act, the appropriate government needs to consult the Advisory Boards before fixing the minimum wage rates.
The recommendations made in the 15th Indian Labour Conference (‘ILC’) in 1957 and the Supreme Court’s judgment in 1992 are considered as the ‘norms’ to determine MW.
The ILC’s norms include: (i) three consumption units for one wage earner without incorporating the earnings of women, children and adolescents; (ii) a minimum food requirement of 2,700 calories per adult person per daily; (iii) clothing requirements at 72 yards per annum for an average working family of four; (iv) a house rent corresponding to the minimum area provided for under the Government's Industrial Housing Scheme; and (v) 20 per cent of total minimum wage for fuel, lighting and other miscellaneous items.
The Supreme Court added the following components: children’s education, medical requirements, minimum recreation including festivals/ceremonies, and contingencies such as old age and marriage. The top Court also directed that these consumption items should constitute 25 per cent of the total minimum wage.
The number of scheduled employments vary greatly between the States. In 2020, Assam had 103 scheduled employments while Punjab had only 71 . For the same scheduled employment, MW differs across regions. For example, the MW for agriculture in Puducherry in 2020 was Rs. 55 and in New Delhi it was Rs. 596. MW ranges widely between the states – for instance, in Kerala MW ranged from Rs. 72 to Rs. 333.04 in 2005 (as per Indian Labour Statistics for the period 2009/2010). It has to be noted that the MWA did not provide for national floor level MW.
There was a need to have some uniformity in MW and reduce wage disparities. Based on the recommendations of the National Commission on Rural Labour (1990), the government mooted the concept of a National Floor Level MW (‘NFLMW’), which will be common to all employees. NFLMW is non-statutory and hence the state governments can fix MW lower or higher than NFLMW.
For example, in several states, the lowest of the MW was lower than the NFLMW at Rs. 160 per day fixed in 2015 – in Andhra Pradesh (69.25, all rates are for per day), Assam (75), North-eastern States (lower than 160), Tamil Nadu (85), Telangana (69.27), Puducherry (55), and Maharashtra (120).
On the other hand, the highest of MW in a state was in Maharashtra (at 446).
The NFLMW has been revised in line with the movements in CPI. The NFLMW per day in 1996 was Rs. 35 per day and it increased to Rs. 176 per day in 2017. It has not been revised since 2017!
The NFLMW had not been revised systematically: once in one year or two years or three years and increases erratically. The highest rate of growth of NFLMW between the years was 37 percent (2013 over 2010) and the lowest was 10 percent (2017 over 2015) as the graph below illustrates.
As a result, the minimum wages which provide for the bare minimum remain lower in actual terms if we take into account the inflation rates, either general index or food inflation rates (see the graph below).
It is well-known that the MWA is the most poorly enforced among the labour laws. The indifference or even severe neglect of the State governments (irrespective of Party/Parties in power) towards MW has meant a serious loss of welfare for millions of workers. The Wage Code has completely diluted the enforcement of the Code by retitling the inspectors as the facilitators and generally weaken their powers. This in contravention of the ILO Labour Inspection (081) (1947) .
In the meantime, the NDA government enacted the Wage Code in August 2019. In the Code, MW applies to all the workers as the scheduled establishments system was abolished, which is welcome. The Code retains the components of MW as they were in the MWA. However, shockingly, as noted by PRS Legislative Research“The Draft Rules do not make it mandatory to revise the dearness allowance (DA) at these intervals.” However, “an endeavour” is to be made by the government to revise DA twice in a year” .
More importantly, the Code provides for statutory FLMW (under Section 9 (1)). Thus, the FLMW acquires powerful legal weight. The government will determine FLMW taking “into account the minimum living standards including the food, clothing, housing and any other factors considered appropriate by the Central Government …”. (as per Rule (11) (1) of The Draft Rules, 2020).
The criteria are vague and will vary between the States owing to different criteria. However, the government should have included the ‘norms’/criteria for fixing the FLMW in the Code itself, which would have greater legal power and the respective clauses can only be amended by the Parliament/Legislative Assembly, unlike in the case of Rules (which are left to the Executive arm of the State).
As per Rule 11(4), the Central Government may revise the floor wage fixed ordinarily at an interval not exceeding five years and undertake adjustments for variations in the cost of living periodically in consultation with the Advisory Board . The usage of ‘may’ (and not ‘shall’) creates uncertainty, which defeats the cause of MW.
As per Section 9(2) of the Wage Code, the appropriate governments shall not fix MW below the FLMW and if the earlier MW is higher than the present FLMW, then the latter will be applicable. Further, different floor wages may be fixed for different geographical areas. Thus, we will not have a single FMW but several.
The government must remove the regional FLMW in the interest of uniformity. Apart from the national and regional FLMW, every state government will fix MW. Thus, there will be multiple minimum wage rates.
The Central government has not implemented the Wage Code till now (just as the other Codes) due to factors like the timely non-framing of Rules under the Codes by some States, strident opposition by the trade unions and the opposition parties. The government seems to be clueless and confused. It appointed an Expert Committee on Determining the Methodology for Fixing the National MW in 2018, which submitted its report in 2019 . The government did not use the Report, which was well researched and made good recommendations.
The Anoop Satpathy Committee recommended a national minimum wage of ₹375 per day (₹9,750 per month) as of July 2018, based on a need-based approach that revised ILC norms and included the Supreme Court’s stipulation. The Central government did not accept the committee’s recommendations.
Then the government constituted the Ajit Mishra Committee in June 2021 for three years, noting that the Expert group “will give recommendations to the Government on Minimum Wages and National Floor Wage”. It noted that to arrive at the wage rates, the group will look into the international best practices on the wages and evolve a scientific criteria and methodology for fixation of wages.” .
This committee is superfluous as the Anoop Sathpathy Committee provided wide ranging coverage of minimum wages and as far as the MW and NLFMW are concerned, the Advisory Boards provided for in the Wage Code will do the task.
Two things become clear, viz. the government has not been in an urgent mode to implement the Wage Code; two, the minimum wage recommended by the new Expert Committee would be less than that recommended by the Anoop Sathpathy Committee.
Why else should the government constitute another expert committee?
It is a matter of great concern that the government has not taken a serious and quick approach to set the kinds of minimum wages provided for in the Wage Code.
Later, Prof. Ajit Mishra resigned as the Head as did another member . In 2021, the government reconstituted the Committee with S.P. Mukherjee as its head. No developments of the new Committee have been reported. The Committee’s tenure is for three years. Reportedly, the Mukherjee Committee’s report has been delayed due to availability of fresh data and information.
Probably, the new series on Wage Rate Index 2016-100 which replaced the earlier series 1963-65=100 could provide vital information for their tasks . The whole exercise of law and rule-making, constitution of expert committees and non-implementation of the Code is confounding.
The Economic Survey 2018-19 observed that “an effective minimum wage policy that targets the vulnerable bottom rung of wage earners can help in driving up aggregate demand and building and strengthening the middle class, and thus spur a phase of sustainable and inclusive growth,…”.
It is not only about macro economics of increasing aggregate demand but more importantly, about the basic welfare of the millions of unorganized workers who do not have the luxury of trade unions and collective bargaining to increase their wages.
Article 43 of the Constitution states, “The State shall endeavour to secure, by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities…”.
Millions of unorganized workers rely on the State which now abdicated its constitutional, legal and moral responsibility.
As a result, the bare minimum needs of millions of workers are deprived. There cannot be a greater misfortune for workers.