Government Constitutes Expert Group for Fixation of Minimum Wages

The Parliament passed the Code on Wages in August 2019. The Code on Wages contains provisions where the government has to fix the minimum wages and the national floor wages. The establishments need to comply with the minimum wages and the national floor wages fixed by the government as per the Code on Wages’ provisions.  

The Code on Wages ensures the right to sustenance for all workers. It extends legislative protection of minimum wages to 100% of the country’s workforce against the current 40% of the workforce. It provides universal minimum wages and the timely payment of wages to all workers irrespective of the wage ceiling and sector. 

On Thursday, the Ministry of Labour and Employment issued an order of constitution of an expert group to provide recommendations and technical inputs on the fixation of the minimum wages for different regions of the country and the national floor wages for all categories of work. The establishments under the Code of Wages cannot pay below the minimum wages fixed by the government. 

The expert group will provide its recommendations by looking into the best international practices and evolve a methodology and scientific criteria for the fixation of wages. The government has constituted the expert group chaired by Prof. Ajit Mishra, Director, Institute of Economic Growth, for three years. However, the government has not provided any clarity when the expert group will submit its recommendations. 

The tenure of three years provided to the expert group implies that there will be a delay in the implementation of the minimum wages for the workers. Thus, the plan to fix a mandatory national minimum wage provided under the Code of Wages will not come into force in 2021.

The government had formed a similar committee earlier in August 2019, chaired by Anoop Satpathy. The Satpathy panel had recommended a national minimum wage at Rs.375 per day or Rs.9,750 per month. It also recommended providing a housing allowance of Rs.1,430 per month for city-based workers. However, the government set aside the recommendations of this committee and set up another committed chaired by Prof. Ajit Mishra on Thursday. 

The Minimum Wages Act, 1948 applies to the scheduled employment workers, including plantations, mining and services currently. The minimum wages differ for different categories of workers. The national floor wages means the minimum level of wages that applies to all categories of workers.

The State Governments cannot fix their minimum wages below the national floor-level minimum wages fixed by the Central Government. The government revises the national floor-level minimum wages every two years, taking into account the rise in the Consumer Price Index for industrial workers. Currency, the national floor-level minimum wages is Rs.178 per day fixed in 2019.

The Economic Survey of 2018-2019 stated that India needs to have a national-level minimum wage for curbing distress migration and promoting social justice. The survey provided that an adequate minimum wage policy targeting the vulnerable inferior wage earners can help to increase the aggregate demand and strengthen and build the middle class, thus spurring sustainable and inclusive growth.

Similarly, experts have also been demanding a national minimum wage, arguing that it will benefit a considerable workforce. The delay in fixing the national minimum wage will hinder labour welfare and aggregate demand. The constitution of the expert group will help to fix the adequate minimum wage by looking into the technical aspects.

Though the government has constituted the expert group for three years, the government may announce a time frame within which the committee needs to submit its report. The report will help to formulate the national minimum wages plan and successfully implement the Code of Wages.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in