Economic Survey calls for Redesigning a Minimum Wage System in India for Inclusive Growth

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4 July 2019 : A well-designed and effective implementation of minimum wages will strengthen the trend towards decreasing wage inequality especially at lower levels. This becomes all the more significant as women constitute the majority of the bottom rungs of the wage distribution. This was the stated in the Economic Survey 2018-19 presented by the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman in Parliament today.

The Economic Survey 2018-19 states 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.

Following are the Policy recommendations for an effective design of minimum wages system as per the Economic Survey 2018-19:

Simplification and Rationalisation: Rationalisation of minimum wages as proposed under the Code on Wages Bill needs to be supported. This code 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.

Setting a National Floor Level Minimum Wage: Central Government should notify a “national floor minimum wage” that can vary broadly across five geographical regions. Thereafter, states can fix their minimum wages at levels not lower than the “floor wage”. This would bring some uniformity in minimum wages across country and would make all states almost equally attractive from the point of view of labour cost for investment as well as reduce distress migration.

Criteria for setting minimum wage: The Code on Wages Bill should consider fixing minimum wages based on either of the two factors viz; (i) the skilled category i.e. unskilled, semi-skilled, skilled and highly skilled; and (ii) the geographical region, or else both. This Key change would substantially reduce the number of minimum wages in the country.

Coverage: 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.

Regular Adjustment and Role of Technology: A mechanism should be developed to adjust minimum wages regularly and more frequently. A national level dashboard can be created at the Centre with access to the state governments whereby the states can regularly update the notifications regarding minimum wages. This portal must be made available at Common Service Centres (CSCs), rural haats etc., with the required mass media coverage so that the workers are well-informed their bargaining skills and decision-making power are strengthened.

Grievance Redressal: There should be an easy to remember toll-free number to register grievance on non-payment of the statutory minimum wages should be given wide-publicity to provide low-paid workers a forum to voice their grievance.

The Economic Survey further states that establishing an effective minimum wage system that will have beneficial impact on multiple dimensions of growth is therefore an urgent necessity.