Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

Minimum wage: what it is, how it is fixed


Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Minimum wage determination criteria

Mains level:  Minimum wages for workers


  • Central trade unions have called a nationwide strike today to protest the government’s announcement of a hike in minimum wages for workers.

Why are the trade unions not happy?

  1. The government has announced a 42% increase in minimum wages for unskilled non-agricultural workers in central sphere.
  2. Employees of the central government and allied departments and undertakings, for category ‘C’ areas from Rs 246 a day to Rs 350 a day — or Rs 9,100 for a month of 26 working days.
  3. A, B and C category areas are determined broadly on the basis of their urban/rural profile.
  4. The trade unions had demanded statutory minimum wage for all workers of not less than Rs 18,000 per month.

Who will benefit from the increase?

  1. The minimum wage revision will be applicable to central government employees in its scheduled employment, in line with the provisions of the Minimum Wage Act, 1948.
  2. Currently, there are 45 scheduled employments under the central sphere, including agriculture, stone mines, construction, non-coal mines, and loading and unloading, and around 1,679 employments of states.

How is the minimum wage determined?

  1. The norms for determining the minimum wage were recommended by the Indian Labour Conference in 1957.
  2. It decided that the minimum wage should be need-based, and should ensure the minimum human needs of the industrial worker.
  3. Five norms were suggested:
  • Three consumption units for one earner in a standard working class family, with the earnings of women, children and adolescents in the family being disregarded.
  • Net intake of 2,700 calories for an average Indian adult of moderate activity.
  • Per capita consumption of cloth of 18 yards per annum, which would mean for the average worker’s family of 4 a total 72 yards.
  • Rent corresponding to the minimum area provided for under the Subsidised Industrial Housing Scheme for low-income groups.
  • Fuel, lighting and other miscellaneous items of expenditure to constitute 20 per cent of the total minimum wage.

SC Judgement

  1. In 1991, the apex Court, in Raptakos & Co. Vs its workers, ruled that children’s education, medical requirement, minimum recreation including festivals, ceremonies, provision for old age and marriage, should constitute 25%, and be used as a guide for fixing the wage.
  2. These six criteria are considered by the central and state governments to fix the minimum wage.
  3. The minimum wages include basic and variable dearness allowance, which is revised twice a year based on Consumer Price Index (Industrial Worker).

Why is there a disparity in minimum wages across India?

  1. Based on the recommendations of the National Commission on Rural Labour in 1991, a National Floor Level Minimum Wage was proposed in order to have a uniform wage structure across the country.
  2. In 1996, the NFL Minimum Wage was fixed at Rs 35 per day, which was revised in subsequent years and currently stands at Rs 160 per day.
  3. Since this Wage does not have statutory backing, it is not mandatory for states — although they are advised to fix minimum wages at not less than the National Floor Level Minimum Wage.
  4. Some states such as Kerala and Delhi already have a higher minimum wage for unskilled labourers than what has been announced by the government.
  5. However, in the absence of legal backing, the lowest minimum wage drops very low.
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