The proposed rules to Wage Code Bill do not solve the problem of minimum wages but exacerbate it. Discuss. (15 Marks)

Mentors Comments:
  • 1. Discuss the provisions of the new rules.
  • 2. Mention how the rules further the problem, then solving it.
  • 3. Provide solutions for the same.
Answer:

The new Parliament passed the Code on Wages Bill, 2019 mandating a minimum wage across the country in its first session itself. This law mandates a universal minimum payment of ₹178 a day. The codification proposes to simplify 32 central labour laws into four codes to bring them in sync with the emerging economic situation, facilitate easier compliance by establishments, promote ease of living and ensure labour welfare and wage and social security for workers. The Code of Wages Bill is the first in the series of four labour codes.

Need:

  • To streamline the definition of wages as present labour laws consist of 12 different definition of wages which is the major cause of litigation and inefficiency in the implementation of labour laws.
  • The definition has been simplified and is expected to reduce litigation and will entail at a lesser cost of compliance for an employer.
  • An establishment will also be benefited as the number of registers, returns, forms, etc., not only can be electronically filed and maintained, but it is envisaged that through rules, not more than one template will be prescribed.

Main provisions:

  • The bill aims to transform the old and obsolete labour laws into more accountable and transparent ones and seeks to pave the way for the introduction of minimum wages and labour reforms in the country.
  • It regulates the wages and bonus payments in all employments where any industry, trade, business, or manufacturing is being carried out.
  • It seeks to subsume relevant provisions of The Minimum Wages Act, 1948, Payment of Wages Act 1936, Payment of Bonus Act Act, 1965 and Equal Remuneration Act 1976
  • It universalizes the provisions of minimum wages and timely payment of wages to all employees irrespective of the sector and wage ceiling and seeks to ensure “Right to Sustenance” for every worker and intends to increase the legislative protection of minimum wage.
  • It has been ensured in the bill that employees getting monthly salary shall get the salary by 7th of next month, those working on a weekly basis shall get the salary on the last day of the week and daily wagers should get it on the same day.
  • The provisions of the bill will apply to all the employees. At present, the provisions of both the Minimum Wages Act and Payment of Wages Act apply on workers below a particular wage ceiling working in Scheduled Employments only.
  • Many unorganized sector workers like agricultural workers, painters, persons working in restaurants and dhabas, chowkidars, etc. who were out of the ambit of minimum wages will get legislative protection of minimum wages after the bill becomes an Act.
  • The Central Government is empowered to fix the floor wages by taking into account the living standards of workers. It may set different floor wages for different geographical areas.
  • The minimum wages decided by the central or state governments must be higher than the floor wage.

Potential of the wages Code:

  • According to the Periodic Labour Force Survey 2017-18, 45% of regular workers are paid less than the minimum wage.
  • The law would benefit about 50 crore workers.
  • With an easily understandable national wage floor— which would apply across job types and geographies—the hope is that compliance will improve.
  • At the moment, women earn roughly 45% less than men in the same occupation. It prohibits gender discrimination in matters related to wages and recruitment of employees for the same work or work of similar nature.
  • A national wage floor would also hopefully reduce rural-urban gaps.
  • Since casual workers can be fired easily, estimates show that the wage may even go down to a miserable ₹20 a day in times of poor demand. A mandated minimum wage will hopefully reduce these glaring inequities.
  • It will substantially reduce the number of minimum wages in the country from the existing more than 2000 rates of minimum wages.
  • This would ensure that every worker gets a minimum wage which will also be accompanied by an increase in the purchasing power of the worker thereby giving a fillip to growth in the economy.

Shortcomings of the Code:

  • For one, the wage prescribed is less than half the ₹375 a day recommended by a high-powered labour ministry panel.
  • It is also miles away from the ₹700 fair wage that the 7th Central Pay Commission had arrived at.
  • The new law increases the prevailing minimum wage standard by a paltry ₹2 a day.
  • The minimum wage laws raise business labour costs. That’s already the largest budget item for most of them. When the government forces them to pay more per worker, they hire fewer workers to keep the total labour costs the same. This increases the unemployment rate.
  • It hits low-wage workers the hardest since they must now compete for fewer jobs. Some smaller companies may not be able to operate with fewer workers. They may be forced to declare bankruptcy instead.
  • According to the Confederation of Indian Industries (CII), states should have the power to determine minimum wages as the concept of a national minimum wage will affect job creation.
  • A minimum wage penalizes companies that are labour-intensive. By default, this rewards those that are in capital-intensive industries. Over time, this can shift the very fabric of the country’s economic base.
  • Minimum wage laws may increase job outsourcing. Companies move their facilities to countries where labour costs are lower.
  • Minimum wage laws may not reduce the country’s poverty. It helps the workers who have jobs but increases unemployment. Research shows experienced workers received higher pay for less experienced workers lost their jobs.
  • It could raise the cost of living in some areas. A higher minimum wage allows workers to pay more for housing. As a result, landlords could raise rents, creating inflation.

Measures needed:

  • Increasing the ambit of the minimum wage system, it recommended deciding minimum wages on the basis of skills and split across geographical regions.
  • With the government in the process of bringing the Code on Wages Bill in Parliament, the survey said the rationalisation of minimum wages proposed by the Bill should be supported.
  • The survey suggested the government should notify a “national floor minimum wage” across five regions, after which States can fix their own minimum wages, but not lower than the floor wage.
  • This would bring uniformity and make States “almost equally attractive from the point of view of labour cost for investment as well as reduce distress migration.”
  • 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.
  • A mechanism for regular adjustment of minimum wages should be developed, with a national-level dashboard at the Centre that States can access and update.
  • An easy to recall toll-free number to lodge complaints about non-payment of minimum wages should be publicised.

A simple, coherent and enforceable Minimum Wage System should be designed with the aid of technology as minimum wages push wages up and reduce wage inequality without significantly affecting employment. An effective minimum wage policy is a potential tool not only for the protection of low paid workers but is also an inclusive mechanism for more resilient and sustainable economic development.

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Akankhya Behera
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Pushkar Pushpesh
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Hey.. you wrote a well presented answer filled with good content!!

Just wanted to know the source of the ‘raptakos case (1991)’ you mentioned in your answer regarding the living wage
I couldn’t find this anywhere on the net.
Thanks

sahithya kasiraju
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