Well-designed minimum wage system required to reduce wage inequality, says Economic Survey 2018-19

Economic Survey 2018-19: calls for streamlining the complex mechanism.

July 04, 2019 09:57 pm | Updated 09:57 pm IST - NEW DELHI

Businessman giving money, Indian rupee currency, to his partner - payment, loan and bribery concept

Businessman giving money, Indian rupee currency, to his partner - payment, loan and bribery concept

A well-designed and streamlined minimum wage system is required to reduce wage inequality in the country, the Economic Survey says.

Currently, the minimum wage system, under the Minimum Wages Act, 1948, in India is complex, with 1,915 different minimum wages defined for different job categories across States, the survey said. Despite the complex system, workers were still falling through the gaps, it said.

“One in every three wage workers in India is not protected by the minimum wage law,” it said, citing the International Labour Organisation.

In its 2018 India Wage Report, the ILO said 66% of wage workers in “scheduled employment” were covered under the minimum wage system. For instance, the survey stated, domestic workers were covered under minimum wage laws in only 18 States and union territories. It also pointed out that while the law did not discriminate between men and women, analysis of different wages showed a bias.

“For instance, women dominate in the category of domestic workers while men dominate in the category of security guards. While both these occupations fall within the category of unskilled workers, the minimum wage rate for domestic workers within a State is consistently lower than that for the minimum wage rates for security guards,” the survey said.

Apart from 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 supportedThe code will bring together 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 legislation.

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, it said, 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 floor wage is currently non-statutory.

The Code on Wages Bill should consider deciding minimum wages based on skill, with different wages for unskilled, semi-skilled, skilled and highly skilled, and on region.

“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.”

In addition, the survey suggested that 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. It said that 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,” the survey said.

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