Author: Shaurya Shrestha Awasthi is a fourth-year student of the National University of Study and Research in Law, Ranchi.
This article examines the significance of the minimum wage policy in enhancing the well-being of low-paid workers, reducing inequality, and combating poverty in India’s workforce. It discusses the limitations of the existing Minimum Wages Act, 1948, which failed to generate desired redistributive outcomes, leading to pervasive low wages, gender pay gaps, and working poverty. In response, the Code on Wages, 2019 introduced crucial reforms to overhaul the minimum wage mechanism, aiming to universalize and simplify its application. Key reforms, such as statutory floor wages and skill-based wage fixation, have the potential to uplift millions of workers. However, the article also highlights some shortcomings, including ambiguities in defining employee categories and setting minimum wages based on calorie consumption. The author proposes suggestions to address these issues and make the new policy a successful venture, ultimately promoting labor welfare and a worker-oriented minimum wage policy in India.
The minimum wage policy is considered as a crucial instrument for enhancing the wellbeing of low-paid workers, lowering inequality and combating poverty in the workforce. A suitable and a pro-worker policy is a sine qua non for better living standards, worker-friendly and non-exploitative regime. Keeping in align to the above-mentioned objectives, The Minimum Wages Act, 1948 has been formulated, however, it failed to generate the optimum redistributive outcomes such as reduction in poverty and inequality levels, improving the standards of living and welfare of low-paid workers. In an effort to pace up with time, the Parliament enacted the Code on Wages, 2019 which brought tremendous changes in the existing minimum wage policy of India, be it the universalization of policy, be it in respect of honouring the skills or be it introducing an altogether different and unique concept of ‘floor wage’. Despite of such colossal pro-labour benefits of the new policy, a nuanced analysis of it makes evident that it is not free from shortcomings. The present blog makes an attempt to explore such unexplored arena and put forward the best way out of it so that a suitable and worker-oriented minimum wage policy could be given a definite reality.
KEY REFORMS INTRODUCED IN THE MINIMUM WAGE POLICY UNDER CODE ON WAGES, 2019
The minimum wage policy as enshrined under The Minimum Wages Act, 1948 failed to meet the needs and requirements of the present-day society and in fact lead to an all-pervasive low wage, high level of inequality, gender pay gap and working poverty. Such a poor state of affairs has been pointed out in a plethora of empirical studies and significantly in India Wage Report and therefore, a policy reform for a complete overhauling of the mechanism is a much needed step. Therefore, in response to this, the new policy under the umbrella of Code on Wages, 2019 has been introduced with certain key beneficial reforms. The composite effect of all the reforms is to increase the standards of living and promote labour welfare.
Universalisation of minimum wages as well as floor wages to all the wage earners is one of the key reforms that will help in fulfilling the objective of new minimum wage policy. Such coverage will help in encompassing the varied vulnerable sections of workers who earlier were not included within the defined scope. Moreover, the said universal application of the minimum wage policy removed the existing distinction between scheduled and non-scheduled employments that was focal for the application of the Minimum Wages Act, 1948.
Another key reform introduced was the creation of a statutory floor wage by the Central Government. According to the Code, each state’s minimum pay must be set at a level that is at least equal to or higher than the floor wage. The code contains measures that prevent states with higher minimum wages than the floor wages from reducing their wage rates. If properly implemented, the model of a legal floor wage will inject new energy into India’s pay-setting mechanism. Millions of low-paid workers who are currently either exempted from the minimum wage law or earning salaries below the minimum wage could see their pay levels increased as a result of this. The floor wage may help to lessen the stark differences presently existing in the minimum wage rates between different states.
Apart from this, the new minimum wage policy attempted to simplify and ease out the complexities which existed in the prevailing minimum wage structure. The fixation of minimum wages on the basis of occupational set-ups or scheduled employments creates the issue of compliance mechanisms and indeed understood as the defined wages of such occupation instead of being the minimum wages. Such fixation unfortunately provides subordinate position to workers and an upper-hand to management in the bargaining process. The new minimum wage policy has discarded the principle of fixation on the basis scheduled employments. The new policy determined the fixation of minimum wages on the basis of skills, geographical regions and arduousness of work. Such attempt will lead to a minimum of three rates and a maximum of twelve rates for each state. This act of simplification will result in increased compliance and provide enough room for collective bargaining.
PLAUSIBLE ENIGMAS IN THE NEW MINIMUM WAGE POLICY
There is no doubt about the fact that the new policy has initiated path-breaking steps for realising the true objective intended while formulating the policy. However, a closer analysis seems to suggest that there are certain areas in the policy as elaborated below which still needs to be demystified and restructured for attaining the intended objective of the policy.
The extent of universal coverage as envisaged in the new policy is one of the facets which will be an obstacle for the effective implementation of the minimum wage policy. Though the principle of universal coverage on a shallow perspective seems to suggest that the policy of minimum wages is applicable to all the wage earners but a deeper analysis reflects that it lefts out many categories of workers. Section 5 of the Code on Wages, 2019 provides, “no employer shall pay to any employee wages less than the minimum rate of wages notified by the appropriate government”. The definition of employee includes “any person employed on wages by an establishment”. This aspect of employment relationship could prove to be detrimental for the universalization principle and would leave several categories of workers outside the purview of new policy. With time and again, primacy has been given to control test for defining the employer-employee relationship. The absence of direct control over the work of the agricultural workers, domestic workers, homemakers and gig workers would likely exclude them from employer-employee relationship and thereby restrict their coverage within the new minimum wage policy. In addition to this, it may not be necessary that every employment relationship will be brought within the arena of new policy. The definition of employee clearly stipulates, “employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward”. Therefore, the new policy may not be applicable to the employment relationship existing outside the realm of designated works mentioned in the definition.
Apart from this, the ambiguity and lack of uniformity persisting over the usage of statutory terms like ‘employee’ and ‘worker’ in the new policy may lead to confusion and hardships in the implementation of the new policy. Section 5 of the Code uses the term ‘employee’ whereas Section 6(6), Section 7(1) and Section 9 in stark contrast used the term ‘worker’. Both the terms cover different categories of works with certain overlaps. Such a lack of uniformity may likely cause confusion in determining the scope of categories of works covered under the new policy.
Another issue is the setting up of minimum wages on the basis of calorie consumption. Calorie requirements play a critical role in determining minimum pay. The new policy specifies that 2,700 kilocalories are needed. According to convention, a typical working-class family consists of the wage earner, a spouse, and two kids, or the equivalent of three adult consumption units(1+0.8+0.6+0.6). However, in reality, a typical working-class household should be equal to 3.5 consumption units(1+1+0.75+0.75). Gender prejudice should be avoided by allocating 1 consumption unit to female adult member instead of 0.8. Additionally, a child’s calorie requirement is not as low as 0.6 and should be increased to at least 0.75 because of the fact that they are in their growing up period.
CONCLUSION AND SUGGESTIONS
The Code on Wages, 2019 has introduced many reforms that will help in strengthening the minimum wage structure of the country. Such reforms are instrumental in eliminating inequality, exploitation and providing better livelihoods to workers. However, there is huge scope for improvement in order to make the new policy a success. The shortcomings in the new wage policy may lead to confusion and compliance issues, eventually resulting in a failed policy. Therefore, it is important to resolve those shortcomings in time in order to make the new policy a successful venture.
The possibility of exclusion of certain categories of workers will create obstacle in the universal application of the new minimum wage policy. Therefore, a clarification or policy modification is required for inculcating the missed out categories in the new regime. Apart from this, the legislature should introduce uniform sort of terminology for the whole new policy otherwise the casual referrals of statutory terms like ‘employee’ and ‘worker’ on different occasions in the new policy is likely to create confusion and implementation issues.
It is envisaged that by including the aforementioned suggested adjustments in the wage code, the minimum wage policy will operate more effectively within the new legal framework. The effective use of these updated and reinforced mechanisms would increase the impact of the wage code’s redistributive outcomes and enable India to provide millions of low-paid workers with dignity and better working circumstances in the ensuing years.
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