Eco Survey calls for simpler minimum wage system to boost inclusive growth

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A simple and effective minimum wage system is an ‘urgent necessity’ for India’s inclusive growth, according to the Economic Survey of 2018-19.

“A well-designed minimum wage system can be a potent tool for protecting workers and alleviating poverty, if set at an appropriate level that ensures compliance. International experience has shown that relatively simple systems are more effective and usually complex systems are least effective,” the survey said.

The survey brought to light the gender discrimination through the present minimum wage legislations and how it had no adverse impact on job creation, and had instead led to a higher income levels in low-paid and informal sector jobs.

The survey supported the Code on Wages Bill, which was approved by the Union Cabinet on Wednesday, to rationalise minimum wages in the country. It termed the present minimum wage system as “complex” with 1,915 wages for various job categories across states.

The proposed code will combine four laws related to wages – the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976 – and has proposed a statutory national minimum wage to be implemented by state governments for all categories of jobs.

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Instead of a single national floor level minimum wage at present, notified by the Central Government but not mandatory for states to implement, the Survey has advocated setting a ‘national floor minimum wage’ that can vary across five geographical regions.

“Thereafter, states can fix the minimum wages, which shall not be less than the floor wage. This would bring some uniformity in the 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,” the survey stated.

According to the survey, minimum wages should be fixed for four categories –- unskilled, semi-skilled, skilled and highly-skilled -- based on the geographical region. It should cover all workers, irrespective of any wage ceilings to make the existing system simpler.

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“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,” the survey said.

The survey suggested regular adjustments in minimum wages, similar to practices in countries such as Nicaragua, the Netherlands, Uruguay, and Costa Rica, where the minimum wage adjustment takes place every six months.

It further suggested that the Centre create a national-level dashboard with access to the States which will regularly update notifications regarding minimum wages. This move will ensure “workers are well-informed and their bargaining skills and decision-making power are strengthened.”

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