Ground realities

Three months after the Code on Wages, 2019, came into being, the government has come up with draft rules stating the manner in which the minimum wages will be determined. According to the draft rules released by the labour and employment ministry recently — Code on Wages (Central) Rules, 2019 — minimum wages should be set keeping in mind the needs of a worker’s family of three. It has prescribed that the minimum wage be fixed by determining the monetary value of net food intake of 2,700 calories per day for a working person and 66-metre cloth per year for the whole family, along with a certain share of expenditure on house rent, electricity, fuel, children’s education, medical requirements, recreation, and contingencies.

It has also proposed categorising 681 professions into four different skill-based baskets: Unskilled, semi-skilled, skilled, and highly skilled, each of which will have a different set of minimum wages, along with differences based on geography — metro, non-metro, and rural areas. It is laudable that the government has sought to prescribe a formula in the rules for calculating the minimum wage for workers compared with the erstwhile Minimum Wages Act of 1948, in which the standard methodology or guidelines for fixing the minimum wages were missing. As a result, the state governments and the Centre mostly relied upon norms recommended by the Indian Labour Conference (ILC) in 1957 to fix minimum wages. The recommendations were subsequently strengthened by a Supreme Court judgment in 1992, popularly known as the Reptakos judgment. The government’s draft rules intend to follow the ILC recommendations and the Reptakos ruling — the spirit of which was followed by the Seventh Pay Commission.

However, at a time when the government is planning to reset labour law legislation and combine 35 labour laws into four codes, policymakers would do well to use some evidence-based analysis and take into account current realities, rather than following the ILC recommendations, made more than six decades ago, and the Supreme Court’s advisory, which came almost three decades back. It is vital to follow a need-based approach, but have the needs of workers in India remained the same in over 60 years? A government-appointed committee on setting minimum wages, which made its report public in February, found a declining trend in terms of calorific requirements of Indians. Based on scientific analysis, the committee found that the consumption pattern of workers in India has changed to a food net intake of 2,400 calories, along with 50 grams of protein and 30 grams of fat per day. It even recommended increasing the size of the households, while fixing the minimum wages, from 3 to 3.6 units, based on the latest available NSSO survey.

Further, the Centre should not complicate the minimum wage system by prescribing wages based on skills, including the “highly skilled” category. While industry should be given a free hand in deciding the level of wage for skilled workers, the Centre can instead fix a different set of minimum wages involving arduous work — a key element of the Code on Wages, 2019, surprisingly missing in the draft rules. The norms are important because they will act as a model for state governments. Rather than rushing in, it should set an example for states by adopting a framework which is commensurate with the present times.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel