Minimum wage sparks inter-ministerial debate

A proposal of the Union ministry of labour and employment for a statutory national legal minimum wage of Rs 115 a day has run into objections from the ministry of finance.

However, many in industry say they welcome the proposed amendments to the Minimum Wages Act, 1948. It does not stipulate that there must be a statutory minimum wage, central or state. There is no central minimum, though many states have legislated on the subject. The levels vary from state to state.

The finance ministry objections came up at a meeting of the Committe of Secretaries of various ministries to discuss the proposed changes. The meeting was in May; there has been no movement since. A senior officer in the labour ministry, who requested anonymity, said as different states had different working conditions, the finance ministry believes the minimum wage should vary accordingly. It was also wary of a rise in minimum wages triggering problems on budgetary spending and inflation.

A finance ministry official, requesting anonymity, said one could not have a uniform policy in all states. It was not fair to compare wages in Kerala with those in Mizoram, for instance. The Centre, he said, had to also take account of the absorption capacity for a uniform floor. State governments may not want to take the additional revenue burden; in that case, the Centre would have to sponsor more of the states’ Plan. This may have significant revenue implications.

Officials in the labour ministry say they don’t buy the rationale. “This (the proposed floor) is the bare minimum every worker is entitled to in any state. The amendment will make the structure of the minimum wage much simpler; at present, it is very complex,” the official said. “There are many states which have, in certain schedules, wages even lower than what we have fixed.”

Another source, involved in the drafting of the amendments, said industry bodies were in favour. “They didn’t raise any objections to the amendments while we were at the drafting stage (when asked for reactions),” the source said.

D K Nair, secretary general, Confederation of Indian Textile Industry, said the industry was with the labour ministry over this issue. “Higher wages will affect our margins, but we also cannot afford an unhappy workforce,” he said.

Amitava Ghosh, senior vice president — regulatory, TeamLease Services, said the minimum wages should be increased and made consistent across the country. “Guaranteed minimum wages would help lift the financial condition of poor workers. At the same time, uniform rates across the country would substantially minimise the migration for jobs from one state to another,” he said, in an emailed response.

Finance ministry officials say it is easy for the private sector to back the labour ministry’s initiative. “The private sector is non-existent in some parts of the country where wages are below the proposed level of Rs 115, such as the northeastern states, hilly states like Uttarakhand, Himachal Pradesh and Jammu & Kashmir,” the official said.

The process of fixing a national minimum wage began in 1991 on the basis of recommendations from the National Commission for Backward Classes. In 1996, the Centre fixed a minimum at Rs 35 a day. It has since been revised six times, to the present value of Rs 115 a day.

A National Labour Institute study estimated that if the present amendments are passed, it has the potential to reduce poverty by 1.5 per cent nationally and by up to seven per cent in poor states.