Economic Survey pitches for well-designed wage system for inclusive growth

India needs to have a well-designed minimum wage system, which would decrease wage inequality, alleviate poverty and bring inclusive growth especially at lower levels, according to the Economic Survey 2018-19.

According to the Survey tabled in Parliament Thursday, over the last 70 years, the minimum wage system in India has expanded and become complex. The first set of complexities arises from issues relating to its coverage.

"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 document stated.

The well-designed wage system would remove wage inequality especially at lower levels and among women who constitute majority of bottom rungs of wage distribution.

Today, there are nearly 429 scheduled employments and 1,915 scheduled job categories for unskilled workers. This massive expansion in job categories and wage rates has led to major variations not only across states but also within states.

The Survey pointed out that one in every three wage workers in India is not protected by the minimum wage law.

It suggested that minimum wages should be fixed for four categories namely, unskilled, semi-skilled, skilled and highly skilled based on the geographical region and should cover all workers, irrespective of any wage ceilings.

As per the document, 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 document pitched for the Code on Wages Bill, which was approved by the Union Cabinet Wednesday for introduction and passage in the Parliament. The government intends to push the bill for passage in the ongoing session of the Parliament.

The Survey said the rationalisation of minimum wages as proposed under the Code on Wages Bill needs to be supported.

This code amalgamates 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 piece of legislation.

It suggested that the definition of wage in the new legislation should subsume the present situation of 12 different definitions of wages in different Labour Acts.

It also said,"the central government should notify a national floor minimum wage that can vary broadly across five geographical regions. Thereafter, states can fix their minimum wages at levels not lower than the floor wage.

This would bring some uniformity in minimum wages across the 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."