Keep it simple

Code on Wages Bill needs to be tweaked

The National Democratic Alliance (NDA) government in this term has decided to adopt a different strategy to push its plans of converting 35-odd labour laws into four codes. It has been reported that the government plans to first take up the Code on Wages Bill, which was introduced in the Lok Sabha in August 2017 and has been vetted by the Standing Committee on Labour after extensive consultations with trade unions and industry. There is a definite need to overhaul the current minimum wage policy. The present law mentions 13 most vulnerable categories of employment, in which the minimum wages are fixed by both the state governments and the Centre and the rates vary in accordance with skill sets, sectors and location. This system has led to over 1,700 minimum wage rates, fixed by both states and the Centre (which can notify the minimum wage rate for railway, agriculture, mining or central government entities). This acts as a huge compliance burden on industry and has the potential of unleashing inspector raj. The cobweb of different wage rates also works against the welfare of workers.
 

In that context, the proposed Code on Wages Bill has several good features. The minimum wage law will be extended to all sectors, in accordance with the proposed law, instead of 13 categories of work — a step that is expected to ensure universal wage protection against exploitation. Under the existing system, the Centre started notifying a uniform national floor level minimum wage from 1996, which is non-binding on states. The national floor level was last revised by 10 per cent to Rs 176 a day in July 2017. But to date, even business-friendly states such as Andhra Pradesh and Gujarat have fixed their minimum wage below the national floor, making the case for a statutory floor. Other states are compliant with the non-statutory floor. The minimum wage rate varies from Rs 69 to Rs 538 across states (with the lowest in Andhra Pradesh and the highest in Delhi), while it is Rs 321 for the industries falling in the central sphere, as of November 2018.
 

But here comes the tricky part — the proposed Bill empowers the Centre to fix a statutory minimum wage, which may differ from state to state or from one geographical area to another. It is bound to make the system complex and confusing and difficult to enforce. The idea of a differentiated national minimum wage rate was taken forward by a government-appointed committee to determine the methodology for fixing the national minimum wage which submitted its report in February. The committee has mooted a national minimum wage level for five different zones. While four of these five regions were grouped using varied socio-economic and labour market factors, the fifth group included all North-eastern states except Assam.

But a regional-level minimum wage rate can lead to disparity among various regions with varying economic profiles. The Centre should thus fix a single national floor for minimum wages for all workers and let the states fix their own rates, keeping in mind the national floor. In short, the need is to go for a simpler structure that is easy to enforce and implement. Passing legislation on minimum wages hurriedly may have a direct bearing on jobs and industrial relations.