The Economic Survey 2018-19, released today, makes a strong case for rationalising and streamlining the current minimum wage architecture in the country. This is in line with the revised version of the code on wages bill approved by the Union Cabinet on Wednesday. A well designed minimum wage system can help “reduce inequalities in income, bridge gender gaps and alleviate poverty,” says the survey, penned by chief economic adviser KV Subramanian.
Over the past decades, the minimum wage system in India has expanded greatly, thereby increasing the complexity of the system. Currently, there are around 429 scheduled employments and 1,915 scheduled job categories of unskilled workers for which minimum wages are specified. This expansion has led to variations not just within but also across states. But despite this proliferation of minimum wages, “one in every three wage workers in India has fallen through the crack and is not protected by the minimum wage law,” it noted.
To address these issues, the survey recommends a simplified architecture where minimum wages are fixed based on either the level of skill — different wages for unskilled, semi-skilled, skilled and highly skilled — or geographical regions or both. This simplified structure is expected to bring down number of minimum wages in India to 300 from about 2,500 wage rates that exist today.
Under this architecture, the Centre would notify a “national floor minimum wage” that could vary across the five geographical regions that were determined by the Expert Committee formed to design the methodology for fixing the national minimum wage. This national wage would serve as a “floor wage”, ensuring uniformity across the country, and that minimum wages of states are not lower than the national wage. States, though, would have the option of fixing wages at higher levels. The Survey has also recommended that the minimum wage be regularly adjusted.
Presumably, this adjustment would be based on the consumer price index for industrial workers. It has also suggested that the minimum wage be extended to all the sectors.
Shifting to this architecture would bring about uniformity in minimum wages across the country, making “all states almost equally attractive from the point of view of labour cost for investment as well as reduce distress migration,” notes the Survey.