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Govt calls for complete overhaul of minimum wages in India; here's why

As per to the Economic Survey 2018-19, the central government should notify a "national floor minimum wage" that can vary broadly across five geographical regions

twitter-logo BusinessToday.In   New Delhi     Last Updated: July 4, 2019  | 17:16 IST
Govt calls for complete overhaul of minimum wages in India; here's why
FM said that despite India's outstanding growth in the last two decades, low pay and wage inequality remain serious obstacles towards achieving inclusive growth

The economic survey 2018-19 has called for a complete overhaul of minimum wages in India, saying the present system is extremely complex with 1,915 minimum wages defined for various scheduled job categories for unskilled workers across various states.

While presenting the Economic Survey 2018-19 in the Parliament today, Finance Minister Nirmala Sitharaman said that despite India's outstanding growth in the last two decades, low pay and wage inequality remain serious obstacles towards achieving inclusive growth.

"An effective minimum wage policy that targets the vulnerable bottom rung of wage earners can help in driving up aggregate demand and building and strengthening the middle class, and thus spur a phase of sustainable and inclusive growth," said Sitharaman.

"One in every three wage workers in India is not protected by the minimum wage law," she said.

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As per to the survey, 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," it said, adding this would bring some uniformity in minimum wages across 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.

The survey has proposed that minimum wages should be based on either of the two factors; the skill category i.e unskilled, semi-skilled, skilled and highly skilled; and the geographical region, or else both.

It is to be noted that the Indian minimum wage system has been quite a debated and dynamic issue. The main argument against a national minimum wage has been the existence of wide disparities in economic development and large variations in cost of living between regions and states.

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Over the last 70 years, the minimum wage system in India has expanded and has become complex. The first set of complexities arises from issues relating to its coverage as expansion in job categories and wage rates has led to major variations not only across states but also within states. The complexities also arise from the lack of uniform criteria for fixing the minimum wage rate. Among others, the minimum wages act does not cover all wage workers.

Edited by Chitranjan Kumar

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