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RSTV: THE BIG PICTURE- CODE ON WAGES BILL


RSTV: THE BIG PICTURE- CODE ON WAGES BILL


Introduction:

            The Union Cabinet approved the introduction of a bill that will codify relevant provisions of four existing laws and intends to increase the legislative protection of minimum wage to the entire workforce. Media reports suggested the Codes on Wages Bill, 2019 will be introduced in the ongoing Budget Session of parliament and would benefit about 50 crore workers. According to media reports, the codification proposes to simplify 32 central labour laws into four codes to bring them in sync with the emerging economic situation, facilitate easier compliance by establishments, promote ease of living and ensure labour welfare and wage and social security for workers. The Code of Wages Bill is the first in the series of four labour codes. It seeks to subsume relevant provisions of The Minimum Wages Act, 1948, Payment of Wages Act 1936, Payment of Bonus Act Act, 1965 and Equal Remuneration Act 1976

 

Background:

The code on wages is one of the four codes that would subsume 44 labour laws with certain certain amendments to improve the ease of doing business and attract investment for spurring growth.

The four codes will deal with wages, social security, industrial safety and welfare, and industrial relations.

 

What are the determining factors?

As per the Bill, minimum wages will be linked only to factors such as skills and geographical regions.

Present status: At present, minimum wages are fixed on the basis of categories such as skilled, unskilled, semi-skilled, high skilled, geographical regions, and nature of work such as mining and are applicable for 45 scheduled employments in the central sphere and 1709 scheduled employments in states.

As per the new Bill, the minimum wages across the country would be only linked to factors of skills and geographical regions, while the rest of the factors have been removed.

 

A National Floor Level Minimum Wage will be set by the Centre to be revised every five years, while states will fix minimum wages for their regions, which cannot be lower than the floor wage. The current floor wage, which was fixed in 2017, is at Rs 176 a day, but some states have minimum wages lower than it such as Andhra Pradesh (Rs 69) and Telangana (Rs 69).

 

Significance:

  • Codification of labour laws will remove the multiplicity of definitions and authorities, leading to ease of compliance without compromising wage security and social security to workers.
  • Uniformity of coverage:-
    • The new Code on Wages will ensure minimum wages to all and timely payment to employees irrespective of the sector without any wage ceiling.
    • It is expected to treat contract labour on par with regular employee to have dignified life.
  • It is expected to provide for an appellate authority between the claim authority and the judicial forum which will lead to speedy, cheaper and efficient redressal of grievances and settlement of claims as that of earlier.
  • Reduction of unemployment:-
    • For instance, “Seattle’s Minimum Wage Experience 2015-16”, a 2017 study by researchers at the University of California Berkeley, found that since the city raised its minimum wage in 2015, unemployment dropped from 4.3% to 3.3%
  • The bill is expected to benefit over 50 crores employees across the country.
  • The bill is expected to go for digital mode/cheques as the mode of payment of wages. This would promote digitization and extend wage and social security to the worker.
  • It also provides for rationalisation of penalties for different types of violations
  • Will ensure decent  Minimum wage for all which will result into increase in disposable incomes in turn help in eradicating Poverty, hunger to achieve SDGs.
  • Multiplicity of definitions will be removed through this change.
  • The wage conditions of unskilled workers will improve.
  • It Will ensure humane working conditions through minimum working hours, overtime etc. and  prevent exploitation of labour.
  • Can lead to formalisation of economy.
  • The Code prohibits gender discrimination on wage-related matters.
  • Also help in reduce regionalism by reducing wage disparity across different regions.

 

Key Issues and Analysis:

  1. Central government may set a national minimum wage. Further, it may set separate national minimum wages for different states or regions.  In this context, two questions arise: (i) the rationale for a national minimum wage, and (ii) whether the central government should set one or multiple national minimum wages
  2. States have to ensure that minimum wages set by them are not lower than the national minimum wage. If existing minimum wages set by states are higher than the national minimum wage, they cannot reduce the minimum wages.  This may affect the ability of states to reduce their minimum wages if the national minimum wage is lowered.
  3. The time period for revising minimum wages will be set at five years. Currently, state governments have flexibility in revising minimum wages, as long as it is not more than five years.  It is unclear why this flexibility has been removed, and five years has been set for revision. 
  4. The Equal Remuneration Act, 1976, prohibits employers from discriminating in wage payments as well as recruitment of employees based on gender. While the Code prohibits gender discrimination on wage-related matters, it does not include provisions regarding discrimination during recruitment.

 

Need for a national minimum wage:

One argument for a national minimum wage is to ensure a uniform standard of living across the country.  At present, there are differences in minimum wages across states and regions.  Such differences are attributed to the fact that both the central and state governments set, revise and enforce minimum wages for the employments covered by them. The introduction of a national minimum wage may help reduce these differences and provide a basic standard of living for all employees across the country

 

Conclusion:

  • Some of the issues like what would the states which already provide higher minimum wage than the proposed national minimum wage do , Time period for revising minimum wage is fixed at 5 years so there is no flexibility. If these are resolved the code would change the face of Indian economy.

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