GS Paper 2
Syllabus: Indian Constitution
Source: LM
Context: India’s decision to transition from minimum wage to a scientifically determined living wage by 2025, with support from the International Labour Organisation (ILO), is commendable.
Types of Wages:
| Type of Wage | Definition |
| Minimum Wage | The minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, cannot be reduced by collective agreement or an individual contract. It includes basic needs like food, shelter, and clothing. |
| In India, the minimum wage calculation varies depending on the state government and worker’s skill level and the nature of their work among other factors. | |
| Living Wage | The wage needed to provide the minimum income necessary to pay for basic needs is based on the cost of living in a specific community. In addition to basic needs, a living wage includes education, health, insurance, and other essential expenses. |
| Article 43 of the Indian Constitution mandates the State to ensure, through appropriate legislation or economic measures, a living wage for all workers, including those in agriculture, industry, and other sectors. | |
| In the Raptakos case (1991), the Supreme Court advocated the concept and the right to living wage. | |
| Fair Wage | A fair wage is a balance between a living wage and a minimum wage. It aims to provide workers with reasonable compensation that meets both their basic needs and ensures a decent standard of living. |
| Starvation Wage | Starvation wage refers to wages that are insufficient to provide the ordinary necessities of life. Workers earning starvation wages struggle to afford even basic essentials such as food, shelter, and healthcare. |
Evolution of Wage System in India:
Current wage system in India:
In India, the current wage system operates under the National Floor Level Minimum Wage (NFLMW), established by the government as per the Code on Wages 2019. This mandates that employers cannot set wages below this minimum level. While the NFLMW is set at Rs 178 per day, states have the flexibility to revise minimum wage rates accordingly, as outlined in Section 5 of the Code on Wages 2019.
Issues with the Current Wage System:
The current National Floor Level Minimum Wage (NFLMW) of ₹176 per day, set in 2017, lags far behind other countries in the Asia-Pacific region, such as China, Vietnam, and Bangladesh. By adopting a living wage approach, India can address the disparity and ensure fair compensation for workers, as demonstrated by examples from countries like Brazil and developed economies such as Australia, the UK, and the US.
Need for Living Wage Standard:
| Need | Description |
| Insufficiency to Meet Basic Needs | The current minimum wage is inadequate for basic needs due to inflation. |
| 45% of salaried workers earn less than Rs 9750 monthly, pushing many below the poverty line. | |
| Alleviating Poverty | Transition to living wages aims to uplift millions out of poverty. |
| Wage Discrepancies | Over 500 million workers, 90% in the unorganized sector, earn varying minimum wages, some below the poverty line. |
| About 80% of unorganized sector workers earn below government-stipulated minimum wages. | |
| Achieving SDGs | India is committed to SDGs including decent work and economic growth; living wages can expedite poverty reduction efforts. |
| Reducing Inequalities | India’s high inequality requires wage structure redesign. |
| Strong economic growth indicates the capacity for higher wages. | |
| Positive Work Culture | Higher wages can boost morale, and productivity, reduce turnover, and enhance customer satisfaction. |
| Investing in employee well-being fosters loyalty and work ethic. |
Legislations on Minimum Wages:
Legislations on Minimum Wage in India have evolved over time. Until 2019, the Minimum Wages Act of 1948 governed minimum wage fixation. This Act allowed the Central government to set wages for certain industries, while State governments had jurisdiction over others, including the private sector. The introduction of the Code of Wages in 2019 aimed to standardize wage regulations and ensure that minimum wages do not fall below the National Wage Floor (NFW). However, full implementation of this code, which is applicable nationwide, is still pending.
Case Studies:
- United Kingdom: Adoption of living wage standards has led to improved employee satisfaction and productivity.
- United States: Initiatives like Seattle’s $15 per hour minimum wage have enhanced working conditions for low-wage workers.
What Needs to be done:
- Minimum Wages for Gig Workers: Currently, only three platforms, including Bigbasket, Flipkart, and Urban Company, have minimum wage policies to ensure workers earn at least the local minimum wage.
- Government Legislation and Policies: Governments should enact laws beyond minimum wage standards, considering comprehensive policies that reflect the true cost of living.
- National Multidimensional Poverty Index: Incorporating health, education, and standard of living indicators into the definition of living wages can align with India’s multidimensional poverty index.
- Inflation Adjusted Wage: To address market volatility, minimum wages should be adjusted for inflation, ensuring alignment with economic fluctuations.
- Overcoming Implementation Challenges: Governments can support small businesses facing increased labour costs through incentives like tax credits or grants.
- Collective Bargaining: Empowering workers through collective bargaining ensures their interests are represented in wage negotiations.
- Adaptation and Innovation: Collaboration between policymakers, businesses, and labour advocates is crucial to mitigate the impact of automation and the gig economy on worker rights and fair compensation.
- Integration with Sustainable Development Goals: Aligning living wages with sustainable development goals strengthens the global commitment to fair compensation and socioeconomic progress.
Code of Wages Act 2019:
India’s Minimum Wage Policy under the Code of Wages Act 2019 aims to modernize outdated labour laws, ensuring transparent and accountable regulations. It universalizes minimum wage provisions for all sectors, guaranteeing timely payment and the “Right to Sustenance” for workers. The Central Government determines floor wages considering living standards, allowing for regional variations. State-set minimum wages must exceed the floor wage. The Code introduces the concept of floor wage, preventing states from setting wages below this baseline. However, concerns arise regarding potential capital flight due to regional wage disparities.
Insta Links
Insights into Editorial: The minimum wage solution
Mains Links
Examine the role of ‘Gig Economy’ in the process of empowerment of women in India. (UPSC 2021)
Prelims Links:
In India, which one of the following compiles information on industrial disputes, closures, retrenchments and lay-offs in factories employing workers? (UPSC 2022)
(a) Central Statistics Office
(b) Department for Promotion of Industry and Internal Trade
(c) Labour Bureau
(d) National Technical Manpower Information System
Ans: C
