The minimum wage policies and legislation of a country play a critical role in protecting workers and also help correct income imbalances caused by rapid globalisation in not only economic markets but also labour markets, smoothing the adjustment process. Labour laws and reforms aim to reduce existing inequality and attempt to redistribute income, especially to the low-paid workers in the labour market, so at least their minimum survival needs are met. In this regard, India’s minimum wage legislation has been envisaged as an effective way to tackle poverty and inequality. In most developing countries such as India, the minimum wage system is a subject of endless debate. Because of its complex structure, it often faces criticism from all sides: social, political and legal. While multiple issues plague the Indian minimum wage system, the core of the problem lies in the complications associated with the criteria for setting the minimum wage and its associated processes. The Indian economy is growing at a phenomenal rate, with a projected growth in gross domestic product (GDP) of 7.4 per cent in 2018 and 7.8 per cent in 2019 (IMF 2018). India has been termed the fastest growing economy in the world, and its development plans have spurred positive sentiments in the global market (Economic Times 2018). Despite this very high rate of growth, multiple challenges remain in protecting workers—particularly in the large informal sector—and in providing them with a minimum wage. This can be attributed to the loopholes in the existing minimum wage policies and legislation and to implementation difficulties. Yet another crucial problem faced while setting minimum wages is determining their optimal level. Minimum wages can be ineffective if they are set too low, and there is a risk of inflation and unemployment if set too high, the brunt of which is faced by workers in the informal sector, since social protection is practically non-existent (Dawn 2017). Furthermore, there are administrative issues such as delays in the revision of rates and ensuring compliance. Non-compliance happens more in rural areas than urban ones and affects the informal sector more than the formal sector. In addition, there is a higher probability of women being paid less than men (ILO 2016), even though Article 39(d) of the Constitution of India guarantees equal wages and equal treatment. Thus, although it may be perceived that the minimum wage is an effective instrument, it has failed to be effective in practice. India was among the first of the Asian countries to enact minimum wage legislation, soon after its independence. The informal sector in India has benefited from the legislation to some extent, but numerous challenges and hurdles in determining levels, enforcement, implementation and coverage have emerged due to its convoluted structure. The mechanism for setting and implementing the level of the minimum wage in India has been hotly debated since its inception. India follows a dual system: while minimum wages are set at the national level (central sphere), all states have the autonomy to set their own minimum wages according to their own costs of living and job markets. This often results in confusion about prevailing minimum wage rates and the same type of work represented by different classifications, with a high chance of different wage rates applying Visa Services in Delhi simultaneously for the same work. This has resulted in India having one of the most complex minimum wage systems in the world, with more than 1700 prevailing rates. The rates are also set as piece rates, hourly rates and monthly rates and are decided at national, regional and sector levels. However, in truth, there is no such thing as a national minimum wage that can be considered an official benchmark—something that has been persistently demanded by national trade unions. Furthermore, even though the International Labour Organization (ILO) has established a set of eight guidelines for establishing a minimum wage, India only follows one: inflation and/or cost of living index/economic situation and/or level of development. The law mandates the revision of minimum wage rates every two years, but since they are set by different authorities at different points in time, the entire process of establishing rates and implementing them lacks clear standards, resulting in confusion for both workers and employers. Discussions about the long-overdue reform of India’s labour market policies have been circulating regarding a better system for determining and implementing the level of the minimum wage, to ensure that the most vulnerable workers are protected and basic social security is made available to them. Reforms are necessary to improve labour conditions and coverage levels. Employers will also have clarity about the minimum wage rates to be paid to workers. There is wide consensus among stakeholders, policymakers, employers, trade unions and academics that the 34 current system is flawed and that there is a pressing need for improvement. Though the implementation of the minimum wage—with all its limitations— has definitely expanded the scope of decent working conditions, which has especially helped low-paid workers, it has also posed severe challenges, including the difficulty in balancing processes across all three levels of government and guaranteeing suitable compliance, in line with ILO guidelines and in the face of labor market distortions. Collective bargaining has also not been effective and has not been explored to its fullest in India, though wherever collective bargaining exists, the prevailing minimum wage rate is considered the starting point. Aiming to reform labour laws in general and specifically the wage system, the Government of India has made a proposal by introducing the Code on Wages Bill (2017) and opening the subject to public debate. This bill proposes to empower the central government to set uniform wages for all sectors nationwide (PIB 2017). With the implementation of this law, the issues hampering the ideal implementation of minimum wages are expected to be resolved, and its benefits are expected to cover a large part of the working population. The new bill is also expected to play a crucial part in reducing the obscurities in wage rates and to aid compliance, without affecting workers’ income levels and social security. This is one of the first significant initiatives undertaken by the Indian government to merge the existing, different labor laws related to wages (Payment of Wages Act of 1936, the Minimum Wages Act of 1949, the Payment of Bonus Act of 1965, and the Equal Remuneration Act of 1976) into one single code. This move is expected to not only considerably improve the ease of doing business but also ensure a universal minimum wage for all workers. This historical change in legislation, when implemented, is expected to help over 40 million workers (Press Trust of India 2018) across different sectors. Once the proposal is enacted into law, the country will have a statutory national minimum wage rate, and it will ensure that state governments are not able to set their minimum wage levels below the national minimum wage established for that region. This new minimum wage will be valid for all classes of workers. In the current system, the law covers only workers in ‘scheduled’ industries or establishments. In addition to changes in legislation, the government aims to increase financial inclusion through multiple e-governance initiatives such as delivering payments through digital or electronic means, along with extending wage and social security coverage for workers. It also intends to ensure compliance through the use of analytics. To address non-payment and incorrect payment of the minimum wage, as well as the procedural hurdles currently Photo: Adam Cohn. Workers in a clothing factory, Mumbai, India, 2015. While multiple issues plague the Indian minimum wage system, the core of the problem lies in the complications associated with the criteria for setting the minimum wage and its associated processes.
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