Code on Wages Bill

Why in news?

In executing its plans on converting 35-odd labour laws into 4 codes, the government plans to first take up the Code on Wages Bill.

What is the current system?

• The present law mentions 13 most vulnerable categories of employment.
• In this, the minimum wages are fixed by both the state governments and the Centre.
• [The Centre can notify the minimum wage rate for railway, agriculture, mining or central government entities.]
• The rates vary in accordance with skill sets, sectors and location.

What are the concerns?

• The existing system has led to over 1,700 minimum wage rates, fixed by both states and the Centre.
• The varied rates turn out as a huge compliance burden on industry.
• It has the potential of unleashing inspector raj, and largely works against the welfare of workers.
• Notably, the Centre started notifying a uniform national floor level minimum wage from 1996, which is non-binding on states.
• The national floor level was last revised by 10% to Rs 176 a day in July 2017.
• But to date, even business-friendly states such as Andhra Pradesh and Gujarat have fixed their minimum wage below the national floor.
• Other states are compliant with the above non-statutory national floor.
• So the minimum wage rate varies from Rs 69 to Rs 538 across states (with the lowest in Andhra Pradesh and the highest in Delhi).
• It is Rs 321 for the industries falling in the central sphere, as of November 2018.
• The variations call for a statutory floor across the country.

How will the wage code bill help?

• The Code on Wages Bill was introduced in the Lok Sabha in August 2017. [Click here to know more on the provisions.]
• Under the proposed law, the minimum wage law will be extended to all sectors, instead of the current 13 categories of work.
• This move is expected to ensure universal wage protection against exploitation.

What are the challenges though?

• The proposed Bill empowers the Centre to fix a statutory minimum wage.
• But notably, this may differ from state to state or from one geographical area to another.
• This idea of a differentiated national minimum wage rate was taken forward by a government-appointed committee.
• The committee has suggested a national minimum wage level for five different zones.
• Four of these were grouped using varied socio-economic and labour market factors.
• The fifth group included all North-eastern states except Assam.
• Despite the grouping, a regional-level minimum wage rate can lead to disparity among various regions with varying economic profiles.
• This is bound to make the system complex and confusing and difficult to enforce.

What could be done?

• The Centre should fix a single national floor for minimum wages for all workers.
• It should let the states fix their own rates, but the states should do so keeping in mind the national floor.
• Such a simpler structure would be easy to enforce and implement.
• Without addressing these gaps, passing legislation on minimum wages may have a direct bearing on jobs and industrial relations.

Source: Business Standard