Govt needs to explore ways if country can be divided into 5 wage zones for better wage management, says Economic Survey
The Survey advises that the proposed labour code should include a provision for a minimum wage for both informal and formal sector workers, as 93% of the labour force is engaged in unorganized work
NEW DELHI :
India needs to have a mandatory national-level minimum wage to promote social justice and curb distress migration, said the Economic Survey 2019 tabled in Parliament on Thursday.
The Survey said that a mandatory minimum national wage will force states to pay more than the floor rate, but not less. “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," chief economic advisor K.V. Subramanian said.
The Economic Survey suggested that since India is a large and complex country, the centre should explore if it can be divided into five wage zones for better wage management. The move, the Survey said, will improve help regions attract investment and reduce distress migration.
“The central government should notify a national floor minimum wage that can vary across the five geographical regions. Thereafter, states can fix the minimum wages, which shall not be less than the ‘floor wage’. This would bring some uniformity in minimum wages across the country and make all states almost equally attractive from the point of view of labour cost for investment, as well as reduce distress migration," the Survey said.
It advised that the proposed labour code should include a provision for a minimum wage for both informal and formal sector workers, as 93% of the labour force is engaged in unorganized work.
“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 the survey, adding that one in every three wage workers in India is not protected by the minimum wage law.
“Minimum wages should be fixed for four categories namely, unskilled, semi-skilled, skilled and highly skilled, based on the geographical region and should cover all workers...," it added.
In recent years, minimum wage systems have been strengthened by many countries to lift workers out of poverty and to reduce levels of inequality. The renewed interest arises as recent literature and evidence suggest that minimum wages can promote social justice without any major negative implication for employment if wages are set at an adequate level, the Survey argued.
The system in India is extremely complex with 1,915 minimum wages defined for various scheduled job categories. “Today, there are nearly 429 scheduled employment and 1,915 scheduled job categories for unskilled workers. This massive expansion in job categories and wage rates has led to major variations, not only across states, but also within states," the Survey added.
The International Labour Organization (ILO) has been advocating decent jobs and better remunerations for the working class. In a November 2018 report, ILO said that around 41% of Indian employees feel they are poorly paid—India stood fourth from the bottom among the 22 countries of the Asia Pacific region, only above Bangladesh, Pakistan and Mongolia. India’s problem is higher informal employment, besides poor quality and low-paid jobs in the formal sector, said K.R. Shyam Sundar, a labour economist and professor at XLRI Jamshedpur. While the gradual growth in the formal sector’s share in the labour market is a good sign, the government has to put in place systems that will improve the quality of jobs, he added. Short-term contractual employment in the formal sector, or in labour-intensive sectors, will not help, Sundar said.
While workers’ unions have been talking about better wages and supporting a national floor price, industry bodies have expressed their reservations. In June, the Confederation of Indian Industries (CII) said that states should have the power to determine minimum wages as the concept of a national minimum wage will affect job creation.
“A well-designed minimum wage system can be a potent tool for protecting workers and alleviating poverty, if set at an appropriate level that ensures compliance," the Economic Survey said, further highlighting how wage disparity among genders and geographies is a key challenge in the country.
International experience suggests that greater compliance with minimum wages has led to a reduction in wage inequality. India’s experience on the impact of minimum wages on wage inequality needs to be evaluated, keeping in mind the segmentation in the labour market and the differences across various categories of workers.
The Economic Survey said effective implementation and monitoring will be key to a national minimum wage floor rate. “A simple, coherent and enforceable minimum wage system should be designed with the aid of technology as minimum wages push wages up and reduce wage inequality without significantly affecting employment."