Cabinet clears Wage Code Bill to ensure higher, uniform wages across country

The union cabinet on Wednesday approved a uniform labour code on minimum wages that makes it obligatory for all industries to pay a minimum wage to all categories of employees across the country, and not just those earning less than Rs18,000 a month as it is now.

The Labour Code on Wages Bill seeks to empower the centre to fix a universal minimum wage for workers across the country. The new law is expected to benefit over 40 million employees across the country.

The Code will consolidate four different wage-related laws - the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976.

The Second National Commission on Labour has recommended that the existing labour laws should be broadly grouped into four or five labour codes on functional basis. Accordingly, the ministry has taken steps for drafting four labour codes covering wages, industrial relations, social security and welfare, and safety and working conditions, respectively, by simplifying, amalgamating and rationalising the relevant provisions of the existing central labour laws.

Ministry of labour and employment has prepared a preliminary draft on Labour Code on Social Security 2017 by simplifying, amalgamating and rationalising the relevant provisions of the 15 existing central labour laws and placed on the website of the ministry on 16 March 2017, inviting comments of the public / stakeholders. The provisions of the Code on Social Security 2017 are under consideration.

The labour code when passed by Parliament will ensure higher and uniform wage across the country. The new law will not only affect competitiveness of trade and industry, but will also affect the ability of states to attract investments on the basis of lower wage rates.

Labour is on the concurrent list, so it is not clear if states will agree to the new proposals. While the move will be popular among trade unions and those currently employed, if implemented across the country, will disadvantage some firms, which would then opt to remain in the informal sector where policing wages is difficult.

According to the latest Economic Survey, 78 per cent of Indian firms employ under 50 workers and just 10 per cent employ more than 500 - the comparable figures for China are 15 per cent and 28 per cent, respectively .

With much smaller firms than China, India's quality suffers as a result. To this, add the cost of poor infrastructure - road transport, for instance, costs $7 per km versus $2.5 in China, and it takes 21 days to deliver goods from JNPT to the US east coast compared with 14 days for China.

States are expected to take into account local conditions, including local cost of living and availability of skills and also the need to attract investment. All of these go together. A uniform wage rate across the country will take way that advantage.

The centre, however, expects wage costs to even out across the country with GST bringing about some uniformity in product and commodity prices ad levelling living costs.

Brazil, which implemented a similar minimum wage law, suffered regional income disparities as a result forcing the country to approve some major changes to that country's labour code.