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Minimum Wage in India: Reality- Pre and Post Pandemic

India currently is undergoing a Post covid recovery phase in terms of economy and employment. The Coronavirus pandemic had an unprecedented worldwide financial and labour crisis harming a large number of workers and industries. While the effect on jobs has been documented, the impacts on wages are less aware.

The relationship between the employment and minimum wage is a controversial subject and it is inevitable that the pandemic has irreparable bearings on it and this article ponders upon the question of minimum wage in India post pandemic. There is quite a difference of views which different theories propound. On one hand, the neo-classical economic theory proposes a descending labour demand curve through which a growth in the minimum wage would lead to decline in employment.

The academic studies, of Stigler (1946) and Shannon & Beach (1995) depicts an inverse relationship between the wage and the demand for labour. Inversely, there are certain other empirical papers such as the Card (1992), and Card & Krueger (1994) which depicted the opposite effect, propounding that an upsurge in the minimum wage has a constructive or no outcome on employment if the former theory is to be believed, then surges in minimum wage during the pandemic could lead to great extent of decline in employment.

The discussion on minimum wages began quite a while back in the US when the Government minimum wage was fixed at 25 cents an hour. The minimum wage system in India as per the Economic Survey 2018-19, contains 1,915 minimum wages demarcated for several scheduled job categories across different states in the country. It was revealed in a survey that 90% of workers don't even know about the minimum wage and, needless to say, are severely exploited.

On November 1948, a central advisory council in the first session appointed a tripartite committee on fair wages consisting of employer's representatives, employee's representatives and the government. The committee proposed that the minimum wage should provide for measures of education medical requirements and amenities and for preservation of the efficiency of the worker.

The legislative enactment for regulation of minimum wage has for was the Minimum Wages Act, 1948 till the 2019 notification of the Code on Wages Act, 2019 (hereinafter referred to as "the Code"). The Code replaced four other labour regulations including the Minimum Wages Act, 1948; the Payment of Wages Act, 1936; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976.

The Code forbids employers from paying workers less than the stipulated minimum wage. In the case of Crown Aluminum Works Ltd. v. Workmen[1], the court went on observe that the employer who does not have the capacity to pay the minimum wages has no right to employ the workers. Further, under section 6[2] of the Code, the appropriate government is empowered to fix the minimum rate of wage taking into consideration the skill of workers for working under certain categories including skilled, semi-skilled, unskilled etc. and arduousness of work. It is further provided under section 8(4)[3] that the minimum wages shall be revised and reviewed by the central and state government at an interval of not more than five years.

Under the Code, the government shall appoint inspectors-cum-facilitators in order to inspect to ensure that the companies are biddable with the Code. The penalty would be subject to the nature of the offense. Three months of imprisonment is the maximum penalty with or without a fine of up to INR 100,000. It has been witnessed that India offers the utmost competitive labour costs in Asia, with a universal minimum payment of ₹178 a day, which is the floor-level wage and that would vary depending upon the geographical areas and other criteria.

India has a serious wages problem, going with the figures of Periodic Labour Force Survey 2017-2018, among regular workers, 45% are given a pay less than the minimum wage. So, concludingly the ground reality is quite inverse that there has been no new change on implementing a national minimum wage. It has been observed that the government hasn't prioritized the execution of a minimum wage plan since possess a highly polarizing effect and potentially would have adversely bearing upon the employers in the post-pandemic period.

Considering the pandemic situation, it is pertinent enough herein to refer the case of Workmen Represented By Secretary v. Management of Reptakos Brett. and Co. Ltd. and Anr.[4], whereunder the Court stated that the employees are entitled to the minimum wage at all times and under all circumstances. It further went on to state that an employer who cannot pay the minimum wage has no right to engage labour and no justification to run the industry.

According to the report of ILO named the Global Wage Report 2020-2021[5], the informal workers in India had suffered fall in wages of 22.6%, it is not in isolation that the formal sector employees too experienced an average salary cut of 3.6% which is still an undervaluation.

Further revelations were made in the report whereby real wage growth in India is recorded as the lowest in the Asia Pacific, less than countries like Sri Lanka, Pakistan and Vietnam and it was recorded that the wage growth rate earlier to the pandemic was quite slow and now it has drowned. It has been further recorded that the pandemic has pushed millions of workers worldwide to becoming unemployed and that 40 countries adopted for "temporary wage subsidies" with an objective to prevent mass layoffs, in order to aid in retaining the skilled workers.

The report further shows that the impact of the crisis on women has been to a great extent worse than men. It has been figured that woman lost 8.1 per cent of the wages in the second quarter of 2020, when comparingly men lost 5.4 per cent. At this point, it is worth noting the words of ILO Director-General Guy Ryder, whereby he stated that "the inequality growth that has been created by the crisis possess threat to a legacy of poverty and the economic instability that would be devastating,".

To conclude with the words of Rosalia Vazquez-Alvarez, "adequacy of minimum wages can protect workers against low wage and reduce inequality". Regarding which, there is an urgent need for effective measures to ensure the minimum wage to every worker in order to bridge the income disparity and to prevent the exploitation of workers.

  1. Crown Aluminium Works Ltd. v. Workmen (1958) SCR 651
  2. The Code on Wages, 2019, � 6, No. 29, Codes of parliament, 2019(India).
  3. The Code on Wages, 2019, � 8(4), No. 29, Codes of parliament, 2019(India).
  4. Workmen Represented By Secretary v. Management of Reptakos Brett. and Co. Ltd. and Anr., 1992 AIR 504
  5. International Labour Organisation, Global Wage Report 2020-21, (Last visited 19th Nov 2022)

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