Minimum wage likely to be fixed for children’s education, medical costs

New set of rules proposed to calculate it; threshold for workers could see increase in next three months

The manner in which the minimum wages for workers is fixed is going to see a big change. The Union government has proposed a set of rules which was adopted while setting the minimum wages for its own officials (in 2016) by the Seventh Pay Commission. As a result, the minimum level for workers is set to go up in the next three months, a senior labour and employment ministry official said, requesting anonymity.

The ministry has made a set of rules prescribing the way in which it will fix the level. And, it will cover the cost to a worker's family of children's education, medical requirements and recreation. This is part of the draft Code on Wages (Central) Rules, 2019, for which public comments have been invited by the ministry.

The rules are part of the Code on Wages Act, 2019, passed by Parliament and notified in August this year, which proposed to give minimum wages to all workers across the country, instead of only a set of industries.

The central government has proposed to follow in toto the Supreme Court’s advisory in a ruling in 1992, popularly known as the Raptakos judgment, and recommendations of the 15th Indian Labour Conference, made in 1957. According to the SC advisory, which will be adopted, minimum wages for workers are to be so fixed that 25 per cent of it constitutes “expenditure for children's education, medical requirement, recreation and expenditure on contingencies”.

Along with it, while setting the level, the government will keep in mind the expenditure of a worker’s family (of three) towards food, clothing, house rent, fuel and electricity, say the draft rules. Most of the components in the wage are proposed to be linked to expenditure on food and clothing. For instance, housing and rent expenditure will constitute 10 per cent of food and clothing expenses. The cost of expenditure by a worker’s family on food with net intake of 2,700 calories per day for three family members and clothing (66 metres cloth per year for the whole family) will be the most important criteria, being followed in present day practice as well. Fuel and electricity cost would constitute 20 per cent of the minimum wage.

To be sure, these proposed norms will apply only to the railways, mines, oil, aviation, telecom, banking and insurance sectors along with central public sector enterprises, governmentowned ports and private contractors engaged by the central government. The norms for all sets of industries will be notified by respective state governments, as in the Code on Wages Act, 2019. The manner of calculating the minimum rate of wages was not prescribed in government rules so far and has been a bone of contention for employers and employees, often leading to litigation. For various reasons, including court cases, it took the Delhi government more than three years to notify a hike in the minimum wage for workers by 37 per cent, after it had started the process in August 2016.

There are two schools of thought on fixing the minimum wage. Either go with a renewed approach in line with realities, keeping economic factors in mind or stick to the historical norms, which are sufficient and were not followed in letter and spirit till date.

“The approach followed by the central government in the draft rules is the right way to go. This was followed by the seventh pay commission, too. It’s a progressive way to recognise that the minimum wage determination process does not change because of time and space. It will definitely lead to a hike in minimum wage,” said K R Shyam Sundar, labour economist and professor of human resources management at Xlri-xavier School of Management.

However, Anoop Satpathy, fellow at the VV Giri National Labour Institute, says the draft rules do not take into account socio-economic considerations and labour market realities.

“The parameters of fixing the minimum wage should be contemporary and evidence-based. It should be delinked to the food component and nonfood expenses should be based on actual expenditure by workers. Economic considerations, including labour productivity and impact on employment, should also be key factors,” says Satpathy, who had headed a government-appointed committee on fixation of minimum wages.