A commentary on minimum wage act

Introduction

A fair wage is the basic demand for workers. In India, where only 7% of workers are in organized sectors (formal or public), workers have some tools like collective bargaining, to negotiate a better wage for themselves. But for the other 93% which is in unorganized sector, a fair wage is still a dream with limited scope for organizing and demanding for better wages. The issue of proper enumeration of wage is still an ongoing debate.

In India (as in many other countries) wages are classified into two categories. Living (or fair) wage and Minimum wage. Living wage is a wage on which a worker and her family can live off. It typically takes into account not only daily expenses of the worker and his/her dependents but also is supposed to include living expenses, medical expenses and children’s education. Minimum wage on the other hand as the name indicates is the lowest wage necessary to maintain a worker and his family at the minimum level of subsistence, which includes food, clothing and shelter. Minimum wages act came into effect on 15/03/1948 under which both the central as well as state governments are the appropriate governments to notify what is called schedule employment as well as fix and revise minimum wages for these employments.

Minimum wage act[MWA], enacted in 1948, is one of the oldest labour legislations in India, based on article 43 of constitution , which states that “The state shall endeavour to secure, by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life, and full enjoyment of leisure and social and cultural opportunities in particular”.

The act applies to so called Schedule employments. Schedule employment means any employment which comes under a schedule that is under central or state government’s purview. The appropriate governments are empowered to declare that a given industry be classified as scheduled employment if the number of employees exceed 1000. That is if number of employees being employed in a particular employment in a given state exceeds 1000, then the state government has the right to declare it as a scheduled employment. Currently there are 45 scheduled employments under central government and a total of almost 1600 employments under state governments. Even with such staggering nos, informal work like domestic work in some states are currently not covered under minimum wage.This is one of the many limitations of the MWA, as in India currently only around 60 percent of the workforce comes under the gambit of MWA. [1]

According to amendments that were proposed in 2008 but have not been implemented yet, the act should apply to all employments across the states, irrespective of the number of employees working in that area. In principle this could be (assuming minimum wage is at least close to living wage, which is currently not the case) welcome change for domestic workers as well other workers in informal sector.

This is an act which is based on ethical ground and not on economic ground and does not take into account the ability of the worker or the capacity of employer to pay. It is an absolute minimum which any employer whose company comes under the scheduled employment must pay otherwise it has no right to run. The law is supposed to be designed to protect the un-organised working class who otherwise will be offered starvation level wages and be heavily exploited.

How does the act work

The norms under which appropriate governments can fix or revise minimum wage were first fixed in 1957 and were later expanded to included two more items (listed (a) and (b) ) below in 1991.

1. Daily minimum wage should be such that an earner of the family can provide food enough for three adults. Enough food is classified in terms of calories. That is 2700 calories per one adult is considered to be the minimum food requirement.

2. It should be enough to provide annual clothing of 72 yards per family. (Note that, this requirement does not take into account the number of family members.)

3. Minimum wage should cover rent housing the earner and his/her family. The minimum area of the house for which rent is fixed is decided by the government’s industrial housing scheme. Once again this provision does not take into account the size of the earner’s family.

4. In addition 20 percent of the minimum wage is to account for Fuel, electricity and other house-hold expenses.

(a) Twenty five percent of total minimum wage should account for Children education, medical requirement, minimum recreation including festivals/ceremonies and provision for old age, marriage etc.

(b) Local conditions (e.g. adverse weather conditions ) should be taken into account in revising the Minimum wage.

It should be noted that the Minimum wages act is applicable for both piece-work (where a worker is paid a fixed amount upon completion of the work, irrespective of the time) or time-work where a worker is paid according to number of hours.

Of course a question naturally arises, who does the math? If the decision makers decide that 2700 calories for three adults costs say 200 rupees a day, the question arises if this is reflective of the varied price rise and the increasing inflation. According to CITU vice president Tapan Sen the actual minimum wages ought to be a lot higher : “In 2014, we prepared an estimate on basis of actual average of retail prices of these items in seven cities – Delhi, Mumbai, Chennai, Kolkata Bangalore, Bhubaneswar and Thiruvananthapuram, The expenses come to Rs 20,861 [a month], or Rs 802 a day.” [3] However, the fact is that today’s minimum wages across states do not reflect the realities of the above criteria. In addition the complete criteria for defining a family’s needs does not accurately reflect the realities of today’s lives. For ex, the minimum wage requirements do not reflect any on the transport or communication cost given that networking, migration and long commutes are the general norms in accessing work today,

It is thus imperative that in fixing the state-wise or national level minimum wage, decision making bodies have to include workers representatives like trade unions. If such multi-partite institutions involving trade unions do not exist or function (as is currently the case in India) then minimum wages are unlikely to be anything close to living wages for working class families.

Methods for Minimum wage revision/fixation

Under this act appropriate governments are required to review the minimum wages at regular intervals not exceeding a period of five years. The method for revision of minimum wages is a two step process where a committees is formed by the appropriate governments which conducts enquiries and makes recommendations as regards to the need to revise minimum wage. These recommendations are then notified in an official gazette and it is required that the proposals be implemented in the scheduled employments within two months of their publication in the gazette. In Tamil Nadu, the State Government notifies minimum wage every 5 years and amends dearness allowance every year based on consumer price index.

Hours of work

Minimum wages act has a provision which also takes into account the number of hours of work. Item 13 explicitly states that the appropriate government may fix the number of hours of work which defines a normal working day and for which minimum wage is fixed. This normal working day should include one or more breaks . In addition, the government may also provide for a day of rest every seven days and minimum wage be paid on these days as well. If a worker is required to work on these days, then except in cases when the work is of urgent nature (this term remains vague in the act), complimentary nature (work which can only be done outside regular working hours) , work which needs to be finished (for technical reasons ) before duty is over , and if the work involved is of intermittent nature; the wage for working on rest days should not be less then the overtime rate.

We should note that the terms like urgent nature, complimentary nature as well as intermittent work have not been defined in the act and perhaps leaves a room for bypassing this act and making workers work overtime.

There is an important provision in the minimum wages act which is often not implemented in practice and this relates to workers who do not work for the entire normal working day. The provision (Item 15 in the act) states that if a worker is being paid minimum wage on daily basis and if on a given day he works less then the requisite number of hours then he be paid proportionately.

However this provision comes with a caveat which states that if the worker has worked less then the normal working hours due to (a) his own unwillingness to work (b) or other such circumstances, then he not be paid at all. What these other circumstances are, or how does one establish that the worker worked less due to his unwillingness and not due to other circumstances like ill-health is not explained in this act.

Punishment

The minimum wage act is ensured both within the central sphere and those industries which come under state level regulations, by the use of inspecting officers (e.g. officers who work in Chief labour commissioner’s office as far as central sphere is concerned) . If it is found that some employer is not paying minimum wage then he can be imprisoned for up to 6 months or fined rupees 500 or both. It is fairly remarkable and a negative aspect of the act that the severity of fine is not associated to the capital of the employer.

Enforcement of Minimum wages act is done via Labour inspectors and various other enforcement machinery. These inspectors are required to perform checks at regular intervals to ensure that the act is faithfully implemented. Clearly role of such inspections is crucial in ensuring implementation of the act and any amendments in labour laws which restricts such inspections will have an affect on Minimum wages act.

Limitations in the act

One of the key problems with MWA in India is that it’s extremely unambitious in the sense of rights afforded to the worker. By allowing definitions such as piece-rate and part time, it has allowed for keeping the wages low in various sectors. Most of these end up being unorganized sectors where enforcement of the act is very poor. National Commission for Enterprises in Unorganized Sector came up with the hard hitting report on the conditions of work and lack of livelihood choices for the India’s unorganized workforce coexisting with the Shining India, an euphemism for the economic progress that was supposed to have been ushered due to globalization [9]. According to a report released in 2007 over 77% of the Indian population, most of which works in unorganised sector, lives in less than 20 rupees per day and had a income less than a purchase parity power of 80Rs(2$).

Clearly the act has failed to have an impact on unorganised workers. Unorganised workers are employed with millions of employers (sole proprietor , domestic or small traders) who are scattered and hence becomes difficult to cover them under law. This diversity in locations and nature of work has left them vulnerable to exploitation in the absence of a broad legal standard.

By keeping the penalty low, the act has allowed for employers to break the law with impunity. In the case of garment workers [4] , the industry had taken a stay order against the minimum wage notification and were allowed for a decade to evade paying minimum wage to predominantly women workers in garment industry. It took an organized struggle by workers to vacate this order and continue their fight for collective bargaining and fair wage.

While the act ascribes to equality between men and women in minimum wage, one of the longest struggles is by domestic workers to be included in the minimum wage. While some states such as Rajasthan and Maharashtra have included them, most of the states do not include domestic workers in spite of the sector being one of the major employment for women. India has adopted the International Labour organisation (ILO) convention on domestic workers and therefore have to make a policy for this segment of the society. Such a Policy has been framed and is currently under consideration with the labour ministry. Preliminary reports in the media indicate that for the “highly skilled” domestic workers the minimum wage will be set at 9,000 a month[3]. One can only imagine how low the minimum wage for so called unskilled domestic workers would be which constitute the majority of that work force.

The formal and public sector are not immune to the evasion of minimum wages. The formal sector has increasingly used contract and temporary workers who are paid unequal wages compared to similar work by permanent workers. In Haryana, after minimum wage was increased for skilled and unskilled workers, reports have emerged on workers being fired and moved to contract labour force [5] .

Formal industries, while are obligated to pay minimum wages, more often that not get away with it. One mechanism prevalent in Industries is the use of trainees as a worker category who are paid stipends and hence are not legally mandated under minimum wage act. Similar trend is followed in public sectors where anganwadi workers and health workers in rural areas are termed as volunteers with an entitlement of honorarium and not a legally mandated wage. Some times, formal sectors don’t pay minimum wages. However, legal cases for pursue of minimum wages, more often than not, result in long winded legal processes and even penalization of workers [6].

Disparities and National floor minimum wage

Minimum wages vary across states due to varying local conditions like cost of living, as well as paying ability of industries which vary from state to state. Thus establishing a national level wage policy has always been difficult. However in order to reduce the disparities in wage structure across states, a concept of National floor minimum wage(NFMW) was proposed by National commission of Rural labour in 1991 and has subsequently been adopted in a legally non-binding manner. This wage is inspected and revised annually based on Consumer price index for industrial workers (which measures change in time of price of a fixed basket of goods and services that are consumed by industrial workers). Currently NFMW stands at around 160 rupees a day. Of course it is highly debatable that even this abysmally minimum amount (which is often less then price set by state level minimum wage) is paid to workers, esp. those involved in manual scavenging and cleaning. Of course as it is legally non-binding it has had absolutely no effect on the employers.

One of the key aspects of the proposed labour law reforms by the current government has been to adopt a national level minimum wage that will cover all the scheduled employments anywhere in the country. However a closer look at this amendment of Minimum wages act reveals that it will (as if often the case with such amendments) work against the interest of the working class.

So for example as per the calculations on various requirements of Minimum wage act has led government to conclude that the minimum rent per month should be 390 and total food costs for 3 adults per day should cost no more then 211 rupees. This calculation fixes the national level minimum wage to 7100 a month! On the eve of a national strike last year, the Government proposed the same floor wage to striking union demands of Rs 15000 per month[7] .This is less then the minimum wage workers are getting paid in many places like Haryana and Delhi where minimum wages being paid to workers are 7600 and 9000 respectively. ! [3]. The fixation of national level minimum wage is unlikely to make things any better as the wage government is asking for falls far short of the actual requirement of families.

The government claims that this national level minimum wage has been fixed after tripartite talks with industries and trade unions. However, the meeting of such central advisory boards, even when they happen, are usually arranged with corporate friendly unions which do not reflect the interest of workers. Most of the time, they are not even constituted, as has happened under the current Government. The unions have been demanding a national level minimum wage of 20000 a month.

Overall impact

One of the notable recent successes on minimum wages was when supreme court mandated that workers under National Rural Employment Guarantee Scheme(NREGS) be paid minimum wage according to the specific State [8]. Not withstanding this, the impact of minimum wage act has been negligible due to fixing of low wages as minimum wage, legal loop holes that help employers get away with not paying minimum wage, low punitive measures and long judicial delays for those who seek justice under the act. As a majority (92 percent) of the workforce is employed in the informal sector which continues to be exploited and a whooping 80 percent of them live in less than poverty income, it would be perhaps not too far fetched to say that the act has largely failed.

However, even such little right is being taken away under the guise of labour reforms. NDA Government has proposed several labour reforms to deregulate labour, a euphemism for disenfranchising workers rights. One such is the Wage Code Bill, which aims to bring all the various acts that deal with wages including payment, equal remuneration and minimum wages act under one single act. However, what this act also does is to further deregulate the industry from monitoring. According to the bill, the labour inspectors are no longer mandated to check factories or other workplaces for minimum wage violations. Instead, their role is turned into advisory capacity to industries on the minimum wages. Asking for minimum wage is a compromise in itself even that compromise stands to further erode as labour reforms are pushed.

The fight for a living wage is not confined to setting and implementing minimum wages alone. New forms of labour arrangement in formal and informal sector are continuing to de-legitimize the status of worker as trainees, apprentices, contract and volunteers. Even, in developed countries like U.S., France, Japan,where the minimum wages act has had some impact as most of the workers belong to the formal sector, new forms of labour arrangement where work is outsourced, franchised or transferred to supply chain, mean that the impact of such acts are disappearing. It needs a sustained struggle on behalf of working class to fight against such classifications to fight for a fair wage.

References :

[1] http://www.global-labour-university.org/fileadmin/GLU_conference_2014/papers/uma_etal_minwages.pdf
[2] http://www.firstpost.com/india/govt-readies-domestic-workers-policy-proposes-rs-9000-minimum-pay-benefits-2395116.html
[3] http://scroll.in/article/766248/modi-governments-weird-maths-for-a-minimum-wage-rs-390-for-monthly-rent-rs-16-for-veggies
[4] http://tnlabour.in/?p=2523
[5] http://www.hindustantimes.com/gurgaon/industries-fire-workers-after-govt-hikes-wages/story-wOHOXhnDz1B2IAKHNZgtcJ.html
[6] http://tnlabour.in/?p=2600
[7] http://tnlabour.in/?p=2655
[8] http://www.downtoearth.org.in/news/mgnrega-wages-should-not-be-less-than-minimum-wage-of-a-state-expert-panel-45445
[9] Report on Conditions of Work and Promotions of Livelihood in the Unorganised Sector, National Commission for Enterprises in Unorganised Sector, Aug 2007

This entry was posted in Featured, Informal sector, Labour Laws, Resources, Working Class Vision and tagged , , . Bookmark the permalink.