Think of a canvas where each stroke is a different law, each one designed to safeguard the rights of Indian workers. For decades, this canvas was disjointed, with different laws scattered here and there across different industries. The Minimum Wages Act of 1948 was an early stroke on this canvas, securing the compensation of hard work for workers.

But with the coming of the new labour codes in 2019-2020, this canvas has evolved into a harmonious masterpiece, weaving different laws together into one complete framework. This blog discusses the evolution from the Minimum Wages Act to the new labour codes and how these developments affect the lives of the workers and the employers.

The Minimum Wages Act, 1948: A Pillar of Labour Rights

Key Provisions:

• Section 3: Fixing of Minimum Rates of Wages
  Provision: The Government fixes minimum wages for certain industries so that workers can earn a decent income to support their families.
  Example: Suppose Rohan is a young farm worker in rural India. Due to Section 3, Rohan receives a minimum wage that enables him to support his family, even during tough economic times.
• Section 4: Minimum Rate of Wages
  Provision: Minimum wages consist of a basic wage and a cost of living allowance, which is the actual cost of living.
  Example: In cities, the basic wage could be ₹10,000 and the cost of living allowance ₹2,000, so the total minimum wage would be ₹12,000 per month. This makes it possible for workers such as Priya, who resides in a city, to buy basic needs.
• Section 5: Procedure for Fixing and Revising Minimum Wages
  Provision: Committees are established to go through and rewrite wages in consideration of changes in the cost of living.
  Illustration: A committee examines the minimum wage rate for textile factory workers and recommends a raise on account of rising housing expenses benefiting workers such as Kumar who toil in textile factories.
• Section 7: Advisory Board
  Provision: Advisory Boards consult on wage fixation to ensure the voice of the workers is taken into consideration.
  Example: An Advisory Board suggests raising the minimum wage for construction workers as a result of increasing housing prices to benefit workers like Ramesh who construct houses for other people.
• Section 14: Overtime
  Provision: Employees should be paid twice the rate for overtime, acknowledging their extra work.
  Illustration: If an employee's regular rate is ₹100 per hour, they should be paid ₹200 per hour for overtime. This way, employees such as Leela, who tend to work extra hours, are paid justly.
• Section 22: Penalties for Certain Offences
  Provision: The employers who undercompensate employees are punished, discouraging exploitation.
  Example: An employer who pays ₹8,000 rather than the minimum wage of ₹10,000 can be fined or sent to prison, safeguarding workers from exploitation.

Constitutional Relevance

The Minimum Wages Act aligns with several constitutional principles:

• Article 39(a): Ensures that the state secures adequate means of livelihood for men and women equally, promoting social justice.
• Article 43: Directs the state to secure living wages, a decent standard of living, and social and economic opportunities for all workers.
• Article 23: Prohibits forced labour, which includes paying below minimum wages, as it exploits workers.

 
The Act's constitutionality was challenged in cases like Bijay Cotton Mills Ltd. V. The State of Ajmer (1954), where the Supreme Court ruled that the Act's provisions are reasonable and permissible under Article 19(6) of the Constitution, as they serve the public interest
 

The New Labour Codes: A Unified Framework

Key Provisions:

• Consolidation of Laws: The new codes consolidate four key labour laws, making compliance easier and minimizing confusion.
  Illustration: Employers now have the facility to file a single return covering all labour laws, minimizing paperwork and administrative expenses. This assists small business entrepreneurs like Suresh in maintaining their compliance in an easier way.
• Universal Minimum Wage: The Code on Wages provides a universal minimum wage that is uniformly applicable across all sectors.
  Example: A minimum wage of ₹18,000 per month is fixed, applicable to all employees across all industries. This favors employees like Aisha, ensuring she is paid a reasonable salary.
• Definition of Wages: A standard definition of wages is introduced, specifying what is considered wages.
  Example: The definition encompasses all types of remuneration, helping employees like Vivek receive all due benefits.
• Floor Wage Concept: A floor wage ensures a minimum standard of living nationwide.
  Example: A floor wage of ₹15,000 per month helps workers like Nalini in rural areas ensure basic sustenance.
• Simplified Compliance: The mergers minimize bureaucratic barriers and facilitate easier compliance.
  Example: Employers can now focus on business development, knowing compliance is streamlined.

Impact and Opportunities

• Enhanced Worker Protections:
  • Universal Coverage: Minimum wage protections now cover all industries.
    Example: Gig workers like ride-sharing drivers gain economic security through minimum wage access.
• Reduction of Income Inequality:
  • Floor Wages: Helps bridge regional income disparities.
    Illustration: ₹15,000 per month provides basic needs coverage, narrowing the rural-urban wage gap.
• Formalization of Informal Sectors:
  • Incentives for Formalization: Extending wage protections encourages formalization.
    Example: Small businesses gain access to social security schemes for employees.
• Boost in Economic Productivity:
  • Fair Wages and Morale: Improves job satisfaction and lowers turnover.
    Example: Research shows fair wages increase productivity and worker loyalty.

Challenges

• Regional Disparities: Cost of living differences may undermine uniform wage floors.
  Illustration: ₹15,000 might suffice in rural areas but not in cities like Mumbai or Delhi.
• Enforcement Challenges: Informal workers may lack awareness or access to enforcement.
  Example: Street vendors might not know their rights or how to claim them.
• Employer Resistance: Increased costs could lead to job cuts or price hikes.
  Example: A small restaurant may struggle to manage higher wage obligations without losing competitiveness.

Opportunities

• Data-Driven Monitoring:
  • Empirical Surveys: Use surveys like NSSO to assess wage policy impact.
    Example: Surveys help shape informed future wage and employment policies.
• Inclusion of Gig Workers:
  • Extending Protections: Address new-age labour challenges through inclusion.
    Example: Including gig workers under wage laws can stabilize their income and improve job quality.
• Strengthening Social Security:
  • Connecting with EPF Contributions: Helps workers save for the future.
    Example: Making EPF mandatory for minimum wage earners ensures financial security during retirement.

Recommendations for the Government:

To ensure maximum benefits from such reforms, the government may think of the following:

• Regular Revision of Floor Wages:
  • Inflation-Adjusted Increases: Develop a system for revising floor wages periodically by adjusting them based on inflation and economic growth. This will guarantee that the buying power of the workers is intact in the long run.
  • Example: A biennial review system can be useful in adjusting floor wages to address changes in living costs.
• Strengthen Enforcement Mechanisms
  • More Inspectors: Hire more labour inspectors and utilize technology for real-time monitoring. This can make it easier to detect and rectify compliance issues.
  • Example: Utilizing mobile apps for reporting violations can make the process simpler and facilitate faster action against offending employers.
• Prioritize Informal Sectors:
  • Incentives for Compliance: Offer incentives for informal sector employers to adhere to minimum wage regulations. This can be in the form of tax relief or subsidies for small businesses.
  • Example: Offering a temporary tax exemption for small businesses that formalize their workforce can incentivize compliance.
• Support Small Businesses:
  • Subsidies or Tax Breaks: Provide subsidies or tax breaks to small enterprises with wage compliance challenges. This can assist them in covering higher costs without hurting their business.
  • Example: Giving a one-time subsidy to small businesses can assist them in converting to the new wage plan without resorting to layoffs.
• Promote Awareness Campaigns
  • Worker Education: Educate workers regarding their rights under the new codes so that they can claim their entitlements. Awareness campaigns can be done through media, community outreach, and workplace training.
  • Example: Organizing workshops in rural areas can educate workers regarding their rights and how to report violations.
• Expand Social Security Coverage:
  • Comprehensive Benefits: Connect minimum wages to comprehensive social security benefits such as health insurance and pensions. This can improve workers' overall well-being and economic security.
  • Example: Providing health insurance to all minimum wage earners can shield them from medical crises.
• Incorporate Feedback Loops:
  • Advisory Boards: Create advisory boards with worker representation to regularly assess the impact of wage policies. This can assist in determining areas for reform and ensuring that policies are still effective.
  • Example: Having worker representatives on policy review can bring useful perspectives on the effectiveness of wage policies and propose needed changes.

 
Conclusion
The shift from the Minimum Wages Act of 1948 to the new labour codes is a major step forward for India's movement toward equal labour rights. Although the reforms solve many of the long-standing problems, their success will depend on proper implementation and ongoing monitoring. By addressing issues like enforcement deficits and regional imbalances, India can achieve an inclusive labour market truly serving the interest of workers as well as employers—a single canvas where the contribution of every worker is appreciated and rewarded.