The nature of labour laws in developing countries is often perceived to be
exclusive of informal employment or the unorganised sector without written
contracts or unions, though the contrary is actually true. Article 43 of the
Indian Constitution conceptualised the need for a better standard of living by
enacting appropriate and uniform economic and labour states for every Indian
The Indian Minimum Wages Act, 1948 was thus formed soon after
independence, wherein Section 3 and 4 of the Act lays down the procedure for
fixing the minimum rates of wages for different class of employment. The Act
sought to regulate wages for two-fold reasons; firstly, it intended to bridge
the gap between the purchasing power of the lower class and the middle class;
secondly, increase collective power of wage labourers against exploitative
employers and more aggressively push for the right to work.
With the recent
fiscal conditions after the COVID-19 pandemic and the new Wage Codes set to come
in by mid-2022, it is high time that the current minimum wages and the laws
governing them are looked at in order to not repeat past errors and help bring
back economic stability in the Indian labour force. To get a better
understanding of India's position thereof, it is necessary to draw a comparison
between India's current minimum wage model and minimum wage regulations in the
US, UK and Australia.
This is because these three countries offer very diverse
mechanisms of calculating minimum wages and the allied benefits offered by their
governments. Additionally, the author will give her comments on the impact of
minimum wage post-COVID and will critically analyse the reasons for the
prominent gender gap in wage parity around the world even though equal minimum
wage laws exist on paper.
The Indian Minimum Wage Paradigm
Minimum wages in India varies from state to state, area of development within
state or the zones, region, industry, occupation, level of skill and nature of
work. The Codes on Wages Act 2019, which intends to replace the Minimum Wages
Act, 1948 as well as the Equal Renumeration Act, 1976, mandates that employers
pay the minimum wage as specified for the particular state and sector. Central
and State governments are further obligated to revise and review the minimum
wage atleast every five years.
Even though India might not offer a minimum wage
as high as those in developed countries, it offers one of the most competitive labour costs in Asia with an average of Rs. 176 per day as the national
floor-level wage. The kinds of work and time allotted to such work is different
for more than 2,000 jobs in India just for the unskilled sector, while there are
over 400 categories of employment existing in the country.
Since India must
account for all these possibilities, they use a complex method to set such
minimum wages, with the monthly minimum wage calculation (average is Rs.
32,800), which is basic wage plus variable dearness allowance (which adjusts the
minimum wage for inflation), consumer price index (rise and fall) and the house
Wages Code has also introduced a provision for overtime pay for
even 30 minutes extra work. Some states like Andhra Pradesh have come with
initiatives that provide for tax breaks to encourage companies, whether
inter-state or foreign, that have set up their businesses here to hire locally,
fostering growth in the state's economic value.
Under the new Wage Codes,
stricter penalties upto 3 months imprisonment and Rs. 1,00,000 fine will be
imposed in the event of non-compliance to the minimum wage laws. The author
believes that the Wage Code's additional feature of appointing inspectors who
also perform the role of facilitator is a improvement from Section 19 of the
Minimum Wages Act, as it expands their powers and responsibilities, especially
with regards to acting as a guide for employers who might not have the full
knowledge of the law.
Despite the fact that India is a federation with a strong centralising tendency, the 2019 Wages Code has kept the pattern of keeping the
minimum rate according to states rather than a national minimum wage being
uniformly applicable to the country, which was also incorporated in the Minimum
Wages Act. This is a good move in the author's opinion mainly because costs of
production and acquiring raw material vary from state to state. We can draw a
parallel to the population and cost of living as relevant factors to decide the
minimum wage a worker can earn to possess a relatively secure livelihood.
minimum wage for a particular industry in Gujarat would be relatively less as
compared to a worker working in the same sector in Delhi. The minimum wage fixed
would vary even further depending on whether the worker is unskilled,
semi-skilled, semi-skilled or highly skilled. Though the State governments can
fix their own minimum wages, matters in respect of labour and welfare of the
stakeholders involved therein come under the Concurrent List of the Indian
Constitution, meaning that both the Union and State can govern such matters.
biggest benefit of the Wage Codes is the inclusion of 60% of India's workforce,
who were previously excluded from the ambit of applicability of the Minimum
Wages Act as they belonged to a particular set of industries the Act did not
intend to govern. With new kinds of jobs being created and existing jobes
becoming obsolete within two to three years (both because of rapid technological
advancement and innovation), it makes sense to amend the existing minimum wage
model and consolidating it into the Code which has other laws, especially for
purpose of seamless governance.
Laws in the USA vis à vis Minimum Wage
The ILO has noted that countries which are larger in size, like the US, tend to
set a national min minimum wage floor while also providing for option to fix
higher regional rates depending the economic contribution of the state. This
naturally translates into metropolitan cities offering millions of jobs like DC
and California having the highest minimum wage rates, respectively at at 15.2
and 15 dollars/hour. US tends to follow an hourly wage model as its standard
notation, unlike India which looks at daily minimum wage rates as the default.
India and 114 other countries look to the Central and State governments
(executive) to set minimum wage rates, while the US Legislature, comprising of
the Senate and House of Representatives, takes on the role.
India and 79 other
countries also set a mandate to periodically review (for India, every 5 years),
modify or adjust the minimum wages set from time to time, while the US has no
law which casts such a legal obligation. Like India, the US also allows states,
counties, sub-national authoritties and cities to set their own minimum wage
rates, as long as they are equal to or above the national minimum wage
According to the Fair Labor Standards Act of 1938, US federal minimum
wage is currently $7.25/hour, but the wages are higher in 29 states and D.C.
because of demand and industrialisation and development in those regions. Even
though a majority of working class millenials are employed in restaurants and
bars, they get a reduced minimum wage of only $2.13/hour, which is further
inclusive of the tips they get from customers, making it almost impossible to
subsist on with the cost of living and gas prices.
Minimum Wage Model in Britain
On April 1st, 2022, the Chancellor of the Exchequer, Rishi Sunak, announced that
there would be an increase in the minimum wage set. In the UK, the national
minimum wage usually rises by 4% in accordance adjusted with the inflation rates
as measured by the consumer price index (like we saw for India) to maintain a
basic standard of living.
The National Minimum Wage Act 1998 creates and fixes a
national minimum wage across the United Kingdom, unlike India and the US which
have different rates for states. which. In a unique move, national minimum wage
in the UK varies based on age, unlike the US and India. However, like US, it
sets an hourly rate for minimum wage rather than daily like in India.
workers who are under 18, it is £4.81; for 18 to 20 years of age, £6.83/hour;
£9.18/hour for 21 to 22 years; aged 23 years or above, it is £9.50/hour and
£4.30 for apprentices. Thus, we can see the minimum wage getting higher as a
person becomes older to account for their increased responsibilities, including
the possibility of having to financially support their partners and children.
The highest is for those aged 23 years or older (where the rate has increased by
a whopping 6.6% compared to the one before April 2022), which is known as the
national living wage, which is different from UK's "living wage". Despite the
fact that this is the biggest increase by the British government since 2016,
some have heavily criticised the change for still not being enough to keep up
with the exorbitant housing rates in Britain.
Example: A 24-year old working for
35 hours a week at a full-time job would get a gross annual income £17,290,
including tax and pensions payable. He will not be able to even rent a home for
less than 33% of such pay in any place in the UK. Anyone 23 or over, working
full time on the national living wage, will not be able to rent a home for less
than a third of their pay in a single region of England.
The new living wage
(adjusted for costs of fuel, energy, rent and food, so not only inflation
considered, unlike minimum wage) after the April 2021 Autumm Budget (where new
minimum wage was announced) is currently £11.05/hour for the city of London and
9.90/hour for the rest of the UK. The minimum wage might go upto £15 in the
future if the Labour Party follows through on their promise made in 2021 to do
so once they are elected.
Minimum Wage Struture in Australia
Like its fellow commonwealth nation (UK), Australia also has a national minimum
wage as provided by the Fair Work Act, 2009, but it applies only to those
employees not covered by a binding award given by the Fair Work Ombudsman or a
valid subsisting contract. The minimum wages given by a contract or award are
usually higher, like how the minimum wage rates in US states are higher than the
US federal wage. Such wage rate is to be reviewed every year, as compared to
India, where there is a mandate to review it only once in 5 years.
factors taken into consideration by Australia are employment type (like India),
age (like UK) and capacity to do a particular work. Thus, the rates vary for
apprentices trainees (like UK), juniors, employees with a disability. The latter
can be incorporated in the Indian Wage Codes as well, as it provides for not
just compensation for accident/injury on the job, but also a different minimum
wage rates for those with a pre-existing injury before the job or subsequent
injury in the course of employment.
As of 1 July 2021, the national minimum wage
is $20.3/hour or $772.60 weekly. Thus, Australia calculates minimum wage hourly
or weekly, like the US and UK. Since the Fair Work Commission reviews both the
national minimum wage as well as the minimum wage rates under an award in July
of every year, the wages are expected to again change on 1st July, 2022.
Conclusion and Suggestions
Some argue that a national wage in India is the way to go despite hesistancy
from the Centre because additions like the GST further complicate the
calculation of minimum wage apart from countless factors like level of skill,
state population, sector. Labor unions across the country observed a nationwide
strike in January, 2021 to protest the government's stalling on proposals in
this regard and its inaction on increasing workers' minimum wages.
interim orders were issued by the Supreme Court in 2020 directing employers to
pay pending wages to workers, it did not solve the problem of raising minimum
wage during the pandemic. The author further believes that in the wake of the
pandemic, migrant workers should have been given a special minimum wage higher
than the normal minimum wage by taking inspiration from the non-obsolete parts
of the Inter-State Migrant Workmen Act, 1979.
Article 39(a) and (c) of the
Indian Constitution provide for equal pay and Equal Renumeration Act, 1976
specifically prohibits gender discrimination in work, wages and minimum wages.
Despite this, there is clear disparity between the sexes, which is getting worse
during the pandemic, especially for female workers in the unorganised sector.
Many mothers during the lockdown had to balance their work and children. Besides
this, a perusal of all three countries' models, their analysis including their
similarities and differences and the factors they take into consideration for
deciding rates can give India a clearer picture on what to incorporate into the
Wage Codes. This would be a return to our history, where we took suitable
provisions from American and other nations' labour legislations to form our own
labour legislations after becoming an independent territory, including the
Minimum Wages Act, 1948.
- India Const. art. 43.
- Wage Regulation in India, 74 INT'l LAB. REV. 498 (1956).
- Minimum Wages Act, 1948, §§ 3, 4, No. 11, Acts of Parliament, 1948
- Uma Rani & Patrick Belser, Low Pay among Wage Earners and the
Self-Employed in India, 151 INT'l LAB. REV. 221 (2012).
- Equal Renumeration Act, 1976, No. 25, Acts of Parliament, 1976 (India).
- A Guide to Minimum Wage in India in 2021, India Briefing (25th April,
2022, 7:05 PM), https://www.india-briefing.com/news/guide-minimum-wage-india-2021-19406.html/
- Kashif Mansoor et. al, Minimum Wage Compliance and Household Welfare: An
analysis of over 1500 minimum wages in India, 147 World Dev. 6-17 (2021)
- New Wage Code Alert! Employees likely to get overtime for 30 minutes of
extra work, DNA India (24th April, 2022, 10:59 AM), https://www.dnaindia.com/personal-finance/report-new-wage-code-alert-employees-likely-to-get-overtime-for-30-m
- Supra note 3, §19.
- The logic behind different minimum wage systems, International Labour
Organisation (25th April, 2022, 5:36 PM), https://www.ilo.org/global/topics/wages/minimum-wages/rates/WCMS_432669/lang--en/index.htm
- Drew Deliver, The U.S. differs from most other countries in how it sets
its minimum wages, Pew Research Center (25th April, 2022, 8:36 PM), https://www.pewresearch.org/fact-tank/2021/05/20/the-u-s-differs-from-most-other-countries-in-how-it-sets-its-mini
- Even Breese, Minimum wage UK: How does Britain compare to the rest of
the world?, Big Issue (25th April, 2022, 8:36 PM), https://www.bigissue.com/news/employment/minimum-wage-how-does-britain-compare-to-the-rest-of-the-world/
- Minimum wages, Australian Government: Fair Work Ombudsman (25th April,
2022, 9:02 PM), https://www.fairwork.gov.au/pay-and-wages/minimum-wages
- Why minimum wage won't fix India's woes, Livemint (24th April, 2022,
- Kashif Mansoor et. al, Minimum Wage Compliance and Household Welfare: An
analysis of over 1500 minimum wages in India, 147 World Dev. 6-17 (2021).
- Ficus Pax Private Ltd. v. Union of India, W.P. No. 10983 of 2020.
- Inter-State Migrant Workmen Act, 1979, No. 30, Acts of Parliament, 1979
- India Const. art. 39(a), (d).
- Nidhiya Menon et al., The Impact of the Minimum Wage on Male and Female
Employment and Earnings in India, 34 ADR 28–64 (2017).
- Pandemic hurt gender pay-gap in India further; more women failed to get
deserving pay hikes, bonuses, Economic Times (25th April, 2022, 9:47
- Rudolf Broda, Minimum Wage Legislation in Various Countries (1928).
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