Minimum Wages Act, 1948: Wage Fixing Method, Issues and Next Steps

How is minimum wage decided under the Minimum Wages Act, 1948? What are key problems of this act apart from being very old? What may be next steps of the central government towards addressing these problems?

In the Minimum Wages Act, 1948 the minimum wages are fixed or revised via two methods as follows:

• Committee Method: A committee or a Sub-Committee is set up to give advice or make an enquiry.
• Notification Method: The government body responsible for it publishes the proposal and an official date in the Official Gazette.

The revision of the Minimum Wages is made on the basis of the ‘Cost of Living Index’. There are different norms for deciding the minimum wages which vary from industry to industry. The wages are set by the state, a part of the state, a class or classes, and mode of employment. A wage board is constituted to help in fixation of the minimum wages. The Central and State Governments are empowered to fix as well as revise the minimum wages. For scheduled employments, the state governments fix the minimum wages. The central government fixes a National Floor Level Minimum Wage which is usually lower than the minimum wages of most states.

Minimum wages are fixed on a monthly, hourly, daily basis as per the piece rate, monthly rate and the hourly rate. A Central as well as Regional Advisory Board comprising of government bodies, representatives of employers, trade unions.

As per the methods used to determine the minimum wage husband, wife and two children are considered as three units and on the basis of units, minimum wages are decided for agriculture and non-agricultural workers.

Apart from the fact, the current method is very old and obsolete now, the following are some of the major issues in this field:

Huge Unemployment:

• There is a lot of unemployment in India which has many forms. Usually, workers do not have strong voices to channel their [problems to the higher authorities and hence end up working for lower wages out of desperation.

Lack of Awareness and Knowledge of Rights:

• The lack of knowledge about the policies for workers is one of the major problems which lead to exploitation of workers and the inability to get even the minimum wages

Jurisdiction Overlaps:

• The government has defined a ‘minimum wage’, ‘living wage’, ‘fair wage’ which have vague definitions with some overlaps. This leads to issues related to execution of the policy.

As per the Minimum Wage Code, the wage disparity in various sectors is expected to be removed. Also, there has been a word that the government may double the minimum wages to a revised amount of around Rs 18,000. This will lead to better wages for workers. Apart from these policy level changes the government should proactively engage itself in making sure that they reach the poorest of the poor and the most disadvantaged sections of the society through awareness campaigns and activities. Private organisations should be included in so that they also advertise the rights of the workers. Some rules which make it mandatory for each company working in an industry included in the Minimum wages Act, 1948 should make sure that they provide minimum wages as well as make their workers more aware.