Impacts of the Code on Wages 2019 on Employment and Human Resource Development.

Informal workers account for 93% of the entire working population and contribute to over 60% of India’s GDP. Therefore, the Code of Wages Act 2019 has the potential to influence the lives of around 50 Crore workers within the country. A well-made wage system can lessen the rising inequalities in incomes, bridge gender gaps in wages, and alleviate poverty.

Why a new code on Wages?

In India, the labor market preys on excess availability of workers, therefore workers aren't ready to demand fair minimum wages and still live a precarious life. In India, labor laws fall within the concurrent list and are extremely complicated, therefore there was a requirement to bring reform by addressing a number of the problems like multiple definitions of wages, low wages, etc. It will also cause more formalization of the economy. An effective wage policy that targets the vulnerable bottom rung of wage earners can help in driving up aggregate demand and building and strengthening the center class, and thus spur a phase of sustainable and inclusive growth. Minimum wages can promote social justice with no major negative implication for employment if wages are set at an adequate level.

Code on Wages Act 2019

The new wage code removes the multiplicity of wage definitions, which may significantly reduce litigation also as compliance costs for employers. The new Act links wages across the country to the talents of the worker and therefore the place of employment. It seeks to universalize the provisions of minimum wages and timely payment of wages to all or any employees regardless of the world and wage ceiling. It seeks to make sure "Right to Sustenance" for each worker and intends to extend the legislative protection of wage. A National Floor Level wage is going to be set by the Centre and can be revised every five years, while states will fix minimum wages for his or her regions, which can't be less than the ground wage.

It subsumes the subsequent four labor laws:

 1. The Payment of Wages Act, 1936

 2. The Minimum Wages Act, 1948

 3. The Payment of Bonus Act, 1965

 4. The Equal Remuneration Act, 1976.

 Types of Wages

• Minimum Wage: The International Labour Organisation says that the “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which can't be reduced by labor contract or a private contract”. This type of wage includes the necessities such as food, shelter, and clothing.

• Living Wage: The wage which supplies the minimum income essential for buying the basic needs necessary for the value of living under a specific community. In addition to these needs, a ‘living wage’ includes education, health, insurance, etc.

• Fair Wage: A ‘fair wage’ may be a mean between ‘living wage’ and ‘minimum wage’.

• Starvation Wage: It refers to the wages which are insufficient to supply the standard necessities of life.

 Concerns with New Wage Code

• Starvation Wages: it's been alleged that the new wage code will push the starvation wages further by increasing the income capacity and buying power of the informal workers. The increase in purchasing power of the workers will cause a decrease in savings which in turn will reduce expenditure for productive purposes. The usage of the concept of “floor wages” would mean that “starvation wages” which presently give just Rs.178 per day, will still exist and would promote forced labor.

• Deduction of Wages Clause: The new law provides for the arbitrary deduction of wages (up to 50% of monthly wage) supported performance, damage or loss, advances, etc. The deduction clause will cause reduced bargaining power and the right of association of workers. The workers won't be ready to demand even basic work rights in fear of wage deduction. In India, the informal sector employers dominate the workers, thanks to caste and better social station, therefore the above provision may have the potential to become a handy tool for exploitation of those workers. In Raptakos case (1991), the Supreme Court advocated the concept and therefore the right of wage. “Consumer Expenditure Survey” result shows that the typical family expenditure in rural areas to be Rs. 83 per day and in urban areas is Rs. 134 per day.

• Inspection Framework: the principles don't clarify the governance and institutional structure for the “labor inspection system”. The principles propose an ad-hoc unclear mechanism called “inspection scheme”. The scheme provides for the appointment of Inspector-cum-Facilitator by notification by the acceptable government. This might cause the revival of the inspector-raj system within the labor market. The International Labour Organisation’s (ILO) Labour Review Agreement of 1947 (Convention C081) — which has been approved by India — delivers for a well-resourced and self-governing inspectorate with supplies to permit thorough inspections and free access to workplaces. But the provisions of the ILO have not been taken into consideration while making the laws.

Conclusion:

The government must work for “Need-Based Minimum Wage” including the nutrition, healthcare, education, housing, and provisions of old-age. Therefore, a guaranteed wage should be treated as a fundamental constitutional right for each citizen of India. According to the new law, the revision of minimum wages is to be done after every 5 years, which is sort of an extended period considering the volatility within the market. Therefore, minimum wages should be adjusted to inflation so to align the wages to plug volatility. The National Commission for Labour should be formed to streamline the problems and challenges of the labor market and fixing discrepancies in national level wage computation. For the wage system to play a meaningful role in aligning protection with the promotion of sustainable growth, it must be properly designed, its goals clarified, and its enforcement made effective.

Footnotes

https://egazette.nic.in

https://drishtiias.com

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Consulting & Governance shall not be responsible for any errors caused due to human error or otherwise.