There’s a hole in the coverage

Based on official statistics, the recent ILO Global Wage Report 2012-13 indicates that real wages are on a decline in India in the last few years. This raises the question of whether a statutory national or state-level minimum wage could be one of the mechanisms to ensure economic growth translates into improved incomes and is thus able to reduce poverty and inequality.

Interestingly, India was one of the first developing countries to introduce a minimum wage act in 1948. The minimum wage rates are set by the “appropriate government” (mostly state governments) for those employed in certain occupations (or “scheduled” employments). Initially, there were 13 scheduled employments. However, the “appropriate governments” were allowed to expand the list of “scheduled employment” if necessary. Over time, this has resulted in a total of more than 300 different types of scheduled employments.

It has also resulted in a complex system with a very large number of minimum wage rates (1,171, according to one recent count) which sometimes differ widely across states even for the same occupation. In spite of the large number of rates, not everyone is covered. The minimum wage is set only “in certain employments or occupations” and legal coverage is therefore incomplete. According to our own preliminary estimates, in 2009-10, only 68 per cent of the overall wage workers in India were actually covered by any schedules of employment, and in the state of Haryana it was only about

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