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  1. Wage Code Bill cleared by Narendra Modi led Cabinet; higher, uniform wages across country in offing

Wage Code Bill cleared by Narendra Modi led Cabinet; higher, uniform wages across country in offing

At a time when Indian jobs growth is already below what is required, the Cabinet on Wednesday approved a uniform labour code on minimum wages that makes it obligatory for all industries to pay a minimum wage to all category of employees across the country, and not just those earning less than Rs 18,000 a month as it is now.

By: | Published: July 27, 2017 7:31 AM
Wage Code Bill, Wage Code Bill by Modi cabinet, Indian jobs growth, uniform labour code, Manish Sabharwal, Teamlease, uniform wages, uniform wages across india, uniform wages in india, Labour Code on Wages, labour reforms Cabinet clears labour code which mandates a higher and uniform wage across the country. (Image: PTI)

At a time when Indian jobs growth is already below what is required, the Cabinet on Wednesday approved a uniform labour code on minimum wages that makes it obligatory for all industries to pay a minimum wage to all category of employees across the country, and not just those earning less than Rs 18,000 a month as it is now. If passed by Parliament, the new law will not only affect competitiveness of trade and industry, it will affect the ability of states to attract investments on the basis of lower wage rates — the goods and services tax has already reduced their ability to offer VAT sops. Labour is on the concurrent list, so it is not clear if states will agree to the new proposals. While the move will be popular among trade unions and those currently employed, if implemented faithfully across the country, it will add to the series of disadvantages Indian firms face and ensure more of them remain in the informal sector where policing wages is that much more difficult. As Manish Sabharwal, chairman, Teamlease, India’s largest temping agency, puts it, “we have so many problems, this is probably the last thing we need”.

The latest Economic Survey points to the fact that 78% of Indian firms employ under 50 workers and just 10% employ more than 500 — the comparable figures for China are 15% and 28%. With much smaller firms than China, India’s quality suffers as a result. To this, add the cost of poor infrastructure — road transport, for instance, costs $7 per km versus $2.5 in China, and it takes 21 days to deliver goods from JNPT to the US east coast compared with 14 days for China.

“States are expected to take into account local conditions including local cost of living and availability of skills and also the need to attract investment. All of these go together. So, when the Centre imposes a common minimum wage, you are taking away a very valuable policymaking tool of states,” said Pronab Sen, former chief statistician of India. Sen said the move would lead to wide income disparity in India with the possibility of low-income states suffering de-industrialisation, leading to wide regional income disparity.

Brazil, which implemented a similar minimum wage law, suffered regional income disparities as a result. Which is why the Brazil Senate recently approved some major changes to that country’s labour code. Amidst some serious opposition, the Brazilian government tweaked the law to allow agreements negotiated between employers and workers, on a range of issues, to override the current labour law. “I don’t know how they (Centre) are going to impose this, where is the machinery,” said Sudipto Mundle, member, 14th Finance Commission. Industry, especially the unorganised sector that could be affected more, could find ways around to bypass the law if economics tells them that they can’t afford, Mundle added.

If Parliament approves the code, the minimum wage will be applicable to all classes of workers, which at present, is applicable to scheduled industries or establishments in the law. The Labour Code on Wages, 2015, will empower the central government to notify a “national minimum wage” (below which no state can fix their minimum wages) and this will be revised every two years (five years if the dearness allowance becomes part of the minimum wages). Given India’s labour laws are already very restrictive, imposing one more condition will only make it more difficult for companies — especially smaller ones — to function efficiently.

“Bringing four legislations into one is a major step towards labour reforms. However, there are two sides to it. Industries may opt for more mechanisation which will be good for the economy as productivity will go up, but it will also mean fall in employment. This will vary across industries,” said economist Rajiv Kumar. The code will also seek to define industrial strike afresh by including concerted casual leave by 50% of more workers while the provision for prior notice of strike would be extended to “all activities similar to existing public utility services”.

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  1. R
    Rajat
    Jul 28, 2017 at 6:47 pm
    It will bad impact on middle class farmers.
    Reply
    1. S
      Sushil chhetri
      Jul 28, 2017 at 1:58 pm
      Sir tea gardean labour's also come in under minimume wage code bill.....?
      Reply
      1. praveen Gaikwad
        Jul 27, 2017 at 3:43 pm
        in USA minimum wages are decided area to area, profession, work experience, industry, etc. considering cost of living factors. for example in silicon valley, west coast minimum wage is 100,000$/year for same job minimum wage in texas or florida will be 50,000 to 60,000 $/year. in India it should be implemented on similar lines. Minimum wage is decided by labor office in each state in USA and varies from state to state.
        Reply
        1. S
          Shajan Daniel
          Jul 27, 2017 at 1:36 pm
          In Kerala, already we are paying one of the highest wages in the country. Added to that, PF, ESI, Variable DA and other Festival allowance, Bonus, and sevaral days of closures due to Hartals, Holidays etc., the Central Govt. also is playing upto the crowd and this is is now the much needed recipe for "How to close small MSME's and small scale units in couple of months". Already reeling under compe ion from other states who give far much lesser wages, Most small scale industries in Kerala will suffer,, and lead to closure
          Reply
          1. Abhijit Sengupta
            Jul 27, 2017 at 1:02 pm
            Small establishments are already struggling to cope up with so many debacles, this is going to have major impact on their survival and in turn would affect the larger sector of community. If these establishments cannot pay higher wages, they would get closed down.
            Reply
            1. N
              Neel
              Jul 27, 2017 at 12:18 pm
              Sanjeev: you have a very poor understanding of MSME industries in India. Rs 18K may not be much in the cities, but in villages its a jackpot! I myself am running a silk reeling industry in a pretty remote area in India, where there is massive unemployment and mass rural urban migration. I started this labour intensive industry because I wanted to provide them jobs. I currently employ around 25 people from the village at avg ry of Rs 7000 and make Rs 50000 myself. And those people are happy to earn this much as they all have their own houses and govt provides ration at nominal costs via NFSA. The education for their children and medical costs are pretty negligible too (govt schools and hospitals). The business which I am running is highly compe ive in the country. So its not like as if I am running my industry inefficiently. So making Rs 18000 a uniform wage across all states will make such businesses impossible to run resulting in shutdowns. Pan India policy never works.
              Reply
              1. R
                Raghav
                Jul 27, 2017 at 11:54 am
                The premise that wage would make employment uncompe ive holds good - if you cannot focus on efficiency, output, productivity, which will make the industry compe ive as a whole. It is our productivity which is the problem (bigger) than the wage.
                Reply
                1. S
                  Sandipan
                  Jul 27, 2017 at 11:44 am
                  Government has taken the right step in fixing min labour rates. Government should also ensure uniform laws for job security and safety across all industries in India.
                  Reply
                  1. H
                    Hanees
                    Aug 4, 2017 at 10:52 am
                    Along with wage over time restrictions are also in place hence IT and BPO'S have already stopped overtime now huge chunk of people are changing job as without overtime they cannot survive only in the ry which may be above 18000 but not sufficient in metros
                    Reply
                  2. Raju Rachaiah
                    Jul 27, 2017 at 11:44 am
                    Any law which is passed, has to be implemented by the concerned.It has to be watched and supervised by the bureaucracy for its proper implementation and ultimately the objective of the govt. of benefiting the target group is achieved. But is it happening in India? With the most dishonest and deceiving implementer and secondly the most dishonest and corrupt bureaucracy, which has to enforce the proper implementation of such laws. Both the implementer and enforcer join to cheat the beneficiaries and pocket the funds! If any body question, they will only see darkest side of life!
                    Reply
                    1. S
                      Sanjeev
                      Jul 27, 2017 at 9:37 am
                      Such a hypocrite. At current cost levels sustaining below 18k a month is like living a poverty stricken life. The author is concerned about the wellbeing of owner of temping companies and unnecessarily spicing his claim by adding examples of Brazil. By this change, any person employed will at least be able to give a decent education to their children but still not afford a good medical facility. I need not go into details of the benefits from education.
                      Reply
                      1. S
                        S.K.Pathak
                        Jul 27, 2017 at 12:22 pm
                        It will done long back but one doubt is that whether States are agree for this or not for passing in the both the parliament (LOKSABHA RAJYA SABHA), after that it is to be kept 90 days for hold after that it will take a Law or Act. i think it will take another Six months if it is moving continuously and not disturbance in this case.
                        Reply
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