The Union government has started the process of fixing India’s first statutory national floor wage under the Code on Wages. However, if a state has a minimum wage higher than the national floor, the state’s minimum wage will prevail, explains Debashis Acharya
What the Code on Wages says?
The code amalgamates four labour laws: the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976. By setting a statutory national floor wage, the Code establishes a minimum wage right for workers in both the organised and unorganised sectors. By covering full-time, part-time, temporary, casual, and contractual workers, the Code universalises minimum wages across all employee categories.
What changes for workers now?
The central government has begun the process of fixing the floor wage, taking into account the minimum living standards of a worker, with different floor wages for different geographical areas. The Centre may also seek the opinion of the Central Advisory Board and the state governments. States must follow this when setting the minimum wage based on their cost of living. If a state has a minimum wage higher than the national floor, the state’s minimum wage will prevail.
How disparity in minimum wages across states is a problem
The wage -fixing authorities at the Centre and states have been setting minimum wages for their respective “scheduled” employments under the Minimum Wage Act. The 1988 Labour Ministers’ Conference recommended protecting wages against inflation by linking them to the Consumer Price Index for Industrial Workers.
This adjustment was made through the Variable Dearness Allowance (VDA). States are supposed to revise the wages twice a year or annually. The wages in the central sphere of scheduled employment are revised twice a year. For instance, as on March 30, 2026, the minimum central sphere wage, including VDA, for unskilled workers in Area “A” states is Rs 528.
The regional minimum wage advisory committees are supposed to work on reducing disparities in minimum wages. But, in 2023, for example, the minimum daily wage for construction workers was Rs 176 in Nagaland and Rs 856 in Tamil Nadu.
Why national floor wage isn’t a new idea
To reduce the wide disparity in minimum wages across the country, and achieve uniformity, the 1991 National Commission on Rural Labour introduced the concept of National Floor Level Minimum Wage (NFLMW) to be applicable to all employees.
The NCRL’s main concern being rural wages, NFLMW followed the Planning Commission’s rural poverty line norms and set the minimum wage at Rs 20 per day in October 1990. The NFLMW was implemented at Rs 35 per day by a necessary price adjustment. It was last revised in 2017 (Rs 176/day) and has stayed frozen since then. The state governments were persuaded to ensure that their minimum wages do not fall below this level, since the NFLMW is non-statutory.
How state-level inflation dynamics matter in fixing the national floor wage
The regional variation clause in the new wage Code becomes significant in light of the findings of the Economic Survey 2025-26 on state-level inflation.
While most states experienced inflation easing in line with the national trend during April-December 2025, Kerala and Lakshadweep deviated from the national trend and stayed above the upper tolerance band of 6%. Meanwhile, Delhi and Himachal Pradesh showed marked persistence in their deviations from the national average.
Thus, the case for using Section 9’s regional-floor provision is strengthened over a single uniform number. The presence of regional-floor under the new Code ensures that workers have protection in persistently high-inflation states.
A 2021 World Development paper used data on 1,500 minimum wages and found non-compliance as a key feature of the Indian labour market, with non-compliance rates as high as 90% for some classes of workers. Thus, compliance and enforcement may still remain a challenge, though the new Code on Wages and its provisions are a welcome step.
The writer is professor, School of Economics, University of Hyderabad
