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National Minimum Wage

Background

On 17th January 2017 an expert committee was constituted by the Ministry of Labour and Employment, under the Chairmanship Dr. Anoop Satpathy. The main objective of the committee was to recommend methodology for fixation of National Minimum Wage (NMW) and determine the base level NMW through an evidence-based approach.

The report “Determining the Methodology for Fixation of the National Minimum Wage” was submitted by the committee to the Government of India on 14th February 2019. Currently the report is placed on the Ministry of Labour and Employment website, to enable the process of consultation and dialogue.

There have been many changes since the framework for the fixation of the minimum wages were recommended by the 15th ILC (Indian Labour Conference) in 1957, which was further enhanced by the Supreme Court judgement in Workmen v Reptakos Brett & Co. case in 1992.

Criteria on which the minimum wage has been proposed

  • The committee used nutritional requirement normsas recommended by the Indian Council of Medical Research (ICMR) for Indian population.
  • The report recommends a balanced diet approach. It proposes that food items amounting to the level of ± 10 per cent of 2,400 calories, along with proteins ≥ 50 gm and fats ≥ 30 gm per day per person to constitute a national level balanced food basket.
  • The report recommends that minimum wage should include reasonable expenditure on ‘essential non-food items’, such as cloths, house rent, fuel and light, educational expenses, medical expenses, footwear and transport, must be equal to the median class.
  • Expenditure on any ‘other non-food items’ be equivalent to the sixth fractile (25-30 per cent) of the household expenditure distribution as per the NSSO-CES 2011/12 survey data.
  • The committee conducted rigorous analysis and verified the changes in the demographic structure, consumption pattern, nutritional intakes, composition of food baskets and the relative importance of non-food consumption items to address the realities in the Indian context.

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What’s the proposed National Minimum wage?

  • The report has recommended to fix the need based national minimum wage for India at INR 375 per day (or INR 9,750 per month)as of July 2018, irrespective of sectors, skills, occupations and rural-urban locations for a family comprising of 3.6 consumption unit.
  • The report also proposes to introduce an additional house rent allowance(city compensatory allowance), averaging up to INR 55 per day i.e., INR 1,430 per month for urban workers over and above the NMW.
  • Regional variations: The report not only proposes single national minimum wage at an all-India level, but has also recommended different NMWs for different geographical locations of the country, to take into account the local realities.
  • To estimate NMWs at regional levels it has grouped the states into five regions based on a composite index and have recommended region specific NMWs as follows:
Region States National Minimum Wage
Region I Assam, Bihar, Jharkhand, Madhya Pradesh, Odisha, Uttar Pradesh, and West Bengal Rs 342 per day

(Rs 8,892 per month)

Region II Andhra   Pradesh,  Telangana, Chhattisgarh, Rajasthan, Jammu & Kashmir and Uttarakhand Rs 380 per day

(Rs 9,880 per month)

Region III  Gujarat, Karnataka, Kerala, Maharashtra, and Tamil Nadu Rs 414 per day

(Rs 10,764 per month)

Region IV Delhi, Goa, Haryana, Himachal Pradesh, and  Punjab Rs 447 per day

(Rs 11,622 per month)

Region V Arunachal Pradesh, Manipur, Meghalaya, Nagaland, Sikkim,  Mizoram and Tripura Rs 386 per day

(Rs 10,036 per month)

 

Way ahead

  • The committee has also proposed to review the consumption basket every five years, subject to the availability of NSSO-CES data.
  • To reflect the changes in the cost of living, basic minimum wages should be revised and updated within the period of 5 years in line with the consumer price index (CPI) every six months.

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