To provide minimum wages to the workers working in
organized sector
To stop exploitation of the workers
To empower the government to take steps for fixing
minimum wages and to revising it in a timely manner
To apply this law on most of the sections in organized
sector (scheduled employment)
Historical Backdrop
The initiative by Shri K.G.R.Choudhary in 1920: set up
boards for determination of wages
The International Labour Conference adopted
convention 26 and 30 in 1928 relating to wage fixing machinery in trades or parts of trades
A Minimum Wages Bill was introduced in the Central
Legislative Assembly on 11.4.46 and came into force with effect from 15.3.48
The Committee on Fair Wage was set up in 1948 to
provide guidelines for wage structure
Broad Features of the Act
[Sec 3]: The Act lays down the principles for fixation of
A minimum time rate of wages
A minimum piece rate
A guaranteed time rate
An overtime rate for different occupations, localities
or classes of work and for adults, adolescents, children and apprentices
[Sec 4]: The minimum wages may consist of
A basic rate of wages and a cost of living of
allowances
A basic rate of wages with or without the cost of
living allowance and the cash value of the concessions in respect of essential commodities supplied at concessional rates
Short Title and Extent [Sec. 1]
This Act, the Minimum Wages Act, 1948 extends to the
whole of India
This Act may be called the Minimum Wages Act, 1948
How Does It Going To Benefit
An Act to provide for fixing minimum rates of wages in certain
employments. WHEREAS it is expedient to provide for fixing minimum rates of wages in certain employments; An Act to provide for certain benefits to employees in case of sickness, maternity and "employment injury" and to make provision for certain other matters in relation thereto WHEREAS it is expedient to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto The minimum rate of wages may consist of: a) A basic rate of wages and a cost of living allowance or b) A basic rate of wages with or without the cost of living allowance and the cash value of the concessions in respect of essential commodities supplied at concessional rates. c) The act lays down that wages shall be paid in cash although it empowers the appropriate government to authorize the payment of minimum wages either wholly or partly in kind in particular cases. d) It provides that the cost of living allowance and cash value of the concessions in respect of supplies of essential commodities at concessional rates shall be computed by component authority at certain interval. e) The act empowers the appropriate government to fix the number of hours of work per day, to provide for a weekly holiday and the payment of overtime wages of which minimum rates of wages have been fixed under the act. f) The act lays down for appointment of inspectors and other authorities to hear and decide claims arising out of payment of wages at less than the minimum rates of wages or remuneration for days of rest of work done on such days or of overtime wages. g) All establishments covered by the act are required to maintain registers and office records in the prescribe manner h) The act provides the procedure for dealing with complaints arising out of the violation of the provisions of the act and for imposing penalties for offences under the act.
DEFECTS IN THE LAW
A minimum wage is a legal minimum for workers. It means workers are guaranteed a certain hourly pay helping to reduce relative poverty. However, a minimum wage could have potential defects:
1. Unemployment. If labour markets are competitive a minimum
wage could cause unemployment because firms will demand less labour, and higher wages may encourage more workers to supply their labour.
Firms in labour intensive industries will be most affected. For
example, hairdressers and cleaning companies will see a proportionately bigger increase in their wage bill.
2. Cost Push Inflation. A minimum wages can cause cost push
inflation. This is because firms face an increase in costs which are likely to be passed on to consumers. This is even more likely if wage differentials are maintained.
3. Black Market. A minimum wage may increase the number of
people working on the black market so firms can avoid paying the legal minimum.
4. Poorest dont benefit. A limitation of the minimum wage is
that it doesnt increase the incomes of the lowest income groups. This is because the poorest have to rely on benefits and are therefore not affected by minimum wages.
5. Limited Impact on Relative Poverty. Many who benefit
from the minimum wage are second income earners and therefore the household is unlikely to be below the poverty line. A household with a single income earner just above the min wage is likely to be relatively poorer. But, they will not benefit from the minimum wage.
SUGGESTIONS:
The effect of a min wage on unemployment is uncertain, the
structure of the labour market is very important. E.g. if the labour market is a monopsony, a minimum wage may not cause unemployment.
Empirical evidence from the US and the UK suggests that a
moderate increase in the minimum wage doesnt cause a fall in employment. Therefore the key question is how high the minimum wage can rise before causing unemployment.
The impact of a minimum wage wage differentials is
important. For example, skilled workers just above the minimum wage may feel they deserve more. However, increasing the minimum wage tends to have limited impacts on wage differentials.
There may be a good case for a regional minimum wage
because actual wages tend to be lower in the north than the south. In London, very few workers benefit from the minimum wage and in this region the minimum wage could increase.