Establishing a national minimum wage floor right decision?

To provide technical inputs and recommendations on establishing a national minimum wage, the Indian Ministry of Labour and Employment (MoLE) recently set up an expert group. Ajit Mishra, chairman of the Institute of Economic Growth, has formed an expert group that will be in place for three years. Thus, the new wage code mandates that the government will not fix the floor for a while. After determining the minimum standards of living for workers, the Central government intends to establish a minimum wage floor for 2019. It may also be used to repair a floor for the states, so that the latter are not required to pay less than the stated Centre standard.

In January 2017, another expert committee, composed of new members, was established under Anoop Satpathy, the secretary of the New and Renewable Energy Ministry. In 2019, the committee recommended that the national minimum wage be fixed at $375 per day, or $9,750 per month, as of July 2018. This minimum wage was shown to be independent of occupation or skill. Additionally, the committee also suggested increasing the city allowance for house rent. The other major policy recommendation made by the committee was the establishment of regional minimum wages based on cost of living, which was the correct approach due to the variance in cost of living across the country. The report’s progress seems negligible, as the government only modestly raised the minimum wage in 2019. On the other hand, a number of trade unions advocated higher wages. Also Read: Unjustified prices of Covaxin

The expert committee will have to strike the right balance in this context. To deter employers from hiring more workers, employers will have to make a choice between investing in labor-intensive techniques of production or using capital-intensive methods.

If it is set too low, their food will be in short supply. Although the minimum wage should not be set too high, in principle, there should be a certain minimum threshold to allow the free market to determine wages above that threshold. This makes sense. In the interests of greater clarity, the government should finish the exercise as soon as possible. Nearly half of the companies in the industry have been negatively affected by the company disruptions caused by Covid-19. Wage clarity would help firms plan more accurately as the economy rebounds. This will also offer greater assurance to those who are currently on the lookout for ways to put their household finances in order. Also Read: Bring back Indian Economy on Track

Because of India’s large pool of available labour, the country has not been able to take advantage of labor-intensive manufacturing and exporting. This is one of the main reasons behind this confusing web of labour laws. Businesses in India, because of this, were unable to acquire scale, thus putting their companies at a disadvantage in global markets. The government has done well by enacting labour codes, which help simplify these laws. Rules in this area should be kept simple to increase the chances that firms will hire more workers and expand their size. Formalization in the labour market would help ensure that workers’ rights are safeguarded.

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