The Indian Finance Minister, Arun Jaitley, has recently claimed that resistance to economic reforms in India appears to be waning though there is no finishing line for tax reforms. This clearly shows that the government intends to streamline regulations and encourage more private investment through reforms. People in India seem to be in favour of an open economy which can attract more investment and create employment.
Labour reforms have been contentious in India. They require substantial changes in the legal framework of governing and pertaining to the relation between the employers and employees. So far the government has been discussing labour reforms, but recently the Lok Sabha has passed the Code on Wages bill that proposes to bring minimum wages as a statutory right for the citizens. This bill was presented in Parliament in the monsoon session. This bill proposes a monthly minimum wage to be implemented. It will be binding on all the states. Once it is passed, the states will not be in a position to fix lower minimum wages than the wages fixed by the central government.
In this bill, the government has subsumed the four acts namely, the Minimum Wages Act of 1948, the Payment of Wages Act 1936, the Payment of Bonus Act 1965 and Equal Remuneration Act of 1976. The present bill aims to reduce the disparity in minimum wages in India.
It is yet to be seen that what amount of minimum wages is fixed by the central government but it is assumed that it will be higher than the minimum wages fixed by the various state governments. There is an apprehension that this bill will result in retrenchment of employees and will also slow the rate of employment growth.
At present, India is facing job losses and the task before the government is to create more employment. The criteria of fixing the minimum wages are based on various factors like the nature of skill-set, geographical conditions, economic conditions, and social realities among others. To fix a uniform level of wages across a country as diverse as India maybe a tall task. Stiff resistance can be expected from the states. If the wages are higher, the prices are bound to increase. It is also important that the bill covers the minimum wages for organised as well as the unorganised sector.
The fear of automation is not yet very high in India but if the minimum wages increase, the market may switch to automation and reduce the number of employees. There is already a fear pertaining to automation and digitalisation that has been initiated in the banking and finance sector. It is in the overall interest of the country to simplify labour laws so that industry and service sectors are encouraged to employ more people. This is the need of the country today.
–—The writer is the Executive Director, Chamber of
Indian Trade & Industry