Through the Minimum Wages Act, the Parliament declared that governments — not economic agents — would decide the amount of wages paid.
The following is a chapter from the book 70 Policies that Shaped India: 1947 to 2017, Independence to $2.5 Trillion.
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Seven months into Independence, the dominance of socialist thinking and a welfare model of development weighed heavy on India’s lawmakers. Even before the country could get a handle on industrialisation, Parliament, through the Minimum Wages Act <1>, enacted on 15 March 1948, declared that governments (both central and states) not economic agents would decide the amount of wages paid. As an idea, minimum wage was embedded in the Constitution to ensure a decent standard of life <2>, but in India, the law became a tool for control rather than regulation: there are more than 1,200 minimum wage rates in India <3>. Clearly, casual and politics-led implementation of minimum wages has reached stratospheric levels of inconsistency and shows signs of market failure in a policy of excessive control. But this is not the end of all wages-related laws. The Trade Union Act of 1926 <4> (amended in 2001 <5>) permits trade unions to regulate relations between workmen and employers. The Industrial Disputes Act of 1947 <6> allows trade unions to take up the issue of wages to “make provision for the investigation and settlement of industrial disputes.” The Equal Remunerations Act of 1976 <7> entitles equal wages to women for same or similar work. The Contract Labours (Regulation and Abolition) Act of 1970 <8>, to “regulate the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances,” ensures that contractors pay wages, with the liability of non-payment resting on the principal employer. Despite all these provisions, only eight percent of the workers were aware of the Act <9>. Moreover, there are informal workers, who add up to 92 percent of all workers but lack the power of collective bargaining and are not organised. This means that there is an economic disconnect between job creation and output. Smaller enterprises are perhaps not equipped to deal with the complexity of so many laws governing the working conditions of labour, or the entitlements these laws give are not economically viable for them. Either way, this is an area that needs legal attention and legislative consolidation.
<1> The Minimum Wages Act, 1948, Ministry of Law and Justice, Government of India, 15 March 1948. <2> The Constitution of India, Article 43, Article 43, Part IV: Directive Principles of State Policy, The Gazette of India, Government of India, 26 November 1949, accessed 28 December 2017. <3> Biju Varkkey and Rupa Korde, “Minimum Wage Comparison: Asian Countries: Official Representation of Minimum Wages,” Indian Institute of Management Ahmedabad, June 2012, 4, accessed 28 December 2017. <4> The Trade Unions Act, 1926, Section 2(8)(h), National Commission for Women, 25 March 1926, accessed 28 December 2017. <5> Trade Unions (Amendment) Act, 2001, Northern Coalfields Ltd, 3 September 2001, accessed 28 December 2017. <6> Industrial Disputes Act, 1947, Ministry of Labour and Employment, Government of India, 11 March 1947, accessed 28 December 2017. <7> The Equal Remuneration Act, 1976, Ministry of Law and Justice, Government of India, 11 February 1976. <8> The Contract Labour (Regulation and Abolition) Act, 1970, Chapter V, Section 21, Ministry of Law and Justice, Government of India, 5 September 1970. <9> A. Srija, “Implementation of the Minimum Wages Act, 1948: Case Study of India,” Global Journal of Human-Social Science: F 14, no. 7 (2014): 8, accessed 28 December 2017.
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Gautam Chikermane is a Vice President at ORF. His areas of research are economics, politics and foreign policy. A Jefferson Fellow (Fall 2001) at the East-West ...
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