The Code on Wages, 2019 was enacted to consolidate four key labour laws, including the Minimum Wages Act, 1948, aiming to streamline wage regulation in India. Despite this consolidation, the Code does not establish a uniform, legally binding national minimum wage. Instead, it leaves wage fixation to the discretion of state governments, resulting in fragmented wage regimes. This legislative choice occurred amid growing concerns over wage stagnation and income inequality, especially affecting the informal workforce that constitutes over 90% of India's employment (Periodic Labour Force Survey 2018-19). The failure to mandate a national minimum wage represents a significant policy gap in securing wage security and reducing poverty.

Constitutional and Legal Framework Governing Minimum Wages

Article 43 of the Directive Principles of State Policy directs the State to secure a living wage for workers, forming the constitutional basis for minimum wage legislation. The Minimum Wages Act, 1948 (Sections 3 and 6) empowers both the Central and State Governments to fix and revise minimum wages for scheduled employments. The Code on Wages, 2019 consolidates the Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act, and Equal Remuneration Act, aiming for uniformity in wage regulation. However, the Code stops short of prescribing a uniform national minimum wage or a mandatory revision mechanism linked to inflation or cost of living.

Judicial pronouncements reinforce wage security as integral to the right to livelihood. The Supreme Court in Olga Tellis v. Bombay Municipal Corporation (1985) recognized the right to livelihood as part of the right to life under Article 21, implying the necessity of wage protection. Yet, the absence of a national minimum wage framework under the Code weakens enforceability and uniform protection across states.

Economic Realities of Wage Distribution in India

The informal sector employs approximately 90.8% of India’s workforce (Periodic Labour Force Survey 2018-19), yet only 17% of workers are estimated to receive minimum wages as per the Labour Bureau Report 2023. This low coverage reflects weak enforcement and the absence of a national wage floor. Wage disparities are stark: average daily wages in agriculture stand at ₹250 compared to ₹600 in manufacturing (Economic Survey 2023). Real wages have declined by 1.5% between 2016 and 2022 (Centre for Monitoring Indian Economy, 2023), indicating wage stagnation that suppresses aggregate demand.

Consumption expenditure constitutes 60% of India’s GDP (Central Statistics Office 2023), making wage security critical for sustaining economic growth. Yet, budget allocations for minimum wage enforcement remain below 0.1% of GDP (Union Budget 2023-24), reflecting inadequate institutional prioritization. This underfunding hampers monitoring, compliance, and dispute resolution mechanisms essential for effective wage protection.

Institutional Roles and Challenges in Minimum Wage Enforcement

• Ministry of Labour and Employment (MoLE): Responsible for formulating labour laws and overseeing enforcement.
• Labour Bureau: Collects and publishes wage and employment data, providing empirical inputs for policy decisions.
• Central Advisory Board on Minimum Wages (CABMW): Statutory body advising the government on wage fixation, but its recommendations lack binding authority.
• State Governments: Empowered to fix and enforce minimum wages, leading to diverse wage floors and enforcement standards.
• Supreme Court of India: Judicial oversight has emphasized wage security, but enforcement remains a legislative and administrative challenge.

Comparative Analysis: India vs Brazil on Minimum Wage Policy

Critical Gaps in the Code on Wages, 2019

The Code’s failure to mandate a uniform national minimum wage or a periodic revision mechanism linked to inflation and cost of living results in fragmented wage regimes across states. This fragmentation undermines wage security for a majority of workers, especially in the informal sector. The discretionary nature of wage fixation by states leads to wide disparities and weak enforcement. Additionally, the absence of adequate budgetary support for enforcement agencies limits effective monitoring and grievance redressal. These gaps perpetuate income inequality and wage stagnation, constraining domestic consumption and inclusive growth.

Significance and Way Forward

• Enacting a legally binding national minimum wage with periodic revisions indexed to inflation and productivity would provide wage security and reduce disparities.
• Strengthening institutional capacity at the Centre and states with increased budgetary allocations for enforcement is essential.
• Improving data collection and transparency through the Labour Bureau can inform evidence-based wage policies.
• Establishing a uniform framework would enhance ease of doing business and labour mobility across states.
• Judicial reinforcement of wage rights must be complemented by legislative clarity and administrative action.

Mains Question

Critically analyse how the absence of a legally binding national minimum wage under the Code on Wages, 2019 impacts wage security and income inequality in India. Suggest measures to address these challenges.