The Wage Rate Index and Minimum Wages (GS 3, Economics, The Hindu, Indian Express, PIB)

The Wage Rate Index and Minimum Wages- Today Current Affairs

News?Context : The Labour Bureau under the Central Ministry of Labour and Employment  has recently revised the base year of Wage Rate Index from the old series of 1963-65 to 2016. Now The Wage Rate Index value for 2016 will be taken as 100 in place of 1963-65, and a new series will be developed. 

The Wage Rate Index basically shows the relative change or percentage in wages during a period of time for different industries. Wages rate for base year is considered as 100 for a particular industry. 

Supposedly the average daily wages for manufacturing industry in the year 1963-65 was 5 Rupees, then the Wage Rate Index value will be considered as 100. And say in 2020  the average daily wages for the same manufacturing industry is 350, then the  Wage Rate Index value will be calculated as 7000. It simply means that the daily wages in the manufacturing industry have become 70 times more costly. Thus the  Wage Rate Index measures the inflation in wages. It helps policy makers and economic analysts in revising key economic policies and analysing the economy respectively. Likewise he government periodically revises the base year for major economic indicators to reflect the changes in the economy such a, for the indicator of economic growth i.e. GDP (Gross Domestic Product)  was revised from 2004-05 to 2011-12; for the indicator of retail inflation i.e. CPI-C (Consumer Price Index- combined) was revised from 2010 to 2012.  

The coverage and scope in terms of industries and occupation in the new series (2016=100) has been enhanced in comparison to previous one (1963-65=100). Earlier Wage Rate Index  were including 21 industries in manufacturing like cotton, cement, jute, sugar,silk, cigarette, mining, plantation of coffee, rubber and tea, etc., and now it will be adding petroleum, garments and footwear etc. Oil mining has been included to make the mining sector more representative. 46% of the total weight in the new series come from the top five industries like garments textile, coal mines, motor vehicle, cotton textile, iron and steel. 

The revised Wage Rate Index will play an important role in determining the national floor wages and minimum wages and some other parameters. 

The All India Wage Rate Index Number for the first half of the 2020 for all the 37 industries, as per the new series, stood at 119.7. Hence it can be understood that if average wage rate in 2016 was 100, it became 119.7 for the first half of the 2020, or say an increment of 19.7%. The highest Wage Rate Index in 2020 (half yearly 2), at sector level was reported in Plantation Sector (126.5) followed by Manufacturing Sector (119.6) and Mining Sector (116.7).

Minimum wages as per International labour Organization have been defined as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”

Minimum Wages Act : India introduced the Minimum Wages Act in 1948, giving both the State government and the Central government jurisdiction in fixing wages. The act is legally non-binding, but statutory. It will be considered as forced labour if payment of wages goes below the minimum wage rate. Wage boards from time to time have been  set up and  review the industry’s capacity to pay and fix minimum wages such that they at least cover a family of four requirements of calories, shelter, clothing, education, medical assistance, and entertainment. Under the law, wage rates in scheduled employment differ across states, sectors, skills, regions and occupations owing to differences in costs of living, regional industries’ capacity to pay, consumption patterns, etc. Hence, there is no single uniform minimum wage rate across the country and the structure has become overly complex. 

The minimum wage, until last year, was regulated under the purview of the Minimum Wages Act, 1948. The parliament passed the Code on Wages Act, 2019 in August and amended the existing act. 

Here we mention about The Wage Rate Index and Minimum Wages. Today Current Affairs. The Hindu Analysis.

Md Layeeque Azam, Economics Faculty

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