Employment relationships are shaped by social security systems and legally mandated labour standards, which are all examples of labour laws (Deakin 2016).
Comprehensive labour standards, which include the right to organise and establish minimum standards for wages and working conditions, are crucial for reducing poverty and social and economic inequality. They also absorb the effects of macroeconomic shocks, restore the proper relationship between capital and labour, and improve workers' welfare (ibid:12). Therefore, through its social protection and social justice functions, labour laws contribute to social policy.
In the past, labour laws have developed in tandem with the expansion of the industrial economy and formal sector employment. Large unorganised sectors in low- and middle-income countries prevent the emergence of labour standards (Deakin and Haldar 2015). However, risks associated with working in the unorganised sector can also be reduced through the implementation of effective laws, fair labour standards, and state-sponsored social security programmes (ibid). The idea of the minimum wage and its role as a social safety net in the context of India will be covered in this module. We'll talk about selective central labour laws next. The proposed reforms and recent changes to labour laws will then be briefly discussed. An overview of disorganised work and recent developments is covered in the post's conclusion.
The concept of minimum wage
Selected central labour laws in india
Recent and proposed labor laws reform in india
Unorganised sector or informal sector in india
The concept of minimum wage
The term ‘Sweating’ is attributed to a British economist Sidney Webb who coined the term in 1912 to refer to – ‘earnings barely sufficient to sustain existence’. It was used to describe the situation in which workers worked for extremely low wages that did not support a “socially acceptable level of wholesome family life.” (Nordlund 1997 cited in Cunningham 2007:7). A related term is ‘Sweatshop’ associated with long duration of work, unsafe working conditions and poverty level wages fuelled by the existence of large population of unskilled labour including children and absence of state intervention. Historically, labour laws, trade unions and emergence of labour standards have checked the growth of ‘sweatshop’ type working conditions.
Early proponents of the minimum wages argued that the poor and vulnerable workers (such as women, children and the unskilled) lacked representation and collective bargaining power. Under these circumstances it was the responsibility of governments to correct the markets and serve as collective bargaining proxy for these workers in order to ensure them a standard of living acceptable to society (Cunningham 2007). Public demand for social justice by workers resulted in the emergence of Minimum Wages in the late19th century. Minimum wages is viewed as a redistributive tool that transfers resources from higher income groups to lower income groups (Belser and Rani 2011:54). Moreover in a context where most casual wage workers do not have access to social security benefits, extending minimum wages to the entire labour force can act as increasing social justice (ibid:54)
The Government of India appointed Central Advisory Council in 1947 called Committee on Fair Wages came out with 3 important concepts that continue to remain influential. These are the concepts of, Living Wage, Minimum Wage and Fair Wage. The living wage concept draws upon an understanding of a minimum standard of living that a working person should be able to afford. According to the NCEUS report, it ‘should enable the wage earner to provide for himself and his family not merely the bare essentials of food, clothing and shelter but also a measure of frugal comfort including education of children, protection against ill health, requirements of social needs and a measure of insurance against the more important contingencies like old age.’ (GoI 2007: 203)
Allowing for less comprehensive coverage than living wage, the minimum wage definition also goes beyond mere survival. It ‘must provide not merely for the bare sustenance of life but for the preservation of the efficiency of the worker. For this purpose the Minimum wage must also provide for some measure of education, medical requirements and amenities.’ (ibid: 203).
The notion of fair wages goes beyond minimal acceptable standards. As the NCEUS report highlights, ‘while the lower limit of the Fair wage must obviously be Minimum Wage, the upper limit is equally set by what may broadly be called the capacity of the industry to pay.’ (ibid:203)
The Minimum Wages Act came into force in 1948. This Act empowers both central and state governments to fix and revise minimum rates of wages. Several different types of employments are covered in the Schedule to the Act. The Schedule is in 2 parts. Part 2 deals with employment in agriculture. The appropriate governments have notified the list of scheduled employments in parts 1 and 2. Recent changes have led to the creation of a national floor level minimum wage. In 1991 theNational Floor Level Minimum Wage (NFLMW) is created on the basis of the recommendations of the National Commission on Rural Labour. In 1996 the NFLMW was fixed at Rs.35 per day. In 2007 the NFLMW was revised to Rs.80 per day based on the consumer price index. In 2009 this wasfurther increased to Rs.100 per day and in 2011, revised to Rs.115 per day. 3 In 2015 the NFLMW was revised by the Central Government to Rs.160 per day
Despite the NFLMW, which constitutes a non -binding standard, a wide range diversity is present in minimum wage standards in India. At the state level, minimum wages are established differently for selected occupations. There are some mandatory rates for state companies. Some estimates cite more than 1000 minimum wage rates for different categories of workers in the Indian context (Belser and Rani 2011: 47). Recently, the Ministry of Labor and Employ Make the NFLMW legal.
In 2004-05, it is estimated that 73 million people in India (classified as workers) received salaries that were below the national minimum wage of RS.66 per day. Rural women and workers were more likely to win below the minimum wage. A greater probability of ST, SC and OBC to win the minimum wages compared to the upper castes (Belser and Rani 2011: 50).
Neoclassical economists argued that higher minimum wages have an adverse effect on employment, Keynesians argued that higher minimum wages would lead to greater household consumption, increase aggregate demand and, therefore, would increase employment ( Belser and Rani 2011). However, in the context of India, it is likely that compliance with the legal minimum wage has effects of poverty and inequality reduction. A large proportion of people with employees in India are poor people and low rating in rural and urban areas. Receiving minimum wages would allow these families to move from poverty. On the other hand, not receiving minimum wages would increase the probability that casual workers continue to live in poverty (IBID).
Selected central labour laws in india
The Indian Constitution includes labor on the concurrent list. The regulation of working conditions falls under the purview of both state and federal governments. Both state and federal governments have the authority to enact labor laws. There are a number of major labor regulations. State governments typically draft the coverage and implementation guidelines for federal legislation and enact state-specific labor laws as well. All types of workers are covered by a number of central labor rules, while those working in unorganized sectors are only partially protected by laws that provide a set of minimal working conditions. The execution of central and state labor is the responsibility of the state labor departments. Laws are implemented by state-level employees, such as district-level labor officers and inspectors and labor commissioners in charge of the institutional framework.
The Industrial Disputes Act, 1947
Regulations governing industrial sector employment and dismissal are governed by law. It mandates that any business with more than 100 employees must request authorization from the government before terminating employees, which is infrequently granted. According to the legislation, a worker who has been fired has three years to pursue an unjust dismissal claim. The regulation "drives up costs for midsized organizations and encourages companies to stay small," claim critics.
The Trade Unions Act 1926 (Trade Unions Amendment Act, 2001)
Trade unions are given legal status through registration under the legislation, which also defines them and outlines their duties. It permits the efficient operation of unions, shields them from legal action to foster friendly employer-employee relations, assists in the resolution of disputes, and promotes the welfare of the working classes. This law can benefit both the union of employees and the employers' organization. According to the newly modified statute, there must be 100 employees (or at least 10% of the workforce) who are union members.
The Equal Remuneration Act, 1976
The Act, which is applicable to women workers, calls for the payment of equal remuneration to men and women employees as well as the elimination of sexism in the workplace. According to the Act, employers are required to pay women and men equally for equivalent or identical labor. Additionally, there are provisions in the Act that forbid sex-based discrimination in hiring.
The Contract Labour (Regulation and Abolition) Act, 1970
Any establishment that employed 20 or more workers as contract laborers on any day during the previous year is subject to this Act. Home workers and those employed in management, administrative, or supervisory positions are not included. The act also includes rules for the security of wage payments as well as the health and wellbeing of contract workers. Additionally, recruiting contract labor requires government approval, which employers must request (GoI 2007:162)
The Factories Act, 1948
The law governs the physical conditions of work by establishing a minimum amount of floor space and volume space per worker employed by a firm because it cares about the health and safety of workers. It is relevant to the unit's use of power and is applicable to units with ten or more employees. The act also specifies restrictions for women working at night and restricts the length of workdays.
The Maternity Benefit Act, 1961 (Maternity Benefit Amendment Act, 2017)
The previous rule guaranteed pregnant women who gave birth or experienced a miscarriage a minimum of six weeks of paid maternity leave. Women employees now have the right to 26 weeks of paid leave for the birth of their first two children as a result of a recent legislation. Women who have had two children or more or who have adopted a child are entitled to 12 weeks of paid leave. The new regulation is applicable to all businesses with at least ten employees.
The Child Labour (Prohibition and Regulation) Act, 1986 (Child Labour Prohibition and Regulation Amendment Act 2016)
The 1986 Act forbids the use of child labor (defined as an individual under the age of 14) in the 83 occupations and procedures listed in part B of the schedule of the Act, which are detailed in part A. The law also governs unscheduled work's health and safety, working hours, leave policies, and working conditions. The law is universally applicable to all employment, including rural, urban, and non-agricultural jobs. The Child Labour Prohibition and Regulation Amendment Act of 2016 decreases the number of professions on the prohibited list, allows for flexible work hours, and makes child labor in family businesses and the media sector lawful.
Building and other Construction Workers’ (Regulation of Employment and Conditions of Services) Act, 1996
In workplaces with ten or more employees, the law governs working conditions for building and construction workers and includes provisions for health, safety, the amount of time spent working, and other welfare measures.
Bonded Labour System(Abolition) Act, 1976
The law aims to stop the use of labor bondage to exploit groups of people who are socially and economically disadvantaged and abolishes the system of bonded labor. According to the law, bonded labor is a system of compelled labor in which a debtor signs a contract with the creditor. In exchange for advances, customary obligations, or other types of credit accepted by them or their family members, people working under bonded labor regimes supply work. In exchange, they give up their freedom of mobility and/or lose their freedom to look for other sources of income or employment.
Laws Relevant to Agricultural Workers
The largest and one of the most vulnerable segments of the unorganized sector, agricultural labourers in India are not protected by any special labor regulation. The Minimum Wages Act, passed in 1948, and the Plantation Labour Act, passed in 1951, are the two labor regulations that safeguard the interests of agricultural employees (that is applicable to plantation workers). Bonded Labor System (Abolition) Act of 1976, Child Labor (Prohibition and Regulation) Act of 1986 (Child Labour Prohibition and Regulation Amendment Act of 2016), and Equal Remuneration Act are further pertinent laws. A number of states have passed particular legislation to safeguard agricultural workers' rights.
Recent and proposed labor laws reform in india
Some academics believe that India's labor laws need to be significantly revised and are better suited to the post-independence era. The Indian Ministry of Labour recently recommended codifying several older labor rules into four basic codes. 12 Through this exercise, four codes—industrial relations, social security and safety, health, and working conditions—will be condensed to represent labor regulations. The above reforms were emphasized by the finance minister in the budget for 2017–18. The Equal Remuneration Act of 1976 and the Minimum Pay Act of 1948, among other laws, will be included in the proposed code on wages. The Industrial Relations Code would incorporate the Industrial Disputes Act of 1947 and the Trade Unions Act of 1926.
India is thought to have had harsh dismissal laws. Raising the number of entities that may retrench employees without seeking previous government approval is one of the centerpieces of the proposed amendment. Units with 100 employees might close or retrench without requesting approval under earlier labor laws. Once in effect, the updated industrial relations rule would permit businesses with 300 employees to follow suit. Trade unions have voiced opposition to the planned labor law revisions because they believe that doing so will compromise workers' rights and entitlements by making it more difficult for workers to organize unions, go on strike, and create unstable employment. Many employees went on strike in September 2016 to show their opposition to the proposed measures. Trade unions have expressed concerns about the proposed transfer of control over setting minimum wages to state governments, flexible hiring and firing practices for units with 300 workers, and an exemption from the Contract Labour Act for businesses with 50 or fewer employees.
Recent announcements by the Ministry of Labor regarding increasing the minimum salaries for unskilled agricultural and nonagricultural workers are also included in the labor law amendments. Unskilled farm laborers will be entitled to a minimum pay of Rs. 300 per day in cities falling under C category, Rs. 303 and Rs. 333 in towns falling under B and A category.
Significant increases have also been made to the minimum wage rates for non-agricultural, semi-skilled, and highly skilled workers. Labor regulation rules have always been seen as a barrier to corporate development and economic expansion. To support economic development and the reduction of poverty in emerging markets, however, more than simply abolishing labor laws, institutional capacity-building, the development of dispute resolution mechanisms, the expansion of social insurance, and the promotion of formal sector employment are needed (Deakin 2016:14). Instead of promoting deregulation, India needs better labor laws to support social policy and promote economic growth.
Unorganised sector or informal sector in india
A discussion of labor regulations would be lacking without addressing the unique situation of India's unorganized or informal sector workers. In India, the unorganized sector employs more than 80% of all workers. They are not covered by the current labor laws and were not eligible for the social security and welfare benefits provided to employees in the official sector. According to the most recent NSSO data, India has 483.7 million persons employed. 472.8 million of them are in employment, and 83% of them have low-paying jobs in the unorganized sector. 17 Rickshaw drivers, street sellers, handloom artists, fishery workers, and unskilled home-based employees are a few examples of people who operate in the unorganized sector.
The characteristics of India's unorganized sectors and employees have been defined in a number of ways. The Unorganized Workers' Social Security Act of 2008 defines the "unorganized sector" as any business owned by an individual or self-employed person that produces, sells, or offers services with less than ten employees. A home-based or self-employed worker, a wageworker in the unorganized sector, or a worker in the organized sector who is not covered by any of the laws specified in the Act are all considered "unorganized workers" according to the same statute (MOLJ 2008). With the exception of plantations and organized agriculture, the NCEUS report classified agricultural operations as belonging to the unorganized sector (p.3). Workers who lack legislative protection for social security and working conditions are referred to as unorganized workers.
There is more agreement on the traits of informal employees and the working circumstances in the informal sector despite definitional disagreements. The majority of workers in the informal sector are poor and experience a variety of social and economic disadvantages, including insecure employment, low and irregular pay, lengthy work hours, hazardous working conditions, lack of access to legal recourse in cases of employer disputes, forced labor, gender or caste-based discrimination, and no social security. The majority of governments encouraged formal employment as a stated policy objective because historically a sizable and persistent informal sector has been linked to high poverty and low productivity (see Deakin 2016). International treaties and recommendations, such as Article 18 of the ILO recommendation 204 of 2015, "Transition from Informal to Formal Economy," argue that workers in the informal economy should have access to respectable working conditions, such as minimum wages, social security, and maternity leave.
The Government of India passed the Unorganised Workers' Social Security Act 2008 to offer welfare benefits to the vast majority of people working in the unorganized sector. Eight current assistance programs that were intended for eligible (below poverty line) people were diverted to people who were registered as unorganized sector workers.
These programs include JSY, NFBS, IGNOAPS, and NSBY. Although the Social Security Act is a positive move, it has been noted that, with the exception of handloom weavers, fishermen, and handicraft artists, it does not explicitly link eligibility for welfare programs to a person's position as an unorganized sector worker but rather to their BPL status (Kannan 2010). The NCEUS study's suggestion that all workers in the informal sector be provided with a universal minimum level of social security is not addressed by the statute that resulted from that report (ibid:17).
Belser, P and Rani, U. 2011. Extending the Coverage of Minimum wages in India: Simulation from Household data. EPW, Vol.XLVI, 22
Cunningham, W. 2007. Minimum Wages and Social Policy: Lessons from developing countries. Washington Dc: WB
Deakin, S and Haldar, A 2015. How should India reform its Labour Laws? EPW, Vol.L, 12:48-55
Deakin, S . 2016. The contribution of labour law to economic development and growth. WP 478. CBR Research Programme on Corporate Governance.
Government of India (GoI) 2007. Report on conditions of Work and Promotions of Livelihood in the Unorganised Sector, Commission for Enterprises in the Unorganised Sector (NCEUS), New Delhi.
Kannan, K.P 2010. The Long Road to Social Security, HIVOS Knowledge programme, Paper, 2. http://www.bibalex.org/Search4Dev/files/387441/225033.pdf
Ministry of Law and Justice 2008. The Unorganized Workers’ Social Security Act, 2008