On June 3, the Centre issued an opaque press release stating that it has constituted an expert committee under the chair of Professor Ajit Mishra, director of the Institute of Economic Growth (henceforth Mishra Committee) “to provide technical inputs and recommendations on fixation of Minimum Wages and National Floor Minimum Wages”.
And that it “…has been constituted for three years from the date of notification.”
This move of the Central government is bewildering for several reasons. The tenure of the committee is three years.
When I read it first, I thought it was a printing mistake and it would be rectified to three months. But the comments of the Senior Labour and Employment Advisor to the government and the Member Secretary of the Committee confirmed that its tenure is indeed three years. Why would any committee with a limited mandate such as this – unless it is a commission to enquire into a host of issues like the Second National Commission on Labour or the National Commission on Enterprises in the Unorganised Sector – be given such a long period?
Nevertheless, we should wait for the explicit terms of reference for the Mishra Committee to be able to make some sense of this move of the government.
In the meantime, there are four issues that should be debated and addressed:
1) What is the context preceding the appointment of the Mishra Committee?
2) Is it a welcome addition to the existing maze of bodies?
3) What value can it add, given the rigid legal mandate?
4) What are the possible implications of this measure?
The first draft of the Wage Code was presented in parliament on August 10, 2017, and the revised Code was passed in 2019.
On January 17 2018, the Centre constituted an Expert Committee under the Chair of Dr. Anoop Sathpathy, Fellow of the V.V. Giri National Labour Institute (henceforth, Sathpathy Committee) with a wide mandate to make a detailed review of minimum wages given the historical and the judicial context and recommend national and regional minimum wages, “…keeping in mind global best practices and their adaptability and relevance to the Indian context.”
The Sathpathy Committee, which included an expert on wages from the ILO’s New Delhi office, submitted its detailed scientific report in 2019.
The committee dealt in a detailed manner with several aspects such as the history of minimum wage policy in India, ILO’s framework concerning the minimum wage system, and the minimum wage systems in several countries. Ultimately, it recommended a national minimum wage rate of Rs 375 per day and a monthly wage of Rs 9,750 (and a housing allowance of Rs 1,430 for workers living in urban areas) and region-wise minimum wages (five regions).
The report was not well-received by trade unions, though it received some support for specific parts. Most of India’s trade unions demanded a national minimum wage of Rs 600 per day as per the Seventh Pay Commission’s recommended wage rate, which is not surprising as they as a pressure group will pitch for higher minimum wages.
Incidentally, the Sathpathy committee report did not figure in any of the discussions on wages initiated by the government. The Centre’s decision to give a meagre rise, from Rs 176 to Rs 178, in 2019 was seen as a possible rejection of the Sathpathy Committee report. Again, the very constitution of the Mishra committee reflects the implicit rejection of the recommendations of the Sathpathy committee.
The presence of three government representatives in the Mishra committee could raise some eyebrows, as it may lead to a moderation of the recommendations concerning the minimum wage rates. It is a simple economic anticipatory rationale that the Mishra Committee may be constrained to recommend a minimum wage less than that recommended (adjusted for inflation) by the Sathpathy Committee – else why another committee?
Ideally, the Mishra committee must enjoy autonomy and be an “arms at length” panel, with no overt government steering.
Alternatively, the Central government could have outsourced this job to ILO officials as the body possesses global technical expertise. Some ILO officials have done valuable work on minimum wages in India and in developing countries. It is, therefore, a mistake to call the Mishra Committee an “expert committee”.
To be sure, I am not questioning in any way the academic credentials of the technical members of the committee.
The Indian state, regardless of the party in power at the Centre, has always revelled in constituting committees and commissions and then consigning them to the already piled up committees’ reports’ dustbin.
The Sathpathy Committee report has met such a fate. What is the guarantee that the Mishra committee report, even if it is delivered well before its due date, i.e. June 2024, will not meet with the same fate as its predecessors’ reports?
Is it a welcome addition to the existing maze of bodies?
The Wage Code and the Rules framed under it provide for a maze of bodies – Section 8(1)(a) and Rule 38 provide for the appointment of a multi-partite committee (comprising representatives of employers and employees and independent persons) and Section 42 and Rule 28 for an Advisory Board at the central and the state levels. Rule 4(2) provides for the constitution of a committee comprising representatives from several Union Ministries and two technical experts to categorise workers’ skills.
In pursuance of the Draft Rules under the Wage Code notified on July 7, 2020, the Central government on March 1, 2021, issued a notification for the constitution of an Advisory Board inviting suggestions and objections from the stakeholders and the business matters concerning the functioning of it.
Thus we effectively have another expert committee. The question in passing is whether this body has a statutory basis? The rather brief press release does not mention any legal clause supporting its formation.
What value it can add given the legal and tripartite mandate?
The press release very briefly provides the mandate for the Mishra committee. The panel will give recommendations to the government on Minimum Wages and National Floor Level Minimum Wage (NFLMW).
To arrive at the wage rates, the group will look into the international best practices on the wages and evolve a scientific criteria (sic) and methodology for fixation of wages.”
I have already dealt with the review by the Sathpathy Committee relating to international practices. Now, the Mishra Committee is expected to provide recommendations to the government on minimum wages and the NFLMW. But the Wage Code and the Rules have provided enough inputs on them.
The Wage Code and the Rules provide for a statutory NLFMW, regional minimum wages (metropolitan area, non-metropolitan area and the rural area as defined under Rule 4 framed under Section 6), and minimum wages at the state levels. The central government will determine the former two and the latter by the respective states and Union Territories.
The Wage Code and the Rules have provided the set of criteria to be considered for the determination of a statutory NFLMW and minimum wages (regional and the state levels). For example, Section 9 prescribes “minimum living standards of a worker” to determine NFLMW. For fixation of minimum wages under Section 6 by the appropriate government, the Code defines a variety of factors like workers’ skills, arduousness of work [Section 6(6)(b)], and any other prescribed norms [Section 6(6)(c)].
Rule 3 framed under Section 6(5) [wrongly stated as it should have been Section 6(6)(b)(c) as required under Section 67(2)(b)(c)] defines the criteria following the recommendations of the Indian Labour Conference (ILC) and the criteria prescribed in the Supreme Court’s judgment in Workmen Represented by Secretary vs. Management of Reptakos Brett. And Co. Ltd. and Anr.,1992 (AIR 504) for calculation of minimum wage rate.
The tripartite body, the ILC and the Supreme Court have dealt with the criteria and the Sathpathy Committee have made suitable revisions as they deemed fit. The Advisory Boards will have to follow the criteria spelt in Rule 3 to determine minimum wages. Rule 11 clarifies that the statutory NFLMW will also be determined by criteria spelt out in Rule 3.
What will be the functions of the Expert Committees and the Advisory Boards to be constituted under the existing regulations? What will happen to their recommendations in the light of the Mishra Committee’s recommendations as and when they arrive?
Also, the question is: what value addition can the Mishra Committee make to the prescribed legal mandate discussed above? What is the guarantee that the stakeholders will welcome this Committee’s recommendations?
What are the practical implications?
Even though the Wage Code was enacted in August 2019, the eventual Rules notifying the Advisory Board at the Central level was done only in March 2021 arguably due to the economic slow-down and the terrible adverse impact of COVID-19 on business. But the workers, both formal and informal, have suffered multiple deprivations, including acute diminution in income-earning opportunities and depreciation in real wages. The Central government’s non-statutory minimum wage rate is a measly Rs 178. Various surveys and anecdotal evidence document substantial diminution in income levels and rising informality amongst workers. Millions are reported to have lost jobs during the COVID-period.
The non-implementation of the four Labour Codes and very partial implementation such as that we have noted here indicate a huge legal void. During the recent period, several state governments and the Central government have announced changes in the variable dearness allowance (VDA) component of the minimum wages while some like Kerala have revised the basic minimum wage rate for a sector.
The practical question is: when would the universal minimum wage regime be implemented? The Central government needs to quickly announce the statutory NFLMW. Then the state governments can take suitable action to revise the minimum wage rate apart from announcing appropriate changes in the VDA.
The CITU, in a letter dated June 4, 2021, has questioned the validity of the appointment of the Mishra committee. It has called for its rescindment. The de novo proceedings in the context of what we have discussed above are superfluous. It would defeat the social dialogue process based on which the government has included the “criteria” in the Rules for determining minimum wages. Further, there are provisions in the regulations as mentioned above to include experts in the expert committees and the advisory boards.
The constitution of the said committee, notwithstanding the technical expertise, will send adverse signals to the stakeholders that the government is simply biding time and not interested in implementing the Codes. Another committee with a three years tenure will frustrate the aspirations of the working class who have been waiting for a minimum wage.