Context: Ministry of Labour recently released a new series of Wage Rate Index (WRI) with base year 2016, being compiled and maintained by the Labour Bureau, an attached office of the ministry. 

  • The new series of WRI with base 2016 will replace the old series with base 1963-65, a labour.

Rationale behind the change

  • The government periodically revises the base year for major economic indicators to reflect the changes in the economy and to capture the wage pattern of workers.

What changes have been made?

  • As per the recommendations of the International Labour Organization, National Statistical Commission etc, the base year of WRI numbers has been revised from 1963-65 to 2016 by the Labour Bureau to enhance the coverage and to make the index more representative. 
  • The new series of WRI has increased the scope and coverage in terms of number of industries, sample size, occupations under selected industries, weightage of industries etc.
  • The new WRI series would be compiled twice a year on point-to-point half-yearly basis, as on January 1 and July 1 of every year.
  • The weighting diagram in the new WRI series has been prepared from the results of the Occupational Wage Survey (seventh) round. 
  • Total 37 industries have been covered in the new WRI basket as against 21 industries in the 1963-65 series.
    • The selected 37 industries in the new series are categorized as 
      • 30 industries from the manufacturing sector, 
      • 4 industries from the mining sector and 
      • 3 industries from the plantation sector. 
    • The earlier series had 14 industries from the manufacturing sector, 4 from the mining sector and 3 from the plantation sector.
  • In the new WRI basket, the current wage data has been collected from 2,881 units under 37 selected industries as against 1,256 units under 21 industries in the old series. 
    • About 700 occupations have been covered under 37 selected industries in new series of WRI.
  • The weights used in WRI series in both series were the base year estimated employment figures in respective occupations in each selected industry. 
  • The weighted average of the occupation level indices in an industry, weights being the base year estimated total employment bill in each occupation, gives WRI at the industry level.
  • Similarly, the weighted average of the industry/sector level indices, weights being the base year estimated total employment bill in each industry/sector, gives the sectoral/All-India Index. 
  • The sector level weights under the new series have changed in comparison to the old series. 
  • The weight of the manufacturing sector has increased substantially over time whereas the weight of the plantation sector and the mining sector has declined under the new series vis-à-vis the old one.
  • Total 16 new manufacturing industries have been added in the new series of WRI baskets, including synthetic textiles, textile garments, printing and publishing, footwear, petroleum, chemical & gases, fertilizers, drugs & medicines, among others.
  • In the new series, the oil mining industry has been introduced in the basket in place of mica mines industry, to make the mining sector more representative of the three different kinds of mining namely coal, metal and oil. 
    • Total 3 plantation industries namely tea, coffee and rubber have been retained in the new WRI basket with enhanced coverage.

Expert Citing

  • The expert group on Minimum Wages & National Floor Wages were of the opinion that this base revision of WRI will play a critical role in coming out with minimum wages and national floor wages along with other parameters which will be decided in due course of time by the expert group. 

Related Facts

International Labour Organization (ILO) Standard on Wages:

  • According to ILO Minimum wages 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 wage systems should be defined and designed in a way to supplement and reinforce other social and employment policies, including collective bargaining, which is used to set terms of employment and working conditions.
  • ILO conventions for deciding Minimum Wage:
    • The Minimum Wage Fixing Machinery Convention, 1928:
      • It encourages countries to implement minimum wages where no arrangements exist for the effective regulation of wages by collective agreement or otherwise and wages are exceptionally low.
    • The Minimum Wage Fixing Convention, 1970:
      • It called for coverage of all groups of wage earners whose terms of employment are such that coverage would be appropriate. 
      • The principle of full consultation with social partners lies at the heart of this Convention.

Global Wage Report 2020: 

  • Before the outbreak of Pandemic: Globally, 266 million people (15 percent of all wage earners) were earning less than the hourly minimum wage even before the onset of the COVID-19 pandemic.
    • This was partly because many countries excluded agricultural and domestic workers from their coverage and partly because of the large numbers working informally where the rules are not enforced.
  • Most affected: Those in lower-skilled occupations lost more working hours than higher-paying managerial and professional jobs.
  • The impact on women: Was worse than that on men. Such a discrepancy was mainly caused by reduced working hours more than by the difference in the number of lay-offs.
    • Women were overrepresented among workers earning minimum wage or less. 
    • Sectors such as leisure, tourism and hospitality, which were among the worst hit, typically employ more women.
  • The growth in inequality: Created by the COVID-19 crisis threatens a legacy of poverty and social and economic instability that would be devastating.

The Social Security Code Act, 2020

  • Social security funds for unorganised workers, gig workers and platform workers: It proposes to empower the centre to constitute a social security fund for the provision of social security for the unorganised workers, platform workers or gig workers or any such class of workers.
  • National Social Security for gig workers and platform workers:It proposes to bring unorganised sector, gig workers and platform workers under the ambit of social security schemes, including life and disability insurance, health and maternity benefits, provident fund and skill upgradation.
  • It proposes to form a National Social Security Board that would recommend suitable schemes for the different sections of unorganised sector workers.
  • The Social Security Code will extend the scope of the Employees State Insurance Corporation to all 740 districts in the country and that of the Employees’ Provident Fund Organisation to all institutions with 20 or more workers as well as the self-employed. 

Salient features of Code on Wages, 2019:

  • The Code on Wages, 2019 seeks to consolidate and simplify four pieces of legislation — Payment of Wages Act, 1936, 
    • Minimum Wages Act, 1948, 
    • Payment of Bonus Act, 1965 and 
    • Equal Remuneration Act, 1976
  • The govt. has said the Code on Wages, 2019 would expand the coverage of workers in all industries in the unorganised sector as the old Minimum Wages Act covered only 30% of the total workforce. 
  • Minimum wages: In the repealed Minimum Wages Act, there was provision to fix minimum wage in an employment which has more than 1,000 workers. The new Code has dispensed with the necessity of having a minimum number of workers.
    • 10,000 slabs of minimum wages that existed before the code, would now be reduced to 200 slabs.
  • Definition of worker: The Code will have the same definition of the term “worker”; but, a person employed in a supervisory capacity drawing up to ₹15,000 will also be considered a worker. 
  • Floor wage: The central government will have the power to fix a “floor wage”. Once it is fixed, State governments cannot fix any minimum wage less than the “floor wage”. 
  • MGNREGA: There was a conflict between the minimum wages fixed by the State governments for agriculture workers. 
    • Several High Courts have placed the Minimum Wages Act to override MGNREGA. MGNREGA has been excluded from the purview of the Code on Wages.
  • Enforcement provisions: The Code has created an inspector-cum-facilitator who will act as per the inspection scheme framed by the government. 
    • He will advise employers and workers to comply with the provisions of the code and may carry out inspections as may be assigned by the government .
  • Claim mechanism: A government official without legal and administrative background can hear such claims. 
    • However, any dispute regarding bonus will continue to go before the Industrial Tribunal. 
    • The new Industrial Relations Code Bill provides for a two-member Tribunal. 
  • Provisions on penalty: An officer (not below the rank of an under secretary to the government will be notified with power to impose a penalty in the place of a judicial magistrate.

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