Central Government Increases Minimum Wage for Workers

30-09-2024

In September, The Central Government of India announced an increase in minimum wage rates by revising the Variable Dearness Allowance (VDA), set to take effect on October 1. This move aims to support workers, particularly in the unorganized sector, amidst rising living costs.

Key points:

Purpose of Wage Increase

The adjustment in minimum wage rates is designed to help workers cope with inflation and the increasing cost of living.
Beneficiaries include workers across various sectors such as:
1. Building Construction
2. Loading and Unloading
3. Watch and Ward
4. Sweeping and Cleaning
5. Housekeeping
6. Mining
7. Agriculture (within central sphere establishments)

Wage Categorization

Minimum wage rates are categorized based on:
1. Skill Levels: Unskilled, Semi-skilled, Skilled, and Highly Skilled.
2. Geographical Areas: Classified into Areas A, B, and C.

Revised Minimum Wage Rates

Following the revision, the minimum wage rates for Area A are as follows:

Worker Category	Daily Min Wage	Monthly Min Wage
Unskilled Workers	783	20,358
Semi-skilled Workers	868	22,568
Skilled Workers (including clerical and watch and ward without arms)	954	24,804
Highly Skilled Workers (including watch and ward with arms)	1,035	26,910

VDA Revision Process

The VDA is revised twice a year (on April 1 and October 1).
Revisions are based on the six-month average increase in the Consumer Price Index (CPI) for industrial workers.
The last revision occurred in April 2024.

Delhi Minimum Wages 2024: CM announced increase in Monthly Wages

In addition to the central government’s announcement, the Chief Minister of Delhi, Atishi, has also increased both the dearness allowance (DA) and minimum wage for skilled and unskilled workers.
The new rates for Delhi will come into effect on the same date, October 1.

Delhi Minimum Wage Revised Rates:

The maximum increase in the minimum wage can be seen in the skilled workers.
They will now get ₹ 702 more than what they used to get previously, followed by Semi-skilled workers, who got an increment of ₹ 650.

Following table to know the new rates of Delhi Minimum Wage:

Category	Previous Rates (₹)	New Rates (₹)	Increase (₹)
Unskilled Labourers	17,494	18,066	572
Semi-Skilled Workers	19,279	19,929	650
Skilled Workers	21,215	21,917	702

Does Delhi Have Highest Minimum Wage?

CM Atishi highlighted that Delhi offers over ₹18,000 as the minimum wage for unskilled workers, while other states have much lower rates.
In Rajasthan, it's ₹8,063, in Madhya Pradesh ₹10,000, Uttar Pradesh ₹8,300, Haryana ₹10,000, and Chhattisgarh ₹10,900.
Delhi’s minimum wage is the highest in the country.

Here’s the table with the minimum wages for unskilled workers across different states of India:

State	Minimum Wage for Unskilled Workers (₹)
Delhi	18,066
Rajasthan	8,063
Madhya Pradesh	10,000
Uttar Pradesh	8,300
Haryana	10,000
Chhattisgarh	10,900

Minimum Wage to Increase Every Two Year

Delhi CM Atishi stated that the AAP government will raise the minimum wages for workers every two years.
This plan follows the government's policy of increasing the Dearness Allowance (DA) for all government employees every two years.
The minimum wage will be revised every two years, ensuring regular increments in the earnings of the workers.

Background: Minimum Wage in India

Minimum wage landscape in India is crucial for foreign businesses due to its complexity. Minimum wage varies by state and is influenced by multiple factors, including region, industry, skill level, and nature of work.

Key points on Minimum Wage in India

How is Minimum Wage Calculated?

Factors Influencing Wage:
1. State and Area: Varies by geographical location and development level within the state (zones).
2. Industry and Occupation: Differentiated for unskilled, semi-skilled, skilled, and highly skilled workers.
Calculation Method:
1. India has nearly 2,000 job types for unskilled workers and over 400 employment categories.
2. The minimum wage includes:
  1. Variable Dearness Allowance (VDA): Adjusts for inflation based on the Consumer Price Index (CPI).
  2. House Rent Allowance (HRA)
Regular Monitoring: Minimum wage rates must be tracked as they are subject to periodic changes, especially for VDA.

Regulation of Minimum Wage

Legal Framework: Governed by the Minimum Wages Act, 1948, transitioning to the Code on Wages Act, 2019. This new code will replace:
1. Minimum Wages Act, 1948
2. Payment of Wages Act, 1936
3. Payment of Bonus Act, 1965
4. Equal Remuneration Act, 1976
Key Provisions:
1. Prohibits employers from paying less than the stipulated minimum wage.
2. Minimum wages must be reviewed and revised by both central and state governments at least every five years.
Living Wage Initiative: India is considering establishing a living wage by 2025, working with the ILO to cover essential social expenditures like housing and healthcare.

About Labor Costs:

Current Wage Rates:
1. National minimum daily wage is approximately INR 178 (USD 2.13), translating to INR 5,340 (USD 63.97) monthly.
2. Regional disparities exist, ranging from INR 160 (USD 1.92) in Bihar to INR 423 (USD 5.07) in Delhi.
Comparative Analysis:
1. India’s average minimum wage in 2021 was USD 95, significantly lower than Vietnam (USD 160), Thailand (USD 220), and Malaysia (USD 258).
2. The average Indian salary for unskilled work typically ranges from INR 2,250 (USD 26.95) to INR 70,000 (USD 838.50) per month.
3. The median monthly salary is around INR 29,400 (USD 352.17).
4. Current data shows an average monthly wage of INR 46,861 (USD 561.33).

Minimum Wages for Unorganized Workers:

Variable Dearness Allowance: Revised twice a year (April 1 and October 1) based on CPI changes. The next adjustment will be effective from October 1, 2024.

Labor Market Overview:

Size and Growth: India’s labor market includes over 471 million workers, with projections indicating a working-age population exceeding 1 billion by 2030.
Economic Impact: This demographic shift strengthens India's competitiveness in both services and manufacturing sectors.

Absence of National Minimum Wage

Decentralized Structure: Under the Code on Wages Act, 2019, minimum wages are determined by state governments, resulting in varied standards across the country.
Political Considerations: The government has delayed implementing a national minimum wage due to its polarizing nature and potential adverse effects on employers post-pandemic.

Labor Law Reforms

New Legislative Framework: In 2020, three labor codes were approved:
1. Industrial Relations Code Bill, 2020
2. Code on Social Security Bill, 2020
3. Occupational Safety, Health and Working Conditions Code Bill, 2020
Implementation Delay: These codes are pending implementation rules from states, likely deferring until after the 2024 general elections. The aim is to ensure consensus to prevent industrial unrest.
Impact of New Codes: Once in force, they will bring gig and inter-state migrant workers under social security, influencing minimum wage considerations while also facilitating flexible hiring practices.

Conclusion

The increase in minimum wage rates is a significant step towards supporting workers in the unorganized sector and mitigating the effects of inflation. As the revised rates come into effect, it reflects the government's commitment to improving the economic conditions for its workforce. Employers and workers should stay informed about these changes to ensure compliance and benefit from the new wage structures.

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Central Government Increases Minimum Wage for Workers