The labour ministry will soon prepare a Cabinet note for amending a Bill to link minimum wages of factory workers to the retail inflation rate and enhance penalties for erring companies, a ministry official said on Thursday.
The move to amend the Minimum Wages Act will have an economic cost ? it may crimp profit margins of small and medium sized companies while pushing up demand for food and other essential goods, leading to some cost-push inflation as was the case when wages under the National Rural Employment Guarantee Scheme were raised in tandem with consumer price inflation.
The minimum wage was last revised up to R115 per day in April 2011 from R100. It was R80 per day between 2007 and March 2011. A recent assessment by the agriculture ministry shows farm wages more than doubled in last 10 years while the average wages in factory rose by 63% as industrial slowdown capped salary hikes and as the minimum wage rate was not revised for over a year. The proposed Bill to amend the was recently approved by a committee of secretaries with ?broad consensus? on linking minimum wages to CPI for industrial workers with recommendations for some ?minor changes?, the official told FE on condition of anonymity. ?We will take a month or so to move the proposal to cabinet,? he said adding the Bill may be taken up for approval in parliament in the winter session.
While hike in minimum wages will pinch companies, the official said ?there is negligible impact on the government’s exchequer as most of the contract workers in public sector earn much higher than the mandated minimum wage.? ?The MSMEs will feel some pinch,? he added.
While the government has linked rural wages under Mahatma Gandhi National Rural Employment Guarantee (MGNREGA) scheme to inflation, industrial workers have to depend on the profitability of their company for annual increments.
After NREGA scheme rolled out, the average increase in farm wages outpaced that for industrial workers. The wages for agricultural labourers involved in ploughing rose by an average annual rate of 10.8.3% while it was up 117.7% for those engaged in harvesting during 2001-2011. In contrast, the industrial wages rose by an average annual rate of 62.6% in the last decade.
Industrial slowdown in the past one year has eroded corporate profit margins and prompted employers to freeze wages or offer moderate hikes even as the CPI-IW shows an annual rise of over 10% in recent months.
While wages were either capped or increased marginally in recent years, there is a rising trend of companies violating the provisions of Minimum Wages Act.
According to latest data available with Labour Ministry, the number of inspection conducted by government officials on companies increased to 16,780 in 2010-11 from 14,720 in 2009-10, while the number of prosecution rose to 5,950 from 4,382 during the same period. The provision number for inspections were 8,842 in 2011-12 while prosecution was 4,497. The number of persons convicted for violating the Act was 4,459 during 2010-11 as compared with 3,415 in the previous year.
The rising trend in denying workers even the minimum wages especially in the unorganised sector have prompted government to enhance the penal provision in the proposed Bill, the labour ministry official said.
