Recognition of Unorganized Sector under Minimum Wages Act

Submitted by: Mr. Ramsai Charan Kondala

Sem: V
Roll no. 201255

Damodaram Sanjivayya National Law University

Contents
INTRODUCTION ......................................................................................................................................... 2
CONSTITUTIONAL STATUS OF MINIMUM WAGES ACT, 1948.AND INTERVENTION OF OTHER LABOUR
LEGISLATIONS INTO THE WAGE LEVEL AND STRUCTURE OF WAGES. ...................................................... 4
ANALYSIS ON WAGE POLICY ..................................................................................................................... 6
NORMS OF WAGING POLICY ..................................................................................................................... 7
IMPLEMENTATION OR ENFORCEMENT OF THE ACT ................................................................................ 8
CONCLUSION............................................................................................................................................. 9

INTRODUCTION

The minimum wages in our country is given to the workers, under minimum wages act, 1948.
This act protects interests of the workers and protects them from exploitation from the employers
and capitalists.There need of the hour to increase the basic rates of minimum wages and there is
necessity to change the view and approach on this issue. The present minimum wage system
which is extracted from minimum wage legislation in India instead of eradicating the poverty, it
is in fact increasing it Initiatives by strengthening

effective enforcement of machinery,

simplifying the system which is related to coverage and revisions of minimum wage rate,
relating the rates with the Consumer Price Index Numbers (CPI), and various workers increase
the involvement in organizations for the implementation of the Minimum Wages Act, There is a
huge debate between the union leaders of our nation regarding its effectiveness of protecting
interests of workers, of all proportions by this piece of labor legislation. Even though there are
periodic revisions done to this act it was unable to protect the unorganized workers. This project
will through lame light on issues and concerns relating to unorganized workers who are largely
out of minimum wage legislation.

CONSTITUTIONAL STATUS OF MINIMUM WAGES ACT, 1948.AND

INTERVENTION OF OTHER LABOUR LEGISLATIONS INTO THE WAGE LEVEL
AND STRUCTURE OF WAGES.

The concept of the living wage is mentioned in the directive principles of state policy given in
the constitution of India, The minimum wages act was established under article 43 of Indian
constitution explains that, "The State shall strive to secure by appropriate legislation or
economic/financial organization or in any other way to all employees, industrial, agricultural or
otherwise work, a living wage, conditions of work safeguarding a decent standard of life and full
pleasure of vacation and social and cultural opportunities."1
The term labor was mentioned under item no., 22 of the concurrent list hence both state and
central governments can make labor legislations. Legislations regarding the casual workers and
contractors are generally done by the central government through central legislation, all such
central legislations will make an influence may be direct or indirect upon the wage level and the
structure of wage in the informal sector.(The term informal sector means the sector which is
not taxed and not included In GNP unlike the formal economy).
Here are some of the central legislations which show direct impact on the wage level and the
structure of wages.
The Minimum Wages Act, 1948 This act provides minimum remuniration for work and it
provides the minimum wages for workers both in organized and unorganized sector.
The Trade Unions Act, 1926 This act enable workers into small units to form unions, unions
give power to bargain wages and conditions of work.
The Industrial Disputes Act, 1947 - To enable unions to raise industrial disputes on wages and
the conciliation machinery to intervene.
The Equal Remunerations Act, 1976 - Assure equal wage to women for same or similar work.

http://nceus.gov.in/Report_Bill_July_2007.htm

The Payment of Wages Act, 1936 -To regulate the manner of payment of wages and their
realisation in case of non-payment.
The Contract Labours(Regulation and Abolition) Act, 1970 - The contractor is required to pay
wages and in case of failure on the part of the contractor to pay wages either in part or in full, the
Principal Employer is liable to pay the same.2
Among the labour legislations minimum wage legislation was a paramount legislation for the
benefit of unorganized workers, as the wages in organized sector are determined by negotiation
between the laborers/employees and the employer. Whereas the people in unorganized sector do
not have the terms of employment hence there are no proper working hours as the time of work
alters from day to day. Theydont have the secured work and more over most of the people who
work in the organized sector are illiterates hence there is every chance for the employer to
exploit the labour of these workers hence the intervention of the government is necessary
through labor legislations like minimum wages act.
The objective of the minimum wages act is to ensure that minimum sustenance wage for
employees. The act needs that the appropriate government of the country to fix minimum wage
rate for the workers of informal sector and to revise and review the minimum wage rates at
regular intervals not exceeding 5 years. years .The whole indication of this act is to prevent and
protect the laborers from exploitation by the employers without paying the proper wages and
preventing the employer to implore his incapability to pay the said wages to his workers.
The minimum wage rate can be fixed at :a) Time rate
b) Piece rate
c) Guaranteed time rate
d) Overtime rate.

March 11, 2008, Risinglabour concerns for Indian government, Business Standard.

The Act provides that different minimum wage rate may be fixed for,
a) Different scheduled employments,
b) Different works in the same employment,
c) Adult, adolescent and children,
d) Different locations or e) male and female.
Also, such minimum wage may be fixed by
a) An hour,
b) Day,
c) Month, or d) Any other period as may be prescribed by the notified authority.3
Government in the year 1988 conducted a meeting of labour ministers and took a key decision,
with the genuine motive of protecting the fair minimum wage and maintains the minimum wage
level against inflation. They introduced the concept of Variable Dearness Allowance (VDA). The
VDA is linked up with consumer price index (CPI) so that VDA changes with changes inCPI
whereas CPI Changes accordingly with inflation. VDA is applicable both for the organized and
unorganized workers, but VDA which is being decided for the unorganized workers are not
satisfactory as they are comparatively low than the VDA provided to workers in organized
sector. The revisions and the increase in scale of amount inVDA of unorganized workers are
less, compared to the organized workers. The VDA is revised twice a year in the months of April
and October4.

ANALYSIS ON WAGE POLICY

In the present globalized world along with the increasing technology there is increase in the
number of basic commodities hence an ideal wage policy should consider the current
circumstances of the society along with socio economic factors, nutrition, agro climatic
conditions, internal factors and things like paying capacity should also be taken into the

http://nceus.gov.in/Report_Bill_July_2007.htm
http://labour.nic.in/wagecell/welcome.html

consideration. Inflation takes a unique position in being a factor for construction of wage policy
where the other takes a side.
Coming to the present scenario the wage policy is getting vague towards the workers of
unorganized sector there are multiple factors which are causing this situation the main factor is
that the labour legislation is a matter of concurrent list and the state also have power over the
legislation because of which there is similar implementation of this legislation throughout the
country and the respective state governments are influencing the norms for fixation of wage
policy according to their own state policies. The above mentioned important problems and norms
that are necessary for the existing wage policy are elaborated as follows.

NORMS OF WAGING POLICY

The objectives of the waging policy and the Minimum wages act are intact but the problem arises
with the norms of the act and the policy. The act itself has many loops and flaws. The guide lines
laid down by the 15th Indian labour conference (ILC) mentions that the minimum wage given to
the worker for working eight hours a day should be covering all the basic needs of him and his
family(family means his/her(spouse) and two children).
Minimum wages not being linked with DA crumbles the real wages of workers due to inflation
and drags the workers below the poverty line. Prior to 1990 minimum wages act used to have a
clause which says that the wages should be revised for every five years which was a huge gap
and there is other clause stating that if there is no such revision done the old wages should
continue these clauses lead to negligence for few governments in 1990 the bill was passed
amending those clauses asking to revise the wages twice a year (i.e., once in every six months)
relating to VDA and CPI.
In most of the cases the wages to the labourer depends on the place and the value of the
subject/object on which they have to work, for instance a goldsmith was employed to design and
make a gold ornament according to the design and similar type of ornament was asked to design
with the silver to other smith but the amount which will be paid to the smith will be more
compared to the worker who designed the silver. The difference lies on in the skill of the
worker/employee but on the subject/object on what they are working. Similarly there are some
situations where jobs are same but the sectors are different to overcome these malfunctions

some of the sates like Andhra Pradesh, Himachal Pradesh etc categorized the workers into
four categories unskilled, semi-skilled, skilled and highly-skilled. This type of classification
helps the governments to overcome malfunctions, but there are still inefficiencies even the
central labour ministry is not following this categorization.
In order to fix minimum wage, the employment schedule should include employment/industrial
activity. At present the number of scheduled employments in the Central government is 45
whereas in the case of state government the number is 1232. The criteria for this are that at least
1000 workers should be working in that activity in that particular state. As we know there will be
more than half of the percentage get exempted from this mostly people from unorganized sector
hence this clearly shows that most of the unorganized workers are out of the purveyance of this
wage policy and also from this act.

IMPLEMENTATION OR ENFORCEMENT OF THE ACT

The implementation of this act brought significant changes in the field of organized workers but
its implementation was left unremarkable for the workers of unorganized sector, as mostly
workers in the unorganized sector do not have secure jobs they will be mostly scattered and the
employers who employ these unorganized workers are more in number and most of them may be
one time employers. In the other case these workers will struggle hard to get the jobs as almost
most of them being the daily wage laborers in hunger and need of job accept the job for the wage
which is below the minimum wage level or in other cases they fear of losing their job the
workers fear to complain on these issues hence all these employers get more vulnerable for
exploitation in unorganized sector.
The legislation even after being designed for the benefit of these workers the law was unable to
cover all these unorganized workers, sometimes it was the inefficiency and laziness of the
government which is being reason for poor implementation of minimum wages act in our
country. Inefficient enforcement of the Act is the issue in most of the states in India. The issue
arises due to lack of awareness among the workers, about minimum wage provisions and their
entitlement under the labor legislation. Statistics show that almost 80% of the total workers in an
unorganized sector are able to earn 20 rupees per day or even less than half of the government
specified rural least wage of 49 rupees per day and urban wage of 67 rupees. This is
predominantly factual in remote areas and in places where workers are not united or organized.

Hence the result of their wages have long since failed to keep pace with increasing costs and
continue to decrease in real value over time5.

CONCLUSION
According to intelligences, 422.6 million that means 94% of employees out of the total
workforce of 457.5 million people belonging to the unorganized sector in India. These workers
donate more than 60% of Indias gross development products growth. The term unorganized' is
frequently utilized in the Indian perspective to mention the vast numbers of women and men
involved in different forms of occupation. These workers are involved in unorganized financial
activities in small scale industries, construction, cottage industries,

textile and garment,

horticulture, manufacturing units, sweeping-cleaning, rural occupations, forest based

employments, fisheries, loading-unloading, mining, forestry, agriculture , temporaries, home
workers, domestic servants, time rated, casuals, part time workers, own account workers, service
sector and contractual workers.
Majority of the workermen who are working in the rural areas belong to unorganized sector so
there is increase in migrations in rural areas in search of job. The migrants often remain outside
the purview of India's collective bargaining strength of the unions and tough labor legislations.
Workers who are being engaged in the unorganized sector does not have the profit of quite a few
labor legislations such as the Minimum Wages Act or the Factories Act. Social welfare measures
such as providential fund, maternity benefits are not given to these un organized workers
Instead of revising the wage levels once within in a period the author would suggest to revise the
act. The central government should make amendments in the bill such that it regulates all the
state governments of the country for its effective implementation there is dare necessity for this
act to make changes in it focusing the unorganized workers and stringent laws protecting these
unorganized workers from exploiting them. The wage policy is also not adequate and hence the
wage policy should also be changed so that the wages given to the workers will be adequate and
the wage policy should be made keeping these unorganized workers under purveyance. The
government should implement rural employment schemes so that the migrants in the
unorganized sector will get reduced so that operation of law will get easier. The people mostly
who belong to the unorganized sector are unskilled laborers hence government should provide
5

March 11, 2008, Risinglabour concerns for Indian government, Business Standard.

the skill training to workers of almost all ages so that they can turn unskilled labour into skilled
labour and make them a part of organized sector and will help these workers to be self-employed
for example government will give free training classes to the people and give them loans with
less interest rate so that he can buy a car on hypothecation. Organizations for the unorganized
works should be formed so that employment opportunities may increase and chances of
exploitation by the employer may also decrease. Government should also think about fixing the
wages of the house maids who are generally in houses of two or more people.
Hence by this paper the author discussed about minimum wages act in respect with unorganized
workers and also discussed about the flaws in the act and summarized by giving the suggestions
that are necessary to protect unorganized workers.

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