MIMIMUM WAGES ACT 1948

-By Avinash Hariramani

80303160043
Objectives of the Act

To provide minimum wages to the workers working in

organized sector

To stop exploitation of the workers

To empower the government to take steps for fixing

minimum wages and to revising it in a timely manner

To apply this law on most of the sections in organized

sector (scheduled employment)

Historical Backdrop

The initiative by Shri K.G.R.Choudhary in 1920: set up

boards for determination of wages

The International Labour Conference adopted

convention 26 and 30 in 1928 relating to wage fixing
machinery in trades or parts of trades

A Minimum Wages Bill was introduced in the Central

Legislative Assembly on 11.4.46 and came into force with
effect from 15.3.48

The Committee on Fair Wage was set up in 1948 to

provide guidelines for wage structure

Broad Features of the Act

 [Sec 3]: The Act lays down the principles for fixation of

A minimum time rate of wages

A minimum piece rate

A guaranteed time rate

An overtime rate for different occupations, localities

or classes of work and for adults, adolescents, children
and apprentices

[Sec 4]: The minimum wages may consist of

A basic rate of wages and a cost of living of

allowances

A basic rate of wages with or without the cost of

living allowance and the cash value of the concessions
in respect of essential commodities supplied at
concessional rates

Short Title and Extent [Sec. 1]

This Act, the Minimum Wages Act, 1948 extends to the

whole of India

This Act may be called the Minimum Wages Act, 1948

How Does It Going To Benefit

An Act to provide for fixing minimum rates of wages in certain

employments.
WHEREAS it is expedient to provide for fixing minimum rates of
wages in certain employments;
An Act to provide for certain benefits to employees in case of
sickness, maternity and "employment injury" and to make
 provision for certain other matters in relation thereto
WHEREAS it is expedient to provide for certain benefits to
employees in case of sickness, maternity and employment injury
and to make provision for certain other matters in relation thereto
The minimum rate of wages may consist of:
a) A basic rate of wages and a cost of living allowance or
b) A basic rate of wages with or without the cost of living
allowance and the cash value of the concessions in respect of
essential commodities supplied at concessional rates.
c) The act lays down that wages shall be paid in cash although it
empowers the appropriate government to authorize the payment
of minimum wages either wholly or partly in kind in particular
cases.
d) It provides that the cost of living allowance and cash value of
the concessions in respect of supplies of essential commodities at
concessional rates shall be computed by component authority at
certain interval.
e) The act empowers the appropriate government to fix the
number of hours of work per day, to provide for a weekly holiday
and the payment of overtime wages of which minimum rates of
wages have been fixed under the act.
f) The act lays down for appointment of inspectors and other
authorities to hear and decide claims arising out of payment of
wages at less than the minimum rates of wages or remuneration
for days of rest of work done on such days or of overtime wages.
g) All establishments covered by the act are required to maintain
registers and office records in the prescribe manner
h) The act provides the procedure for dealing with complaints
arising out of the violation of the provisions of the act and for
imposing penalties for offences under the act.

DEFECTS IN THE LAW

A minimum wage is a legal minimum for workers. It means
workers are guaranteed a certain hourly pay helping to reduce
 relative poverty. However, a minimum wage could have potential
defects:

1. Unemployment. If labour markets are competitive a minimum

wage could cause unemployment because firms will demand less
labour, and higher wages may encourage more workers to supply
their labour.

Firms in labour intensive industries will be most affected. For

example, hairdressers and cleaning companies will see a
proportionately bigger increase in their wage bill.

2. Cost Push Inflation. A minimum wages can cause cost push

inflation. This is because firms face an increase in costs which are
likely to be passed on to consumers. This is even more likely if
wage differentials are maintained.

3. Black Market. A minimum wage may increase the number of

people working on the black market so firms can avoid paying the
legal minimum.

4. Poorest dont benefit. A limitation of the minimum wage is

that it doesnt increase the incomes of the lowest income groups.
This is because the poorest have to rely on benefits and are
therefore not affected by minimum wages.

5. Limited Impact on Relative Poverty. Many who benefit

from the minimum wage are second income earners and therefore
the household is unlikely to be below the poverty line. A
household with a single income earner just above the min wage is
likely to be relatively poorer. But, they will not benefit from the
minimum wage.

SUGGESTIONS:

The effect of a min wage on unemployment is uncertain, the

structure of the labour market is very important. E.g. if the labour
 market is a monopsony, a minimum wage may not cause
unemployment.

Empirical evidence from the US and the UK suggests that a

moderate increase in the minimum wage doesnt cause a fall in
employment. Therefore the key question is how high the
minimum wage can rise before causing unemployment.

The impact of a minimum wage wage differentials is

important. For example, skilled workers just above the minimum
wage may feel they deserve more. However, increasing the
minimum wage tends to have limited impacts on wage
differentials.

There may be a good case for a regional minimum wage

because actual wages tend to be lower in the north than the
south. In London, very few workers benefit from the minimum
wage and in this region the minimum wage could increase.