Wages beyond politics: Why the floor wage under the Wage Code is India’s first step towards a living wage

Minimum wage regulation in India has historically suffered from inconsistency, subjective fixation, and political distortion. This became starkly evident in 1991, before the National Commission on Rural Labour (“NCRL”), when the government of Punjab, which then had the highest minimum wage rate, acknowledged that its wage fixation was based on political considerations. Such admissions exposed the disconnect between the statutory intent of the Minimum Wages Act, 1948 (“MW Act”) and its actual implementation. The NCRL then went on to note that this wage differential resulted in large-scale migration of labour from Bihar to Punjab.

Although the MW Act required appropriate governments to revise wage rates every five years, it prescribed no objective criteria for determining the value of the wage. State governments, therefore, used their discretion loosely, often setting wages far below practical subsistence levels, sometimes even below Central government wage standards for the same region. As a result, a manual worker employed in a Central establishment such as Indian Railways would often earn significantly more than a similarly skilled worker employed by a private or State-regulated employer in the same locality.

To introduce objectivity, the Indian Labour Conference in 1957 recommended five considerations for wage fixation: (i) a standard working class family to include the earner, wife and two children, (ii) a minimum food intake of 2700 calories per person, (iii) 72 yards of cloth per family per year, (iv) a minimum housing rent charged by the government for low-income groups, and (v) expenditures on fuel, lighting, and miscellaneous needs constituting twenty per cent of the total wage. 

A few decades later, the Supreme Court in 1992 expanded this basket in the Reptakos Brett case, holding that minimum wage must include components of social dignity such as children’s education, medical needs, recreation, participation in festivals and ceremonies, old-age provisions, and marriage obligations. The apex court quantified this additional requirement at 25 per cent above the core subsistence basket, marking a judicial shift from mere biological survival to human dignity and social efficiency.

This jurisprudence rests on a conceptual foundation created even earlier. The Tripartite Committee on Fair Wages, 1948, detailed a three-tier wage structure. Minimum wage was identified as the non-negotiable lower boundary that protects subsistence and preserves worker efficiency. Fair wage occupied the middle category, determined by capacity to pay, productivity, prevailing wages in comparable occupations, the distribution of national income, and the position of the industry within the wider economy. Living wage formed the aspirational peak, intended to secure a dignified standard of life by providing not only for subsistence but for health, education, comfort, and social participation. The Committee emphasised that minimum wage must never operate as a ceiling; it was meant to be a starting point from which movement toward fairness and eventually toward a living wage could occur.  It was felt that the industrial sector was not ready for a fair wage or living wage, and to achieve a living wage, industrialisation would first have to progress to a level where productivity, capacity to pay, and the overall distribution of national income could sustain standards of remuneration beyond mere subsistence.

The mid-century policy debates further sharpened the issue. The Boothalingam Committee in 1978 examined whether minimum wages should be uniform across the country. It noted that the First National Commission on Labour had considered a single uniform national wage impractical and undesirable, favouring instead regionally-determined minimum wages based on homogeneous economic zones. Workers’ organisations countered that a national minimum below which no employer could hire labour was necessary, so long as safeguards ensured that the floor would not become the maximum.

Others recommended a national minimum only for “sweated industries,” leaving wage determination in more developed sectors to market dynamics. By documenting these conflicting positions, the Boothalingam Committee revealed a deeper structural weakness: wage fixation had become an administrative and political exercise rather than a mechanism to deliver distributive justice. The absence of a universal baseline enabled states to depress wages without consequence, undermining the normative ideals of the 1948 framework.

The NCRL attempted to realign this practice. It reaffirmed that minimum wage must not simply secure survival but preserve worker efficiency, based on costs for a three-member household. Crucially, it recommended a single basic national minimum wage below which no employment should be permitted, with variations reflecting only cost-of-living indices. This recommendation led to the introduction of the National Floor Level Minimum Wage (NFLMW) in 1996. While important as policy, it lacked statutory force. States could ignore it, and the Anoop Satpathy Committee in 2019 found that many States were fixing wages even below the floor, nullifying its intended reform.

The Code on Wages, 2019, corrects this decades-long structural defect. It empowers the Central government to notify a statutory floor wage based on geographic zones. Once fully implemented, no State government may fix its minimum wage below this floor. The Code thus replaces fragmented political discretion with a floor minimum, lifting minimum wages above depressed regional figures and aligning them with nutrition, shelter, education, healthcare, and social dignity. The statutory floor is not merely a compliance requirement; it is an institutional correction against decades of wage erosion.

The floor wage changes the internal mechanics of wage determination. It compresses the historical gap between minimum and fair wages, compelling employers to treat the cost of worker dignity as a fixed input rather than a variable to be suppressed. It resets the negotiation base in industrial relations and can remove starvation wages from the legal policy space. The shift reflects the principle articulated in Crown Aluminium Works (1958), where the Supreme Court stated that no industry has a right to exist if it cannot pay even a bare minimum wage, regardless of whether unorganised workers are willing to accept starvation-level pay. The Courts have also held that payment of wages below minimum wages is forced labour.

Beyond these doctrinal effects, the floor wage has a social consequence often ignored in wage debates. When wages are chronically depressed, workers migrate not in search of growth or aspirational opportunities, but simply to survive. Migration becomes a symptom of financial distress. Workers leave families, uproot communities, and enter informal labour markets in urban centres, frequently in conditions of heightened exploitation. By lifting the wage base uniformly on a geographical basis, the statutory floor can also reduce wage-driven distress mobility. Migration then can become a matter of choice rather than compulsion, and local economies retain their labour force instead of exporting it under duress.

By transforming minimum wage into a statutory entitlement with a floor wage, the Code on Wages 2019 lays a structural pathway toward the constitutional ideal of Article 43. The framers envisioned not mere subsistence but living wages and conditions of work that ensure a decent standard of life. For decades, wage law remained trapped at the subsistence end of the spectrum, with fair wage principles surviving mainly in judicial reasoning and non-statutory policies. The floor wage can be a tool to develop distributive justice, discourage migration driven by economic desperation, and, through periodic revision and real-world cost indices, move India incrementally toward the living wage.

About the authors: Noorul Hassan is an Executive Partner and Kumar Panda is a Principal Associate at Lakshmikumaran & Sridharan Attorneys.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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