National Floor Level Minimum Wage

The National Floor Level Minimum Wage (NFLMW) is a non-statutory benchmark wage rate fixed by the Government of India to ensure a uniform minimum standard of living for workers across all states and union territories. It represents the lowest wage below which no state government is expected to fix its minimum wages, thus serving as a national reference point for wage determination and social protection.
Introduced in 1996 by the Ministry of Labour and Employment, the NFLMW aims to reduce regional disparities in wages, provide a safety net for unorganised workers, and ensure that all employees earn at least a subsistence wage sufficient to meet basic needs.

Background and Rationale

Before the introduction of the NFLMW, minimum wage fixation in India was entirely a state subject under the Minimum Wages Act, 1948, leading to significant variations across regions and sectors. Many states fixed very low minimum wages, while others revised them infrequently, resulting in:

• Inconsistent wage levels across states.
• Inequitable living standards for workers.
• Inter-state migration and wage exploitation.

To address these disparities, the National Floor Level Minimum Wage was introduced as a guiding benchmark for states to harmonise their minimum wages, without interfering with their constitutional powers.

Objectives of the NFLMW

The main objectives of the National Floor Level Minimum Wage are:

1. To establish a uniform minimum threshold for wages across the country.
2. To ensure that no worker is paid below a basic subsistence level, regardless of the region.
3. To serve as a reference point for state governments in fixing their minimum wages.
4. To promote social justice and equitable living standards for all categories of workers.
5. To contribute towards poverty alleviation and inclusive growth.

Legal and Policy Framework

• The NFLMW is not a statutory wage under the Minimum Wages Act, 1948, but a non-binding advisory issued by the Central Government.
• The Code on Wages, 2019, which subsumes the Minimum Wages Act, 1948, has given legal recognition to the concept of a “national floor wage.”
  • Under Section 9 of the Code, the Central Government is empowered to fix a national floor wage, taking into account living standards and regional cost variations.
  • State governments cannot fix minimum wages lower than the national floor wage once the Code is implemented.

Evolution of the National Floor Level Minimum Wage

The NFLMW is periodically revised by the Ministry of Labour and Employment based on the rise in the Consumer Price Index (CPI) and overall cost of living.

(The next official revision is pending, as the national floor wage under the Code on Wages is yet to be notified.)

Methodology for Fixation

The fixation of the National Floor Level Minimum Wage considers multiple factors related to living costs and socio-economic conditions.

The following parameters are used:

1. Consumption Needs:
   • Food consumption norms based on 2,700 calories per adult per day, as recommended by the 15th Indian Labour Conference (1957).
2. Clothing:
   • 72 yards of cloth per family per year.
3. Housing:
   • Rent expenditure corresponding to the minimum area under government housing schemes.
4. Fuel, Lighting, and Miscellaneous Expenditure:
   • 20% of total minimum wage for fuel and electricity, and 25% for other essential needs such as healthcare, education, and recreation.
5. Household Size:
   • A standard working-class family is assumed to consist of three consumption units, i.e., one earning member and two dependents.
6. Inflation Adjustment:
   • Revised periodically in line with Consumer Price Index (CPI) and cost-of-living changes.

Implementation Mechanism

• The Central Government announces the NFLMW periodically.
• State Governments are expected to revise their statutory minimum wages accordingly, ensuring that they are not below the national floor level.
• The Chief Labour Commissioner (Central) monitors compliance and publishes comparative statements of state-wise wage rates.

Although states are not legally bound to adopt the NFLMW (under the old regime), almost all states and union territories have set their minimum wages above or equal to the floor level.

Present Scenario

• As of the latest revision (July 2017), the National Floor Level Minimum Wage is ₹176 per day.
• Most states have fixed their minimum wages above ₹200 per day, depending on cost-of-living differences.
• The Expert Committee on Minimum Wages (2019), chaired by Dr. Anoop Satpathy, recommended a national floor wage of ₹375 per day (₹9,750 per month), with regional variations:
  • ₹342/day for the central region
  • ₹380/day for the southern region
  • ₹414/day for the northern region
  • ₹447/day for the western region
  • ₹386/day for the eastern region

However, this revised rate is yet to be officially implemented pending the notification of the Code on Wages (National Floor Wage Rules).

Advantages of the NFLMW

1. Uniform Benchmark:
   • Promotes uniformity in minimum wages across states, reducing inter-state disparities.
2. Social Protection:
   • Safeguards workers, especially in the unorganised sector, against exploitation and underpayment.
3. Policy Guidance:
   • Provides a framework for state governments and labour departments in wage fixation.
4. Improved Living Standards:
   • Ensures a minimum level of income sufficient to meet basic human needs.
5. Facilitates National Planning:
   • Assists in poverty alleviation and social welfare policymaking.

Limitations and Challenges

1. Non-Statutory Nature (Pre-2019):
   • Before the Code on Wages, states were not legally bound to adhere to the floor level, making compliance voluntary.
2. Wide Regional Cost Variations:
   • Cost of living differs significantly among states, making a single national rate difficult to apply uniformly.
3. Irregular Revision:
   • Delays in periodic updates reduce its real value against inflation.
4. Coverage Gaps:
   • Implementation remains weak in the unorganised and informal sectors, where wage violations are common.
5. Inadequate Enforcement:
   • Lack of inspection and monitoring mechanisms to ensure effective compliance at the ground level.

Relation with the Code on Wages, 2019

The Code on Wages, 2019 has given statutory backing to the concept of a National Floor Wage, marking a significant reform in wage regulation.

Key Provisions:

• The Central Government will fix a National Floor Wage for the entire country or for different geographical regions.
• State Governments cannot fix minimum wages lower than the floor wage.
• It will replace the existing NFLMW and become legally enforceable once notified.
• The floor wage will be revised periodically based on cost of living and inflation.

This reform aims to harmonise wage levels nationwide and ensure social justice through legally guaranteed minimum income standards.

Comparison: Minimum Wage vs. National Floor Level Minimum Wage