Why minimum wages are critical to boost skill development

In India, May Day, or Labour Day was celebrated for the first time in Chennai in 1923 to recognize and honour the contribution of workers towards nation building. At the international level, May Day marks the strike by labour union in the United States, demanding favourable conditions of work, and institutionalising 8 hours of work a day and payment of minimum wages. Going by the spirit of May Day, we present a Skill Talk by Dr. Anoop K Satpathy, Fellow, V V Giri National Labour Institute, Noida, to understand and appreciate the importance of minimum wages in making skilling aspirational.

Importance of May Day in India

With regard to ensuring decent work, we have a humongous challenge in India with the huge informal economy that does not pay minimum wages and the working conditions mostly remain poor. In many industry and sectors, people work for more than 10 to 12 hours a day without any over time wages or  social security. In this sense, we are yet to realize the essence of May Day but, at the same time, we should take into consideration the progress we’ve made so far.

Skill development and minimum wages

Skill development initiatives have a national level target of skilling 400 million by 2022, out of which 104 million are new entrants to the labour market, requiring basic or entry level skilling and the remaining 296 million need re-skilling  or multi skilling since they are already employed.

The fact is that apart from this quantitative dimension, we need to look at the quality of employment from the skilling initiatives. We should focus on labour market outcome of trained graduates in terms of placement, wages and earnings. And so far, we haven’t seen any government skills training assessment report stating levels of wages and earnings of trained and placed graduates.

For example, as per, DDU-GKY guidelines, if you closely observe, the minimum wage could be Rs.6000 per month. In my opinion this is less than unskilled wage rates fixed by many states. To overcome low wages, we must inbuilt objectively the concept of minimum wages across various skill levels, such as, minimum wages for unskilled workers, for semi-skilled workers, minimum wages for skilled and highly skilled workers.

Aligning minimum wages with NSQF levels

Going by the recommendations made in our Report, National Skills Qualification Framework (NSQF), which decides level qualifiers, should be made the objective basis to define what constitutes unskilled, semi-skilled or skilled workforce. In the absence of such a definition today it is upto the employer to decide the skill levels, because they don’t look at your competencies and overall experience. For example, someone could be an unskilled worker, but over a period, he or she would have acquired certain experience, and also a certification from the skill training center.

If you want to define and set up wages in an equitable way, the wages should be linked to the skill they’ve recently acquired, this will help in rewarding the skills. This could be one of the ways to ensure successful implementation of the market linked training programs by increasing the demand and making it aspirational. Currently the wages are not aspirational, people are not voluntarily joining the skill development programs, hence most of the effort is needed in mobilizing them from rural areas and often results in high attrition rates during training.

Wages should be linked with NSQF, as we are aware, for decent employment wages play a crucial role. In our Report we’ve proposed a National Minimum Wage of Rs 375 per day, which is in fact the daily wage for an unskilled worker. Going by this proposition, the wages could be increased for a semi-skilled worker and skilled worker in accordance to NSQF level qualifiers.

National Minimum Wage

The National Minimum Wage is just a need-based minimum wage, it is a bare necessity for worker to manage himself or herself and their family, and ensure they are above the poverty line. Otherwise they can’t maintain their efficiency levels. If we link these wages to the economic factors then the minimum wages would be much higher. In India it is common to find that minimum wages are paid only after working for 12 hours a day.

The National Minimum Wage recommended by the expert committee as per the Code on Wages Bill, 2017 is fixed by the central government and the state governments are expected to fix their minimum wages above and not below, depending on the socioeconomic context and cost of living.  Many state government haven’t revised their minimum wages on a timely basis. In Kerala, Delhi, Punjab and Haryana the minimum wages are fairly high. In many states, the wages are below the threshold levels of survival, and with 1709 minimum wage rates across the country, it is a highly complex scenario.  Therefore, the proposal is to simplify and arrive at a single National Minimum Wage.

Promoting apprenticeships to accelerate skill development

India needs to promote apprenticeships in a big way! Based on a study we had conducted, it can be pointed out that for those who have prior experience at the workplace, their employment opportunity as well as their wages were much higher than those who were trained without prior work experience. Apprenticeships have many advantages in terms of faster placement after industry -integrated training.

Not only in the formal sector, apprenticeships should also be promoted in the informal sector. For MSMEs, it is a boon, because, they will get access to a ready-to-deploy talent pool, and the apprentices can get easily adapted to the requirements of the enterprise in a particularly industry sector. It will also reduce the cost of hiring. Moreover, apprenticeships are  incentivised by the government. For the trainees, the advantage is that they get  job security, since completion of training often assures a job placement. The implementation is a challenge because in India MSME is spread out to the length and breadth of the country, so a cluster based approach or a sector approach will give faster results.