The Indian government is moving forward with plans to establish a central advisory board tasked with determining a statutory National Floor Wage, a key reform under the recently notified labour codes. Unlike the previous non-binding advisory floor, the new floor wage will be legally binding, meaning all states and union territories cannot set their minimum wages below this threshold.
Tripartite Board to Decide Floor Wage
An official from the Ministry of Labour and Employment confirmed to The Tribune that a central advisory board, comprising 15 to 20 members, is being set up. The board will have a tripartite composition, including trade unions, workers' representatives, government officials, and private stakeholders. Additionally, two to three external members will be nominated to the panel.
The board will consider the report submitted by an expert group led by economist and statistician Prof. S.P. Mukherjee in 2021, which recommended a National Floor Wage under the Code on Wages. The Mukherjee panel was tasked with moving beyond basic nutritional requirements to develop a scientific, data-backed methodology for wage fixation, using multi-criteria decision making (MCDM) that incorporates expenditures on housing, healthcare, and education alongside food.
Binding Threshold vs. Advisory Figure
The official emphasized that the floor wage establishes a national benchmark, not replacing state-level minimum wages but setting a baseline below which wages cannot fall. “For multinational corporations, foreign investors and domestic companies operating across multiple Indian states, understanding how the floor wage interacts with state-level minimum wage regulations is essential for labour cost planning, regulatory compliance and investment decisions,” he added.
The central government will determine the floor wage based on economic indicators such as cost of living, consumer price index (inflation), minimum consumption requirements, labour productivity, and regional economic conditions. The process also draws on norms developed by the Indian Labour Conference, which recommend minimum consumption benchmarks for workers and their households.
Expansion of Wage Coverage Under New Codes
One of the most significant reforms under the Code on Wages, 2019, is the expansion of wage regulation coverage. Previously, laws such as the Minimum Wages Act, 1948, applied only to certain “scheduled employments.” The new framework extends wage protections to all employees across sectors, including organised and unorganised sector workers, contract labour, and temporary and casual workers. This expansion significantly broadens the scope of wage regulation across India’s labour market.
Recent labour unrest in factory sectors has accelerated discussions on finalising the national floor wage. Workers have raised concerns about low wages, inflation, and poor working conditions. The demand for a higher floor wage reflects growing concerns about income inequality and rising living costs, highlighting the need for timely wage revisions.
Expert Concerns Over Implementation
Experts remain divided over the implementation and adequacy of India’s statutory National Floor Wage. While the government views it as a structural baseline to guarantee income security, economists and labour advocates warn that low floor levels risk creating a “race to the bottom” in progressive states.
“In a highly competitive market, the legally required national floor risks becoming the default ceiling. Industry lobbying could pressure historically progressive states with higher wages (like Kerala or Delhi) to drive wages down toward the national minimum, effectively nationalising poverty rather than elevating backward regions,” said expert Arun Nayyar. He added that a single, un-nuanced national floor wage falls short because the cost of living varies wildly between rural areas and metropolitan cities. Some economic surveys have proposed dividing the country into five geographical bands to better reflect local costs.
