Floor wage

Also called: National floor wage · Topic: Employment, Unemployment and Informalisation · NCERT: Beyond NCERT

Meaning

Floor wage is a base-level wage fixed by the Central Government under the Code on Wages, 2019. No state can fix a minimum wage below it, and the Centre may set different floor wages for different regions because living costs differ.

It matters because labour is a Concurrent subject, so each state fixes its own minimum wages. The floor wage gives the whole country one legal lower limit. States cannot compete with each other by keeping wages low.

Explanation

How it works: two layers of wage-fixing

• Layer 1: the Centre fixes the floor wage.
• It is the lowest level of wages allowed anywhere in the country.

• It may vary by region, because food, rent and transport cost more in some areas than in others.

• Layer 2: states fix their own minimum wages.

• A minimum wage (the lowest pay an employer may legally give a worker) is set by the state for its own area.

• The state's minimum wage must be equal to or above the floor wage. It can never be below it.

• Simple rule: floor wage ≤ state minimum wage ≤ what the employer actually pays.

Why a floor was needed: stopping the "race to the bottom"

• The problem:
• Labour is on the Concurrent List, so both Parliament and state legislatures can make labour laws.
• A state may keep its minimum wage low to attract factories and investors.
• A neighbouring state then cuts its own minimum wage so it does not lose investment.

• Wages across states keep falling. This is a race to the bottom (states competing by offering workers weaker protection).

• The fix: the floor wage sets a limit that no state can go below. States can still compete, but only above the floor.

Where it sits in the Code on Wages, 2019

• Universal minimum wage:
• The old Minimum Wages Act, 1948 covered only "scheduled employments", a list of jobs named by the government. Workers outside the list had no legal minimum.

• The Code gives a minimum wage to all employees, in both the organised and unorganised sectors.

• Floor wage: this sets the lowest level that every state's minimum wage must reach.

• Together: every worker now gets a legal minimum wage, and that minimum cannot fall below the national floor.
• Illustration (no real figures): suppose the Centre fixes a floor wage of "F" for a region.
• State A can fix its minimum wage at F or above.
• If State B tries to fix a wage below F, that wage is not valid under the Code.

In India

• Law: the Code on Wages, 2019 introduced the floor wage. It also merged four older laws, including the Minimum Wages Act 1948, the Payment of Wages Act 1936, the Payment of Bonus Act 1965 and the Equal Remuneration Act 1976.
• Commencement: 29 central labour laws were merged into four labour codes [1]. All four codes came into force on 21 November 2025 [1].
• Who fixes what:
• The Centre fixes the floor wage.
• State governments fix minimum wages at or above it.

• Labour is a Concurrent subject, so the codes work fully only after each state notifies its own rules. How far each state has done this needs to be checked.

• Constitutional link:

• Art. 43 (a Directive Principle, which courts cannot enforce) asks the State to secure a living wage for all workers.
• Art. 39(a) speaks of an adequate means of livelihood for men and women equally.

• The floor wage is a small step towards these goals. It only guarantees a minimum, not a living wage.

• Related proposal: the Anoop Satpathy committee (2019) proposed a national minimum wage of about ₹375 a day at July 2018 prices (verify).

• International view: the ILO and the ISSA welcomed the labour codes as a step towards stronger social protection and minimum wage frameworks [2].

Don't confuse with

• Minimum wage: the state fixes this for its own area, and it must be at or above the floor wage. The floor wage is the Centre's lower limit on those state minimum wages.
• Living wage (Art. 43): this is the highest level on the wage ladder. It covers a decent life with education, health and some comforts. The floor wage is a legal minimum, not a living wage.
• Need-based minimum wage: this is a method for calculating a minimum wage from a standard family's needs, using the norms of the 15th Indian Labour Conference (1957) and Reptakos Brett (1991). The floor wage is a legal limit in the Code on Wages.
• Universal minimum wage: this is about who is covered: all employees, not just "scheduled employments". The floor wage is about how low a minimum wage can be.

Prelims Hooks

• The floor wage is fixed by the Central Government under the Code on Wages, 2019. States cannot fix minimum wages below it.
• The floor wage may vary by geographical region. It is not one single figure for the whole country.
• All four labour codes, including the Code on Wages, came into force on 21 November 2025 [1].
• Labour is on the Concurrent List (List III, Seventh Schedule), not the Union List. This is why states fix minimum wages and a central floor is needed.
• Trap: Art. 43 speaks of a living wage, not a minimum wage or a floor wage.
• Wage ladder (Committee on Fair Wages, 1948): minimum wage < fair wage < living wage.

Mains Points

• Cooperative federalism and the race to the bottom (GS-II):
• States still fix their own minimum wages, but they cannot go below the Centre's floor. This keeps states from competing for investment by cutting pay.

• Critics may see it as the Centre limiting states' choices on a Concurrent subject. The Code is still working through state rules.

• Formalisation of informal work (GS-III):

• The floor wage, the universal minimum wage and the 50% wage rule [3] together give a legal wage floor to workers who had none under "scheduled employments".

• For most informal workers, this means little without registration, awareness and state-level enforcement.

• Floor vs living wage (GS-III):

• The floor wage guarantees only a minimum. Art. 43 aims at a living wage.
• The gap between the two shows how much work remains. A floor set too low protects few workers, and one set too high may push small firms towards informal hiring.

Related concepts

• Labour laws
• Tripartism
• Fair wage
• Living wage
• Need-based minimum wage
• Lay-off
• Retrenchment
• Hire and fire
• Standing orders
• Fixed-term employment

Read more

• Labour laws and the four labour codes