Minimum wage: The federal mandate

The question whether the federal government fixes the minimum wage following some objective criteria is controversial. The way minimum wage has been announced for the last couple of years is arbitrary.


Fix it!

May Day this year again went uncelebrated. The minimum wage for the private sector used to be announced on the Labour Day. During 2008-2013, PML-N led Punjab government and PPP-led federal government used to compete in announcing the higher rate of minimum wage. However, since its coming into power at the centre in 2013, the PML-N government is announcing minimum wage for private sector workers on the occasion of the federal budget, i.e., in June.

Last year, the federal government increased the minimum wage for unskilled workers to Rs12,000 per month. However, no notification was issued to require compliance with that announcement. There seems to be a pervasive confusion about the mandate of the federal government on issues once described under the now-abolished concurrent legislative list. Some are of the view that the federal government has lost this mandate to announce minimum wages and regulate other labour matters for the whole country with the abolition of concurrent legislative list and devolution of the subject of “labour” to provinces in the wake of 18th Constitutional Amendment.

This scribe is of the view that although the subject of “labour” has been devolved to provinces, the federal government can still legislate on the labour related issues because entries three (external affairs; the implementing of treaties and agreements) and 32 (international treaties, conventions and agreements and international arbitration) in Part I of the federal legislative list exclusively endow parliament with the power and duty to meet the state’s international obligations under various international conventions, covenants and agreements.

A legally binding minimum wage is a worldwide used and accepted method of political regulation of the labour market. The International Labour Organisation (ILO) has three Conventions on minimum wage fixing, namely Convention 26, 99, and 131. Although Pakistan has not ratified any of these conventions, it still is under obligation as a member of ILO to give effect to the provisions of these conventions.

A legally binding minimum wage is a worldwide used and accepted method of political regulation of the labour market. The International Labour Organisation (ILO) has three Conventions on minimum wage fixing

Other than ILO conventions, Article 23(3) of the Universal Declaration of Human Rights provides that everyone who works has “the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection”. Similarly, Article 7 of the International Covenant on Economic, Social and Cultural Rights (ratified by Pakistan in 2008) recognises the right of everyone “to the enjoyment of just and favourable conditions of work which ensure, in particular: (a) remuneration which provides all workers, as a minimum, with: (i) fair wages and equal remuneration for work of equal value without distinction of any kind”. Thus, in order to give effect to both UDHR and ICESR, the federal government can announce the minimum wage and it can require the provinces to follow suit. The provinces can use federally announced minimum wage as a floor and may also provide higher minimum wages in their jurisdictions (as is the case in the United States).

Entry 3 of the federal legislative list requires parliament to give effect to the country’s international obligations and to various agreements and treaties signed under entry 32. Since Pakistan does not follow the system of self-executing treaties, it is only through legislation that the rights and obligations under these international conventions get the force of law. Since ratification of a convention is the prerogative of the federal government, it is also its responsibility to promulgate national level legislation, which can be adopted and adapted by the Provinces, provided that the rights guaranteed under national level legislation cannot be curtailed.

The devolution under 18th amendment does not free the federal government of its responsibility to ensure effective compliance with international labour obligations in all employment related matters including fixing a national floor level minimum wage. The current notion that the federal government’s role is only coordination in labour related matters is untenable and fallacious. In a federation, it is not a job of the federating units to individually uphold international obligations, which are assumed by the state as a whole.

The federal government has the right to enact legislation on labour related matters for industries that remain federal subjects and industries that lie within federal areas. This mandate is not questioned by anyone. What is disputed is its so-called lost mandate to legislate on issues/matters that are devolved to provinces.

While labour as an entry on the now abolished concurrent legislative list is devolved to the provinces, the federation is still competent to legislate on labour issues through various entries on the Federal Legislative List. In accordance with article 3 of the Constitution, the state is required to ensure the elimination of all forms of exploitation and the gradual fulfilment of the fundamental principle, from each according to his ability to each according to his work. Article 37 of the Constitution obliges the state to make provisions for securing just and humane conditions of work. Article 38 of the Constitution speaks about adjustment of rights between employers and employees, and provisions of facilities for work and adequate livelihood with reasonable rest and leisure. The federal legislative list empowers parliament to legislate on matters that are within the legislative competence of the Majlis-e-Shoora (parliament) or relate to the federation (Entry 58), and matters that are incidental or ancillary to any matter enumerated in the legislative list (Entry 59). These two legislative provisions read with article 3, 37 and 38 of the Constitution allow parliament to legislate on minimum wages by making amendments in Minimum Wages for Unskilled Workers Ordinance, 1969, in order to protect people from exploitation and for adjustment of rights between workers and employers.

The question whether the federal government fixes the minimum wage following some objective criteria is controversial. The way minimum wage has been announced for the last couple of years is arbitrary

The federal government can also legislate on labour issues including minimum wage in line with the provisions in the federal legislative list concerning “inter-provincial trade and commerce” and “inter-provincial matters and co-ordination”. This would be quite similar to the use of the commerce clause for regulating labour related matters by the federal government under the US Constitution.

Pakistan has ratified 36 ILO conventions and seven main UN conventions on human rights. In order to ensure conformity as well compliance with these conventions and other international treaties, federal legislature has the authority to provide for some basic standard as enunciated in these international instruments. This compliance is also needed to maintain the hard-bargained GSP-Plus status. The compliance required under GSP-Plus won’t be met with mere coordination of reports on application of international standards. The federal government has to set an example and the provincial governments have to follow that minimum standard at least. A relevant legislation would be enactment of anti-discrimination legislation for protection from discrimination in all employment related. This legislation is a pre-requisite under the ILO conventions 100 (Equal Remuneration Convention) and 111 (Discrimination in Employment and Occupation Convention).

The question whether the federal government fixes the minimum wage following some objective criteria is controversial. The way minimum wage has been announced for the last couple of years is arbitrary. It does not even seem to follow the provisions under Minimum Wages Ordinance 1961, which require a Minimum Wages Board to take into account economic conditions, cost of living and other factors while revising the minimum wages. An arbitrary and political figure, without considering ground realities and without consulting with relevant stakeholders, i.e., employer and employee representative organisations, announced as ‘minimum wage’ cannot guarantee compliance, which is much needed to retain GSP-Plus status.

The article was published on 13 June 2015 by the PakistanToday.

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