Another knee-jerk move

| Updated on January 16, 2018

Ordinance to push cashless wage payments is by and large desirable, but could have waited

No doubt, as part of its plan to tide over a cash crisis on next pay day and prod people to use less cash, the Cabinet has approved an ordinance to amend the Payment of Wages Act 1936. The ordinance seeks to amend Section 6 of the Act to allow for payment of wages under ₹18,000 a month not just by currency but also by cheque — against the present norm of the employer having to obtain the written consent of the employee before paying by cheque. On the face of it, the amendment, which was supposed to have been passed in the winter session, seems like a no-brainer in an age of modern banking and finance. The 80-year-old law was obviously rooted in a context when payments were made in kind, and often not at all, in an economy governed by exploitative feudal relations; cash, by defining recompense in black and white terms, was a liberating force. Today, the wheel has come full circle. Civil society forces have, for some time, demanded cheque or ECS transfer to ensure transparency in terms of wages paid, the identity of the employer or contractor, and the number of employees under him. This may also check frauds related to ESI and EPF; workers under the NREGA stand to gain. However, the recent move is not without troubling features.

Its immediate objective is to ensure that salaries are disbursed next month, irrespective of the cash situation. But it seems unlikely that the millions of informal sector workers, many of whom are also outside the pale of the banking system, will be able to access their money as and when they need it. The RBI and the Centre should have prioritised addressing the cash crunch; this step could have been taken after making adequate preparations. Apart from the fact that the chaos in banks and ATMs may continue, the low information and (financial) literacy levels of the workforce can expose them to exploitation.

The amendment, like most post-November 8 injunctions, places unreasonable curbs on individual choice and, by extension, transfers a disturbing degree of power to the state. It gives the Centre and States the discretion to “specify the industrial establishment” where the employer shall pay “the wages only (emphasis added) by cheque or by crediting the wages in his bank account”. This ironically opens up scope for bribery amidst the drive against black money. How these establishments will be chosen is anyone’s guess. While ushering a shift away from cash is unexceptionable, it is wrong to impose it on the aam aadmi when the banking and telecom infrastructure is barely prepared for the transition. Creating a financially prepared populace goes beyond opening crores of Jan Dhan accounts. On the technology side, it involves setting up an internet and cyber security backbone. Above all, our illiterate or semi-literate millions need both training and time to negotiate a cashless world on their terms.

Published on December 22, 2016

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