The four Labour Codes that took effect on November 21, 2025 will reshape India's labour rules. The Code on Wages, 2019 aims at universal minimum wages to assure a decent living. While it covers the entire economy, its impact on agriculture, the largest employer with informal, seasonal, and mostly underpaid labor, will matter most. This article weighs the potential benefits and costs of applying the Code to farming, based on wage data, theory, and policy analysis. Anchoring wages to current conditions could raise compliance costs, speed structural change, and threaten smallholders' viability.
Recommended Wages vs. Agricultural Realities
Wage recommendations vary by state and occupation; few states set farm-specific rates. Punjab: Rs. 457/day (no food) or Rs. 411/day (with on-site food). West Bengal: Rs. 330 (unskilled), Rs. 363 (semi-skilled), Rs. 400 (skilled) (no on-site food). Even among low unskilled state minimums, gaps persist: Rajasthan Rs. 285/day; Karnataka Rs. 543/day (over 90% higher).
To address regional gaps, the new Code sets a floor national minimum wage linked to living standards; state/industry rates must be above this floor, and cannot fall below it if already higher. Where states have no agriculture-specific recommendations, we compare the central minimum for agriculture with actual wages. Currently, unskilled minimum wages are at Rs. 465/day. For 2023–24, average agricultural wages for field activities: male Rs. 420/day, female Rs. 360/day. Thus, current averages are 10–23% below the recommended minimum. Even the 2023–24 benchmarks reflect a gap: Area ‘C’ unskilled was Rs. 449 on Apr 1, 2024; actual male wages were Rs. 420, 6.5% below. Given that most agricultural labor is unskilled, the implication of the Code is a near-term wage hike for tens of millions.
The Low-Wage State Challenge
Actual farm wages vary a great deal from state to state. Kerala-Rs 912/day and Tamil Nadu-Rs 699/day-exceed the national minimum, usually associated with high productivity in agriculture-around Rs 1.5 lakh/ha/yr-and, therefore, a limited wage impact, although not compliance. Others fall woefully short: Chhattisgarh Rs 303, Gujarat Rs 307, Jharkhand Rs 308, Madhya Pradesh Rs 341, Uttar Pradesh Rs 351, Bihar Rs 377, Odisha Rs 389. In these states, wages are low because of low productivity, and women's wages often less than Rs 200/day.
A legal wage floor would increase labor costs most for those employers where wages are already low, since higher wages above the equilibrium price raise the cost of labor.
Cost Implications
Increase in wages has to match agriculture’s overall economics. In Bihar, hired labour is around 37% of operational cost of rice production; Jharkhand 28%, Odisha 27%. For wheat, it is 18% in Bihar and Gujarat, and 14% in Uttar Pradesh. In Chhattisgarh, with male wage Rs. 303, an increase to Rs. 465 would demand >53% more wages, placing farmers under stress since the share of labour is 19% in rice. This threatens marginal and smallholders, reliant on family and hired labor, with narrow profits and limited credit or scale to absorb costs. The increased cost without compensatory gains in the price of output reduces producer surplus, with the risk of reduced output.
The Mechanization Drive
Despite immediate costs, the Code can hasten structural change. Higher labor costs favor capital over labor, encouraging mechanization in lagging states like UP, Bihar, and MP. Schemes like the Sub-Mission on Agricultural Mechanization and Custom Hiring Centers facilitate this process. Increased seed drills, land leveling, and harvesters could enhance efficiency, reduce labor input per unit, and start capital-labor substitution. At the same time, there is a risk of unskilled job losses in case the social security system is not strong enough.
Policy Synergies
Wage reforms should be integrated into other Labour Codes and agricultural policy. The linking of the Wage Code with the Social Security Code can help improve worker welfare through pensions, insurance, and gratuity, thereby accelerating formalization. Rural job schemes are already supporting higher wages in rural areas; wages should align with minimums to avoid negative interactions. Higher costs for farmers due to reforms should be balanced with productivity gains and better prices. Strengthening farmer organizations and supply chains helps.
Trade-Offs
The Wage Code embodies the trade-off between equity and efficiency: formalized labor, reduced rural poverty, and improved livelihoods of the most vulnerable workers, including women, against higher costs for farmers, possible decline in output, and displacement with no social safety nets. The outcome will depend on policy design: gradual transitions for the more vulnerable states; strengthening social security; promoting affordable mechanization and diversification to less-labor-intensive, value-added crops; and farm-gate price support to allow for higher wages. Carefully designed, the Code could pivot Indian agriculture toward a more modern and equitable trajectory. Hence, a sensitive and comprehensive policy framework is imperative in order to manage this transition.
(Dr Naveen P Singh is Principal Scientist and Dr Balaji SJ is Scientist with ICAR-National Institute of Agricultural Economics & Policy Research (NIAP), New Delhi. Views expressed are personal)