By 2025, India will replace its minimum wage system with a living wage system. The government is seeking technical assistance from the International Labour Organization (ILO) to develop a framework for estimating and implementing the living wage, according to an Economic Times report.
The ILO’s endorsement of a living wage concept earlier this month led to this move. An agreement was reached during a February Meeting of Experts on wage policies, which led to the endorsement. It was subsequently endorsed by the ILO’s governing body on March 13, according to the Economic Times report.
The shift from minimum wages to living wages is aimed at accelerating efforts to lift millions out of poverty and ensure their well-being, according to the report. The report added that India has more than 500 million workers, with 90% of them in the unorganized sector.
The national wage floor has remained stagnant since 2017, despite many earning a daily minimum wage of 176 or more. According to the report, the lack of enforceability across states has led to discrepancies in wage payments.
In 2019, India, which has been a founding member and permanent member of the ILO’s governing body since 1922, passed the Code on Wages. This code proposes a universal wage floor that will be applicable to all states once it is implemented, according to the report.
According to the report, India aims to demonstrate the positive economic outcomes of implementing living wages by seeking aid from the ILO for capacity building and systematic data collection.
The living wage is the wage level required to afford a decent standard of living for workers and their families, considering the country’s circumstances, and calculated for the work performed during normal hours.
India is dedicated to achieving the Sustainable Development Goals (SDGs) by 2030, which aim to promote decent work and economic growth.
India’s 8.4 per cent economic growth indicates the country’s ability to support higher wages.
What Is Minimum Wage?
A minimum wage is a lower level of compensation that an employer is supposed to offer their employees. Especially, when a minimum wage is determined on an hourly basis, employers cannot pay the amount below it.
In India, minimum wage changes from state to state and city to city. In some states it is Rs 22 per hour to Rs 50 per hour. Maharashtra has a basic minimum wage of Rs 62.87 for unskilled laborers, compared to Bihar which has a minimum wage of Rs 49.37 an hour.
India has the highest employment in the unorganized sector, who do not receive the minimum wage as decided by their respective states. There is no mechanism to find out how much wage is paid to them as they get paid in cash and there is no money trail to search like salaried employees paid in their bank account. Due to these reasons, in many cases, the requirements for a minimum wage are not met.
What Is Fair Wage?
A fair wage lies between the minimum wage and the living wage. Although it’s above the minimum wage, it still falls short of what’s necessary for a living standard. The upper limit of a fair wage is determined by the industry’s financial capability to compensate.
What Is Living Wage?
According to an ET Report, senior officials disclosed the living wage as a minimum income necessary for a worker to meet their basic needs, factoring in key social expenditure by an individual such as housing, food, healthcare, education and clothing – were endorsed by the ILO earlier this month. He added that these would be higher than basic minimum wages and said “We could go beyond minimum wages in a year.”
In addition to basic primary needs, the Living Wage also offers more security and assurance for workers and their families. It includes social expenditures like housing, education, food, healthcare, and clothing.
The Impact on Workers
While minimum wages provide a basic level of income for workers, they may not always be enough to cover the cost of living in certain areas. This is where living wages come in, ensuring that workers can afford to meet their basic needs.
