Living wage from minimum wage: is India on the right path?

After agreeing on a livable wage, the International Labour Organization has approved the idea.

Living wage
Living wage

Anchor: “Namaste, and welcome to tonight’s special coverage on a pivotal shift in India’s labour policies. We delve into the ambitious plans laid out by the Indian government to replace the minimum wage with a living wage by the year 2025.

This move has ignited a wave of discussions across the nation, with perspectives pouring in from all corners. To help us understand the implications of this shift, I’m joined by two distinguished guests, Shyam and Krishna. Welcome to the show!”

Shyam: Thank you for having us. It’s indeed a crucial topic that demands attention and analysis.

Krishna: Absolutely, sir. The transition from a minimum wage to a living wage marks a significant step towards ensuring decent living standards for all workers in our country.

As per a report, India plans to replace the minimum wage with a living wage by 2025. To achieve this, the government has requested technical support from the International Labour Organization (ILO) to establish a framework for estimating and operationalizing the salary.

Anchor: Indeed, the transition is monumental. But let’s begin by clarifying the distinction between the minimum wage and the living wage for our viewers who might not be familiar. Shyam, could you shed some light on this?

Shyam: Certainly, sir. The minimum wage is the lowest remuneration that employers are legally required to pay their employees for the work performed. It is often set by government regulations and varies across different regions and industries. The minimum wage aims to prevent exploitation and ensure that workers receive a baseline level of compensation for their labour.

The International Labor Organization (ILO) approved the idea earlier this month after settling on a minimum wage and living wage. The agreement was achieved at a wage policy meeting of experts in February, and on March 13, the ILO’s regulatory council approved it.


A senior government official told The Economic Times, “We could go beyond minimum wages in a year.”

Krishna: On the other hand, the living wage goes beyond merely preventing exploitation. It is calculated based on the cost of living in a particular area, accounting for essential expenses such as housing, food, healthcare, transportation, and education. The living wage is designed to provide workers with enough income to afford a decent standard of living, including the ability to save and participate in social and cultural activities.

Ninety percent of the more than 500 million workers in India are employed in the unorganized sector. Depending on the state in which they work, many of them make ₹176 or more per day as the minimum wage.
However, the national wage floor, which has remained unchanged since 2017, is unenforceable in different states, which results in disparities in wage distributions.

Anchor: Thank you for clarifying that, Krishna. “So essentially, while the minimum wage sets a floor for wages, the living wage aims to ensure that workers can meet their basic needs and enjoy a certain quality of life. Now, Shyam, what are your thoughts on India’s plans to transition to a living wage by 2025?”

Shyam: India’s decision to replace the minimum wage with a living wage reflects a progressive approach towards labour rights and social justice. By guaranteeing a wage that aligns with the cost of living, the government is taking a proactive stance toward addressing poverty and inequality. It acknowledges that a decent standard of living is not a luxury but a fundamental right for every worker.

India became a permanent member of the ILO’s governing body in 1922, having joined the organization as a founder.
There has been no implementation of the 2019 Code on Wages. A universal pay floor has been proposed, and once it is put into effect, it will apply to every state.
India is determined to meet the 2030 deadline for the Sustainable Development Goals (SDGs).

Krishna: “I couldn’t agree more, The transition to a living wage will have far-reaching benefits, not just for individual workers but for the economy as a whole. When workers earn a living wage, they are more productive, healthier, and more motivated. This, in turn, leads to increased consumer spending, reduced reliance on social welfare programs, and overall economic growth.”

According to authorities who spoke with the Daily, the country is considering replacing the minimum wage with living wages as a means of expediting its attempts to lift millions of people out of poverty while maintaining their standard of living.
ILO assistance has reportedly been requested for “capacity building, systematic data collection, and evidence of the positive economic outcomes resulting from the implementation of living wages,” according to an official.

What is the living wage?

Anchor: Shyam, what is the living wage?

Shyam: A living wage is defined by the International Labour Organization as one that is “calculated for the work performed during the normal hours of work, taking into account the country’s circumstances, and necessary to afford a decent standard of living for workers and their families.”
According to the international organization’s guidelines for measuring the living wage, the living wage income is determined.

In addition to necessities like food, clothing, and housing, a living salary allows the earner to give himself and his family some degree of economic comfort, such as protecting their health and sending their kids to school.

What is the minimum wage?

Anchor: Krishna, What is the minimum Wage?

Krishna: According to reports, a minimum wage is the least amount of compensation that an employer must give employees for the quantity of labour they complete in a specific period and that cannot be decreased by a collective agreement or an individual contract.
The idea is to position daily-wage workers against excessively low compensation.

The living wage is determined by different standards than the minimum wage. While the minimum wage is set based on the state of the economy as a whole, the living wage is determined by factors such as a person’s location, marital status, and number of children.

Anchor: “Those are compelling points, Krishna. However, some critics argue that implementing a living wage could lead to job losses or inflation. What are your thoughts on this, Shyam?”

Shyam: “It’s essential to address these concerns, sir. While there may be short-term adjustments for businesses, studies have shown that the long-term benefits of a living wage outweigh any initial challenges. Higher wages stimulate demand for goods and services, creating a virtuous cycle of economic activity. Moreover, businesses that pay living wages often experience lower turnover rates and higher employee satisfaction, which can offset any increase in labour costs.”

Krishna: Exactly, Shyam. “It’s also worth noting that the transition to a living wage is not solely the responsibility of the government. Employers, unions, and civil society all have roles to play in ensuring fair wages and decent working conditions. Collaboration and dialogue among stakeholders are key to successful implementation.”

Anchor: Well said, Krishna. “As we wrap up our discussion, it’s evident that India’s plans to replace the minimum wage with a living wage by 2025 represent a significant milestone in the country’s journey towards inclusive growth and social justice. Thank you, Shyam and Krishna, for sharing your insights with us tonight.”

Dear Readers,

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FAQ

1. What is a living wage?

A living wage is defined by the International Labour Organization as one that is “calculated for the work performed during the normal hours of work, taking into account the country’s circumstances and necessary to afford a decent standard of living for workers and their families.

2. What is the minimum wage?

According to reports, a minimum wage is the least amount of compensation that an employer must give employees for the quantity of labour they complete in a specific period and that cannot be decreased by a collective agreement or an individual contract.

3. Where is the headquarters of the International Labour Organization?

The headquarters of the International Labour Organization is established in Geneva.

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