India Aims for Living Wage by 2025, Replacing Minimum Wage: Know What it is

The Indian government is setting its sights on a significant shift in worker compensation. They plan to move from a minimum wage system to a living wage by 2025. This change has the potential to drastically improve the lives of millions of Indian workers. India is planning to implement the living wage with the help of International Labour Organisation (ILO) according to reports. “We could go beyond minimum wages in a year,” according to a senior government official that talked with The Economic Times.

What is Living Wage?

The International Labour Organisation mentions ‘Living Wage’ as: “It denotes that the concept of a living wage is, “the wage level that is necessary to afford a decent standard of living for workers and their families, taking into account the country circumstances and calculated for the work performed during the normal hours of work;” it is “calculated in accordance with the ILO’s principles of estimating the living wage,” and is “to be achieved through the wage-setting process in line with ILO principles on wage setting.”

In its essence, a living wage is the income level needed by a worker, or a family in some definitions, to afford a basic but decent standard of living. It goes beyond just meeting basic needs for survival; it aims to provide enough income to cover essentials like housing, food, transportation, and healthcare without relying on government assistance.

Here are some key points about living wage:

• Different from Minimum Wage: The living wage is generally higher than the minimum wage, which is the lowest legal hourly wage an employer can pay their workers.
• Varies by Location: The cost of living can differ significantly between cities, states, and even countries. So, the living wage will also vary depending on the location.
• Essential Needs: Living wage calculations typically factor in costs like rent or mortgage payments, groceries, utilities, transportation, and potentially childcare. Ideally, it should allow for a portion of income to be saved for unexpected expenses.
• Decent Standard of Living: The concept goes beyond just surviving. It aims to provide a level of income that allows for participation in society and a basic level of comfort.

What are the Differences Between Minimum Wage and Living Wage?

Why is India Shifting Towards Living Wage?

• There are several factors driving this policy change:
• Economic Growth: India's robust economic growth, with a rate of 8.4%, indicates the country's capacity to support higher wages.
• Addressing Worker Concerns: The current minimum wage is seen as insufficient to meet basic needs, especially with inflation.
• ILO Endorsement: The International Labour Organisation's (ILO) recent endorsement of living wages adds international weight to India's decision.

While the move towards a living wage is positive, challenges remain:

• Implementation: Determining and implementing a national living wage framework across diverse states with varying costs of living requires careful planning.
• Impact on Businesses: Some businesses, particularly small and medium enterprises, might face financial strain due to increased labour costs.

The Indian government has sought technical assistance from the ILO to create a framework for the living wage. This signifies a commitment to a well-defined and operational system.

The shift from the minimum wage to living wage by 2025 represents a significant step towards improving the lives of Indian workers. Balancing affordability for businesses with ensuring worker well-being will be crucial for the success of this policy.