India Looks Towards Replacing Minimum Wage with Living Wage by 2025

India is making strides towards phasing out the traditional minimum wage system in favor of a more comprehensive living wage structure by the year 2025. The government has enlisted the support of the International Labour Organization (ILO) to spearhead this initiative, with plans underway to develop a robust framework for its implementation, as reported by the Economic Times.

Recently, the ILO officially endorsed the concept of a living wage after reaching a pivotal agreement on minimum wages in conjunction with the Indian government. This endorsement was solidified during a Meeting of Experts on wage policies in February and subsequently approved by the ILO’s governing body in a session held on March 13.

India, a founding member of the ILO and a permanent governing body member since 1922, boasts a workforce exceeding 500 million individuals, with a substantial majority engaged in the unorganized sector. Presently, many workers earn a daily minimum wage set by individual states, with variations across regions and sectors.

The existing national wage floor, stagnant since 2017, lacks uniform enforceability across states, leading to disparities in wage disbursements. The implementation of the Code on Wages in 2019, designed to establish a universal wage floor applicable nationwide, is still pending execution.

Aligned with its commitment to achieving the Sustainable Development Goals (SDGs) by 2030, India aims to pivot towards a living wage system as a strategic move to alleviate poverty and enhance the overall well-being of its workforce. The living wage concept, as articulated by the ILO, signifies remuneration adequate to sustain a decent standard of living for workers and their families, tailored to the country’s unique circumstances.

Contrasting a living wage, a minimum wage denotes the lowest remuneration an employer must pay workers for their services within a specific period, safeguarded against reduction by collective agreements or individual contracts. The objective of a minimum wage regimen is to shield daily wage earners from meager pay rates.

Reflecting on the historical context, the US introduced a federal minimum wage post the Great Depression to uphold a baseline standard of living. Subsequently, the divergence between the purchasing power of the minimum wage and the cost of living widened, underscoring the inadequacies of the existing framework.

With the discourse shifting towards a living wage, underscored by the ILO’s recent stance advocating for equitable wages as pivotal for economic development and poverty reduction, the transition from minimum to living wages may herald a significant transformation in labor practices and income distribution.