India to replace minimum wage with ‘living wage’

Published: 29th Mar, 2024

Context

India is preparing to replace the minimum wage with living wage by 2025 and has sought technical assistance from the International Labour Organization (ILO) to create a framework for estimating and operationalising these.

1: Dimension- Issues in India’s Minimum Wage Rate

Disparities among states: In India, the disparity in minimum wage rates across states poses a challenge for foreign companies seeking to establish offices or facilities within the country.
- Unlike implementing a uniform national standard, each state in India sets its minimum wage, contributing to complexities for businesses navigating the diverse regulatory landscape.
Ineffective implementation of Acts: The minimum wage regulation fell under the jurisdiction of the Minimum Wages Act of 1948. Although India notified the Code on Wages Act in 2019, trying to replace four labor regulations, including the Payment of Wages Act of 1936, the Payment of Bonus Act of 1965, and the Equal Remuneration Act of 1976, in addition to the Minimum Wages Act of 1948, the Code on Wages Act has not been implemented since notification.
Type of employment: Of the nearly 500 million strong workforce, most of them are employed with the unorganised sector, this segment falls outside the purview of scrutiny. As a result of which, in many cases even the conditions of a minimum wage are not met.

2: Dimension- Significance of the Shift and Multidimensional Approach

Integrating health, education, and living standards into the calculation of living wages strengthens India’s national poverty assessment framework that employs multidimensional indicators.
There is need for a comprehensive evaluation encompassing economic, social, and demographic factors to determine an equitable living wage standard tailored to the nation’s development trajectory.
With over 500 million workers in India’s labor force, the transition to living wages represents a monumental step towards socioeconomic equality and sustainable growth.

Fact Box

v About Living Wage

According to ILO, a living wage level is deemed essential to ensure workers and their families can maintain a decent standard of living, considering the specific circumstances of each country.
A living wage is calculated based on the work performed during regular working hours, adhering to the organization's principles for estimating such wages.

v About Minimum Wage

Minimum wage in simpler terms is the stipulated lower base of compensation that an employer is supposed to pay the employee.
Here the primary unit is the amount accrued in an hour.
An employer cannot make a payment below that mark.

v Fair Wage

Fair Wage comes after minimum wage, it lies between the minimum wage and the living wage.
It surpasses the minimum threshold yet falls below what's required for a living standard.
While the minimum wage sets the baseline, the upper boundary of a fair wage is determined by the industry's financial capability to compensate.

CURRENT AFFAIRS FOR UPSC IAS

India to replace minimum wage with ‘living wage’

Still Have Questions?

CURRENT AFFAIRS FOR UPSC IAS

India to replace minimum wage with ‘living wage’

Still Have Questions?

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