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Low wages haunts India's economy

Published: 11th Apr, 2024


Amidst the backdrop of economic uncertainty and volatility, daily wage workers continue to face myriad challenges. From meager wages to precarious employment opportunities, the plight of daily wagers underscores the urgent need for comprehensive interventions to address their vulnerabilities.

1: Dimension-Factor behind low wages
  • Low capital and skills: Since capital is scarce and labour abundant and less productive, wages are relatively lower in India.
  • Vicious cycle: The pervasive problem of low wages perpetuates cycles of poverty and deprivation among daily wage earners.
  • Persistence of informal set up: Informal economy suffers from long working hours, low pay and difficult conditions, low job security, inadequate social security regulation and others.
  • Extreme weather events remain a key factor as rural jobs are dependent on agriculture which is dependent on monsoon and rabi and kharif

Stark difference in India’s minimum wage



In India, minimum wages are not market clearing wages. They are regulatory wages to ensure that market wages do not fall below subsistence. They are expected to cover the essential current costs of accommodation, food and clothing (roti, kapada aur makaan) of a small family. It is inadequate for a dignified life.

In America, the minimum wage captures the market value of food, accommodation, utilities, transportation, healthcare and social security at subsistence levels for small nuclear families.

2: Dimension- Impact on low wages on economy
  • Low contribution to aggregate demand: Despite the celebration of higher economic growth, declining incomes mean that people at large do not have sufficient buying power in their hands. These households contribute substantially to economic output, making up 44-45% of Gross Value Added (GVA).
  • Poor standard of living: Labors are forced to live in poor conditions with many sharing a small room in a slum. Water is scarce and drinking water more so. Access to clean toilets is limited and disease spreads. There is lack of civic amenities like sewage. Their children are often deprived of schools and playgrounds.
  • Lack of investment in education: The sporadic nature of employment opportunities and lack of job security not only undermines their financial stability but also impedes their ability to plan for the future and invest in skill development or education.
  • Increased vulnerability to economic shocks: The absence of adequate social protection mechanisms further exacerbates their financial insecurity, leaving them vulnerable to economic shocks and crises.
3: Dimension-Required measures
  • Efforts are needed to address the structural barriers that perpetuate the marginalization of daily wage workers.
  • This includes implementing measures to ensure fair wages, improve working conditions, and expand access to social protection schemes such as unemployment benefits and healthcare services.

Fact Box:

Gross Value Added 

  • Gross Value Added is the value of goods and services produced by an industry, sector, manufacturer, area or region in an economy.

Minimum Wage

  • The national floor level minimum wage (NFLMW) is the minimum wage below which no state government can fix the minimum wage. It was brought into effect from 1996 by the Centre. State governments can set their own minimum wages.
  • India is planning to replace its minimum wage system with a living wage by 2025 to lift millions out of poverty and ensure their well-being.

Government schemes/Acts for labourers

  • Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (ABPMJAY) provides health cover. 
  • Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM) Pension Scheme provide old age protection to unorganised sector workers
  • Others: One Nation One Ration Card Scheme under National Food Security Act, Mahatma Gandhi National Rural Employment Guarantee Act, Deen Dayal Upadhyay Gramin Kaushal Yojana, Pradhan Mantri Awas Yojana, Gareeb Kalyan Rojgar Abhiyan, Mahatma Gandhi Bunkar Bima Yojana, Deen Dayal Antyodaya Yojana, PMSVANidhi, Pradhan Mantri Kaushal  Vikas Yojana etc.
    • Atmanirbhar Bharat Rozgar Yojana (ABRY, Unemployment benefit under Atal Beemit Vyakti Kalyan Yojana (ABVKY), Pradhan Mantri Garib Kalyan Rojgar Abhiyan (PMGKRA), National Social Assistance Program, Deen Dayal Upadhyay Gramin Kaushalya Yojana (DDU-GKY), Pradhan Mantri Garib Kalyan Rojgar Abhiyan (PM-GKRA), Pradhan Mantri Kisan Maan-Dhan Yojana (PM KMDY), Pradhan Mantri Kisan Samman Nidhi etc.


Q:‘Despite the implementation of various programmes for eradication of poverty by the government in India, poverty is still existing’. Explain by giving reasons. (UPSC 2018)
Q: While we found India’s demographic dividend, we ignore the dropping state of employability. What are we missing while doing so? Where will the jobs that India desperately needs come from? Explain (UPSC 2014)

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