India mulls replacing minimum wage with living wage by 2025

In an effort to pull out people from poverty, India is planning to replace the minimum wage with living wage by 2025, reported The Economic Times. As per the report, India has sought technical assistance from the International Labour Organization (ILO) to create a framework for estimating and operationalising these.

Shift to living wage

Living wage is a minimum income that would meet the basic necessities factoring in key social expenditure by an individual such as housing, food, healthcare, education and clothing. These factors were endorsed by the ILO earlier this month.

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As per the Economic Times report, the living wage would be higher than basic minimum wages.

“We could go beyond minimum wages in a year,” a senior government official told ET.

Reform by ILO

The reform was agreed during the ILO's 350th governing body meet that concluded on March 14.

Labour secretary Sumita Dawra, in her intervention on the issue at the ILO, had proposed that the UN body must take into account health, education and standard of living as key indicators to arrive at a definition of living wages for developing countries as these measures are used to assess the national multidimensional poverty in India.

“National Multidimensional Poverty Index in India measures simultaneous deprivations across the three equally weighted dimensions of health, education and standard of living that are represented by 12 sustainable development goals-aligned indicators,” she said in her intervention. “Living wage definition must incorporate these dimensions,” she said, pointing out that the standard of living component must include the components of economic, social and demographic factors.

India which is a founding member of the ILO and a permanent member of its governing body since 1922, has over 500 million workers and 90% of them are in the unorganised sector where many draw a daily minimum wage of Rs 176 or more per day, depending on the state where they work. This national wage floor has not been revised since 2017 and is not binding on states and hence some states pay even less than that.

The Code on Wages that was passed in 2019 binds all the states once the code is implemented.

India's Sustainable Development Goals

The Economic Times quoted officials and said that India views replacing minimum wages with living wages could fast-track India’s efforts to pull millions of its people out of poverty while ensuring their wellbeing. This also comes at a time when the country is striving towards achieving the sustainable development goals (SDGs) by 2030.

“We have sought help from ILO for capacity building, systemic collection of data and evidence of the positive economic outcomes resulting from the implementation of living wages,”the senior government official told The Economic Times.