India is aiming to replace the minimum wage with a living wage by next year (2025) as the government has sought technical assistance from the International Labour Organization (ILO) to create a framework to estimate and operationalise it, according to a report.
Earlier this month, the ILO endorsed the concept after reaching an agreement on the minimum wage with the living wage. The agreement was reached during a Meeting of Experts on wage policies in February, and it was endorsed by the ILO’s governing body at their session on March 13.
“We could go beyond minimum wages in a year,” a senior government official told The Economic Times.
In India, there are more than 500 million workers, while 90% of them are in the unorganised sector. Many among them draw a daily minimum wage of ₹176 or more, based on the state where they work.
However, the national wage floor, which has been stagnant since 2017, lacks enforceability across states and leads to discrepancies in wage payments.
A founding member of the ILO, India has been a permanent member of its governing body since 1922.
The Code on Wages passed in 2019, is yet to be implemented. It has proposed a universal wage floor which shall apply to all states once implemented.
India is committed to achieving the sustainable development goals (SDGs) by 2030.
The replacement of minimum wages with living wages is being viewed as a strategy for the country to fast-track its efforts to pull millions of people out of poverty while ensuring their well-being, officials told the daily.
An official said that help has been sought from ILO for "capacity building, systemic collection of data and evidence of the positive economic outcomes resulting from the implementation of living wages”.
What is a living wage?
The International Labour Organization denotes the concept of a living wage as one that is “necessary to afford a decent standard of living for workers and their families, taking into account the country's circumstances and calculated for the work performed during the normal hours of work.”
The living wage income is calculated under the international organisation's principles of estimating the living wage.
Besides the essentials like food, clothing and shelter, the living wage enables the earner to provide for himself and his family a measure of frugal comfort including children's education and health protection, among others.
Minimum wage
A minimum wage is defined as the minimum amount of remuneration, which the employer is required to pay to the employees for the amount of work performed during a given period, which cannot be reduced by collective agreement or an individual contract, reports said.
The purpose behind this concept is to project the daily wage workers against unduly low pay.
The criteria used to calculate the living wage are different from the minimum wage. The living wage is determined depending on the location, marital status, and number of children of a person, while the minimum wage is decided based on the overall economy.
(Edited by : Sudarsanan Mani)
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