Proposal to Shift from “Minimum” to “Living” Wages

December 29, 2022

The Union Labour Ministry is currently mulling to shift from the “minimum wages” to “living wages” in a bid to bring more people from poverty in the country.

What is a living wage?

The term “living wage” is the theoretical income level that enables an individual or a family to afford adequate shelter, food, healthcare and other basic necessities. It is the minimum income of that helps support a satisfactory standard of living and prevents individuals from falling into poverty.

How is the living wage different from minimum wage?

A living wage is defined as the minimum income necessary for workers to meet their basic necessities. It is different from the minimum wage, which is based on labor productivity and skill sets.
Minimum wage is the lowest amount of money a laborer can earn as mandated by the law. It does not change based on inflation. It can increase only with the government intervention. This is not true for the living wage.
The living wage is determined by the average cost to live comfortably, while the minimum wage is the fixed amount set by the government.
The difference between the minimum wage and the living wage can range between 10 and 25 percent based on the cost of living in a specific place.

About India’s decision

The Indian government is considering to shift from the minimum wage to the living wage to eliminate poverty in the country. If such a shift happens, it would have significant financial implications for India and the government. It will make Sustainable Development Goal commitments easily achievable.

India is planning to receive assistance from the International Labour Organization (ILO) to understand what constitutes a living wage since it is highly subjective. The ILO member states, including India, have recently requested the ILO to contribute to the improved understanding of living wages by undertaking a peer-reviewed research on the theoretical concepts and theoretical estimations.

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