Shall India Move Beyond Minimum Wage to Living Wage Framework?

General Studies Paper-3

Context

• The Union Ministry of Labour and Employment is considering a shift from the conventional “minimum wage” to a more comprehensive “living wage” framework, covering essential social expenditures.

Living Wage vs Minimum Wage

• A minimum wage is the legally mandated lowest amount an employer must pay a worker, irrespective of the cost of living.
  • It is typically based on factors such as labor productivity, occupation, industry type, and skill level.
• A living wage is the income necessary for a worker and their family to afford a basic but decent standard of living.
  • It is calculated based on essential expenses like food, housing, clothing, education, healthcare, transport, and a small margin for emergencies.

Why There is a Need for a Living Wage in India?

• Wages Not Meeting Basic Needs: A recent report by Quess Corp and the Udaiti Foundation reveals that 54% of female blue- and grey-collar workers are dissatisfied with their pay, and 80% save less than ₹2,000 per month, indicating that current minimum wages are inadequate for sustaining a decent life.
• Rising cost of living and inflation: Inflation and fluctuating commodity prices are eroding the purchasing power of Indian households, making it increasingly difficult to afford essential goods and services.
• Improve Social Parameters: Implementing living wages would reduce poverty, improve workers’ quality of life, and increase domestic consumption.
• Social justice and human rights: A living wage aligns with the principles of social justice and human rights, ensuring workers can live with dignity and participate fully in society.
• Aligned with Constitutional Mandate: It aligns with constitutional mandates (Article 39 and 43) and international labour standards set by the ILO.

Challenges to Implementing a Living Wage

• Lack of Updated Cost-of-Living Data: Current minimum wage calculations are based on poverty line formulas from the 1970s.
  • The real-time, region-specific data on expenses (e.g., healthcare, education, housing) is missing, complicating accurate living wage estimation.
• Wide Regional Disparities: Cost of living varies significantly between rural, peri-urban, and metropolitan areas. A uniform national living wage may not be viable.
• Informalization of Labour Market: Over 90% of India’s workforce is employed in the informal sector, often outside the ambit of wage laws and enforcement mechanisms.
• Implementation Gap in Labour Codes: The Code on Wages 2019, which promises a national wage floor and universal applicability, remains unimplemented.
  • Delays in operationalising these legal frameworks reduce credibility and momentum for reform.

Way Ahead

• Introduce a tiered wage system: Based on urban, peri-urban, and rural zones reflecting actual costs of living.
• Also, institutionalise Living Wage standards that include health, education, and child-care expenses.
• Gender-Responsive Labour Reforms: Review and amend outdated labour laws to ensure equitable workforce access.
• Promote gender audits in workplaces, especially in the private sector.
• Focus on Industrial Hubs: Encourage women’s participation in sectors like electronics, auto-manufacturing, and semiconductors, where demand is high.
• Provide skill development focused on sectors where women naturally excel, such as those requiring fine motor skills.
• Employer Responsibility for Safety: Mandate and incentivize companies, especially SMEs, to provide safe transport and accommodation for women working in shifts.
• Social Dialogue Mechanisms: Promote tripartite consultations involving government, employers, and employee representatives to build consensus around wage reforms.