India is set to undergo a significant shift in its wage system as it plans to replace the minimum wage with living wages by 2025. The government aims to seek technical assistance from the International Labour Organization (ILO) to develop a framework for estimating and implementing living wages. But what does this move mean for Indian workers and the overall economy?

Lifting Millions Out of Poverty

The transition from minimum wages to living wages is a crucial step towards improving the lives of Indian workers. With over 500 million workers, of which 90% are in the unorganized sector, India faces challenges in ensuring fair and sufficient wages for all. By implementing living wages, the government aims to lift millions out of poverty and provide them with a decent standard of living.

Addressing Wage Discrepancies and Enforceability

Currently, many workers earn a daily minimum wage of ₹176 or more, but the national wage floor has remained stagnant since 2017. Moreover, the lack of enforceability across states has led to wage payment discrepancies. The shift to living wages seeks to address these issues by establishing a more uniform and enforceable wage system across the country.

The Role of the International Labour Organization

India, as a founding member of the ILO, is seeking technical assistance from the organization to develop a comprehensive framework for estimating and implementing living wages. The ILO defines the living wage as the wage level necessary to afford a decent standard of living for workers and their families. With the ILO's support, India aims to showcase the positive economic outcomes of implementing living wages and promote decent work and economic growth.

Challenges and Benefits of the Transition

While the move towards living wages is commendable, it comes with its own set of challenges. Implementing a national living wage framework across states with varying costs of living requires careful planning. Small and medium enterprises, in particular, may face financial strain due to increased labor costs. Additionally, the diversity of living costs across different regions of India poses a challenge in establishing a uniform living wage rate.

Despite these challenges, India's robust economic growth and a rate of 8.4% indicate the country's capacity to support higher wages. The transition to living wages not only addresses worker concerns about the current minimum wage but also aligns with India's commitment to achieving the Sustainable Development Goals by 2030.

Balancing Affordability and Worker Well-being

Balancing affordability for businesses with ensuring worker well-being will be crucial in the successful implementation of living wages. The government's commitment to developing a well-defined and operational system, with the assistance of the ILO, is essential. By providing enough income to cover basic needs such as food, clothing, and shelter, living wages will improve the overall well-being of workers and their families.

A Positive Step towards a Fairer Wage System

India's plan to replace the minimum wage with living wages by 2025 represents a significant step towards creating a fairer wage system. The shift aims to reduce poverty, bridge wage discrepancies, and promote economic growth. As the government collaborates with the ILO to develop a comprehensive framework, it will be important to ensure effective implementation and address the diverse needs of workers across different regions.