India plans to shift from minimum wage to living wage by 2025

New Delhi: India is preparing to replace the minimum wage with living wage by 2025 and has sought technical assistance from the International Labour Organization (ILO) to create a framework for estimating and operationalising these, ET has learnt.

Living wages – a minimum income necessary for a worker to meet their basic needs, factoring in key social expenditure by an individual such as housing, food, healthcare, education and clothing – were endorsed by the ILO earlier this month. These would be higher than basic minimum wages. “We could go beyond minimum wages in a year,” a senior government official told ET.

The ILO had agreed on the reform at its 350th governing body meeting in Geneva that concluded on March 14. There are over 500 million workers in India and 90% of them are in the unorganised sector where many draw a daily minimum wage of `176 or more, depending on the state where they work. However, this national wage floor — not revised since 2017 — is not binding on states and hence a few states pay even less than that.

The Code on Wages, passed in 2019 but yet to be implemented, proposes a wage floor which will be binding on all states once the Code is implemented.

India is a founding member of ILO and a permanent member of its governing body since 1922.

New Delhi is striving towards achieving the sustainable development goals (SDGs) by 2030 and there is a view that 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, officials said.

“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 official quoted above said. 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.