Context: 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.

About Living Wage

• According to ILO, a living wage level is deemed essential to ensure workers and their families can maintain a decent standard of living, considering the specific circumstances of each country.

• A living wage is calculated based on the work performed during regular working hours, adhering to the organization's principles for estimating such wages.

About Minimum Wage

• Minimum wage in simpler terms is the stipulated lower base of compensation that an employer is supposed to pay the employee.

• Here the primary unit is the amount accrued in an hour.

• An employer cannot make a payment below that mark.

Fair Wage

• Fair Wage comes after minimum wage, it lies between the minimum wage and the living wage.

• It surpasses the minimum threshold yet falls below what's required for a living standard.

• While the minimum wage sets the baseline, the upper boundary of a fair wage is determined by the industry's financial capability to compensate.

Issues in India’s Minimum Wage Rate

• Disparities among states: In India, the disparity in minimum wage rates across states poses a challenge for foreign companies seeking to establish offices or facilities within the country.

• Unlike implementing a uniform national standard, each state in India sets its minimum wage, contributing to complexities for businesses navigating the diverse regulatory landscape.

• Ineffective implementation of Acts: The minimum wage regulation fell under the jurisdiction of the Minimum Wages Act of 1948. Although India notified the Code on Wages Act in 2019, trying to replace four labor regulations, including the Payment of Wages Act of 1936, the Payment of Bonus Act of 1965, and the Equal Remuneration Act of 1976, in addition to the Minimum Wages Act of 1948, the Code on Wages Act has not been implemented since notification.

• Type of employment: Of the nearly 500 million strong workforce, most of them are employed with the unorganised sector, this segment falls outside the purview of scrutiny. As a result of which, in many cases even the conditions of a minimum wage are not met.

The major observation in India: Many households still earn less than the NFLMW

• Stagnant Income Growth: There has been no significant growth in income over the past five years across different employment categories.

• Low Earnings Below NFLMW: Many households still earn less than the proposed National Floor Level Minimum Wage (NFLMW). In 2019, an expert committee recommended the NFLMW to be at least Rs 375 per day and Rs 3,050 per week.

• Regional Disparities: Analysis of 34 States and Union Territories (UTs) revealed that in about 19 of them, more than 20% of households earned less than Rs 375 a day or Rs 3,050 a week in 2022-23.

• In states like Chhattisgarh and Uttar Pradesh, over 50% of households earned less than the recommended minimum wage.

• Large Number of Low-Income Workers: The report highlights that nearly 30 crore workers earn less than the minimum wage, indicating a significant portion of the workforce struggling with low earnings.

The year-wise wealth share of the top 10% and the bottom 50% of the population-

• Stagnant Income Growth vs. GDP Per Capita: Despite an increase in GDP per capita over the last decade, income growth among the majority of the population has remained stagnant.

• GDP Per Capita Increase: Over the past 10 years, GDP per capita in India has risen by 60%, indicating overall economic growth and prosperity.

• Low Earnings Below NFLMW: Despite GDP growth, close to 35% of total households still earn less than the proposed National Floor Level Minimum Wage (NFLMW).

• Increase in Wealth Disparity: The share of national wealth held by the wealthiest 10% of the population has increased from 63% in 2012 to 64.5% in 2022. Conversely, the share of wealth held by the poorest 50% of the population has decreased from 6.1% in 2012 to 5.6% in 2022.

Significance of the Shift and Multidimensional Approach

• Integrating health, education, and living standards into the calculation of living wages strengthens India’s national poverty assessment framework that employs multidimensional indicators.

• There is need for a comprehensive evaluation encompassing economic, social, and demographic factors to determine an equitable living wage standard tailored to the nation’s development trajectory.

• With over 500 million workers in India’s labor force, the transition to living wages represents a monumental step towards socioeconomic equality and sustainable growth.

Conclusion

• Stagnant income growth and rising self-employment underscore economic challenges, with many households earning below the proposed minimum wage. Resolving issues requires promoting formal employment, equal pay, rural development, and progressive taxation.