India likely to shift to living wage system by 2025: Know how it differs from minimum wage

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New Delhi: The Indian government is planning to replace the minimum wage system with a living wage system by 2025 and has sought technical guidance from the International Labour Organisation (ILO) in the matter. Living wage is a new wage calculation system endorsed by the ILO which estimates the optimum income level that will allow individuals and households to fulfil their basic necessities such as food and shelter. Living wage also allows a basic level of comfort for the wage earner and their family, including children’s education and health coverage.

Switching to the living wage system is expected to improve the government’s efforts to pull millions of citizens out of poverty. ILO bases living wages on a country’s circumstances. It accounts for work performed during normal work hours.

How is living wage different from minimum wage?

The main difference between the 2 systems of wage calculation is that while the minimum wage is indexed to the overall economy, the living wage accounts for where the individual is located, whether they are married, and a number of children.

Unlike the minimum wage, which is based on a minimum wage floor which has remained mostly unchanged since 2017, a living wage is expected to provide a better scope for the fulfilment of the basic needs of Indians.

The daily minimum wage as of date is Rs 176 and above based on where the unorganised workers are situated. As of date, India has over 500 million workers of which 90 per cent are employed in the unorganised sector.

Living wage is considered to be higher than the minimum wage. While the latter is mandated by law, a living wage is expected to be voluntary in nature. This is expected to boost worker productivity and enhance general well-being.

India plans to implement the system and showcase its positive outcomes with the help of ILO. This move is also expected to enable India to achieve the sustainable development goal of decent work and economic growth by 2030, the ET reported, citing a senior government official.

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