The Labour Ministry is considering shifting to the system of living wages that changes with time, circumstances and the place you live in, from the current minimum wages system. This step is under consideration to put people out of poverty, according to a report by The Economic Times.

Share Market Live

NSE

The move can have huge financial implications for India Inc., and the government, since living wages are indexed to inflation, but it could make a significant difference in achieving the Sustainable Development Goal (SDG) of eliminating extreme poverty by 2030.

"Initial discussions have begun within the labour ministry. India could seek help from the International Labour Organisation (ILO) to arrive at living wages if the idea gets a political backing," a senior government official told ET.

Also read: Govt sets up expert panel to fix minimum wages

So let’s breakdown what is living wage and what is minimum wage.

Living wage

The living wage is the amount necessary for workers to meet their basic living requirements. These living requirements include shelter, food, healthcare, childcare, taxes, and transportation. According to Investopedia, living wage changes with time, circumstances and the place you live in.

The Massachusetts Institute of Technology in 2004 developed a living wage calculator which uses county, state and size of family as the metrics. The living wage is usually 10 to 25 percent higher than minimum wage.

Apart from this, living wage is not governed by law as it changes according to state and circumstances and job type.

Also read: Global recession increasingly likely as cost of living soars: Chief economists survey

According to data by TradeEconomics.com the living wage of a low skilled worker in India for 2018 was Rs 10,900 per month which is Rs 351 per day.

Minimum Wage

In the Constitution of India the Minimum Wage Act, 1948 defines wage as remuneration that is capable of being represented in the form of money. India offers the most competitive labour costs in Asia, with the national-level minimum wage at around INR 178 per day, which works out to INR 5340 per month. Minimum wage in India also differs from state to state. For instance the Delhi government announced a wage hike from Rs 16,506 to Rs 16,792 for unskilled workers, Rs 18,187 to Rs 18,499 for semi-skilled workers, and Rs 20,019 to Rs 20,357 for skilled workers starting from October 1, 2022.

It’s mandatory for employers to provide the employees with Minimum Wage as defined in the act.

According to Section 4 of the Minimum Wages Act, employers are bound to provide any minimum rate of wages fixed or revised by the appropriate government.

The basic wage under section 3 of the said Act consists of:

(i) a basic rate of wages and a special allowance at a rate to be adjusted at such intervals and in such manner as the appropriate government may direct to- accord as nearly as practicable with the variation in the cost of living index number applicable to such workers;

(ii) a basic rate of wages with or without the cost of living allowance and the cash value of the concessions in respect of suppliers of essential commodities at concession rates where so authorized; or-

(iii) an all-inclusive rate allowing for the basic rate the cost of living allowance and the cash value of the concessions if any.

(Edited by : C H Unnikrishnan)