Big Change Coming Soon In Govt, Private Job Salaries! Minimum Wage Vs Living Wage, What Is The Difference?

There is a likelihood that your salary, especially if you are a fresher, would see a paradigm shift. As per the latest reports, the government is mulling replacing the minimum wage concept on employees' payroll and replacing it with living wages. This is said to be effective in 2025. However, the government have not made any official statements yet!

A government official told ET that India is preparing to replace the minimum wage with a living wage by 2025.

Also, the report stated that India has sought technical assistance from the International Labour Organization (ILO) to create a framework for estimating and operationalising these.

What Is Minimum Wage In India?

Minimum Wages:

The Minimum Wages Act, of 1948, provides for fixing minimum rates of wages in scheduled employment including those in the private sector. Both the Central Government and the State Governments are appropriate Governments to fix, review and revise the minimum wages in scheduled employment in their respective jurisdiction and the minimum rates of wages so fixed are equally applicable to both the public and private sectors.

Further, under the Code on Wages, 2019, minimum wages fixed by the appropriate Governments are applicable across all employments in public and private sectors, and organized and unorganized sectors. The provisions of the Code on Wages Act, 2019, relating to minimum wages have not come into force.

Currently, in India, the national floor for minimum daily wages is Rs 178 per day, which is competitive in Asian economies. This minimum daily wage works out to be Rs 5,340 per month. In simple words, the national floor of minimum wage means that no government can set salaries of employees below this limit.

According to India Briefing, the minimum wage and salary structure in India differs based on the following factors: state, area within the state based on development level (zone), industry, occupation, and skill level. This offers foreign investors a range of options when choosing where to locate their setup.

Meanwhile, the ILO describes minimum wages as the amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract.

While ILO explains the purpose of minimum wages is to protect workers against unduly low pay. They help ensure a just and equitable share of the fruits of progress to all, and a minimum living wage to all who are employed and in need of such protection. Minimum wages can also be one element of a policy to overcome poverty and reduce inequality, including those between men and women, by promoting the right to equal remuneration for work of equal value.

What Is Living Wages?

However, earlier this month, ILO had reached an agreement on the issue of the living wage. In a session, ILO pointed out that experts agreed that decent wages are central to economic and social development and to advance social justice. They also play an essential role in reducing poverty and inequality and ensuring a decent and dignified life.

That being said, as per ILO the concept of a living wage is:

- the wage level that is necessary to afford a decent standard of living for workers and their families, taking into account the country's circumstances and calculated for the work performed during the normal hours of work;

- calculated by the ILO's principles of estimating the living wage;

- to be achieved through the wage-setting process in line with ILO principles on wage setting."

Estimation of living wages should follow several principles, including the usage of evidence-based methodologies and robust data, consultations with workers' and employers' organizations, transparency, public availability, and the consideration of regional and local contexts and socio-economic and cultural realities, ILO's release on March 15 explained further.

There has been a positive long-term global trend in average wages. Yet millions of workers worldwide - in both the formal and informal economies - continue to earn very low wages compared to the cost of living and live in poverty. These workers and their families are unable to afford healthy food, decent housing, medical care or schooling for their children, ILO had lastly said.