Can a Living Wage Replace the Minimum Wage?

I'm delving into a topic that's sparking conversations globally — the transition from a minimum wage to a living wage. Let's break it down.

The International Labour Organisation mentions ‘Living Wage’ as: “It denotes that 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 circumstances and calculated for the work performed during the normal hours of work;” it is “calculated in accordance with the ILO’s principles of estimating the living wage,” and is “to be achieved through the wage-setting process in line with ILO principles on wage setting.”

Back to Basics: In Adam Smith's Wealth of Nations, he highlighted the importance of fair wages to sustain livelihoods and foster economic growth. A living wage isn't just about meeting basic needs; it's about enabling individuals to lead fulfilling lives with access to essentials like food, education, healthcare, and housing.

• Varies by Location: The cost of living can differ significantly between cities, states, and even countries. So, the living wage will also vary depending on the location.
• Essential Needs: Living wage calculations typically factor in costs like rent or mortgage payments, groceries, utilities, transportation, and potentially childcare. Ideally, it should allow for a portion of income to be saved for unexpected expenses.
• Decent Standard of Living: The concept goes beyond just surviving. It aims to provide a level of income that allows for participation in society and a basic level of comfort.

Nations worldwide are reevaluating their wage policies, recognizing the potential of a living wage to combat poverty and inequality while fostering economic development. Companies often prioritize profits over fair wages, leading to disparities between minimum and living wages. Contrary to fears of job losses, studies show that increased minimum wages can boost morale, productivity, and ultimately, business outcomes.

Economic Implications: Transitioning to a living wage could alleviate the burden on government subsidies and redirect resources towards broader development initiatives.

India is set to replace its minimum wage system with a living wage by 2025, with the government seeking technical assistance from the International Labour Organization (ILO) to develop a framework for estimating and implementing it, according to reports. The move comes after the ILO endorsed the concept earlier this month, following an agreement reached during a Meeting of Experts on wage policies in February and endorsed by the ILO’s governing body on March 13.

The shift from minimum wages to living wages is aimed at fast-tracking efforts to lift millions out of poverty and ensure their well-being. India has more than 500 million workers, with 90% in the unorganised sector. While many earn a daily minimum wage of ?176 or more, the national wage floor, stagnant since 2017, lacks enforceability across states and leads to wage payment discrepancies. This lack of upward movement in wages has led to disparities in wage payments across different states.