Published on: February 1, 2023
Authors: Dilpreet Singh, Rohit Dhawan
India is considering shifting from the minimum wage to living wages to meet its Sustainable Development Goal (SDG) commitment of eliminating extreme poverty by 2030. However, “living wage” hasn’t been commonly used and could have significant financial implications for India businesses and the government as it is indexed to inflation.
A few key differences between “living wage” and “minimum wage”:
A living wage is defined as the minimum income necessary for workers to meet their basic needs compared to subsistence wage or a minimum wage which is based on labor productivity and skill sets.
Minimum wage is the lowest wage amount of money employees are entitled to revied, whereas the living wage is determined by average costs to live and therefore associated with inflation.
The difference between the two could range from 10-25% depending on the cost of living at that location.
The International Labor Organization (ILO) estimates global monthly wages declined 0.9% in real terms, thereby contributing to rising income inequality. Wages covering the cost of living offer an established method of reducing urban poverty through government’s intervention but would need to be carefully examined.
Outlook: The change may not get translated in the near term, but likely to come into play after 2024 general elections.
Chief Advisor, India, HR Policy AssociationContact Dilpreet Singh LinkedIn
Resource Manager, HR Policy in India, HR Policy AssociationContact Rohit Dhawan LinkedIn