MINIMUM WAGES & LIVING WAGES (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     26th March 2024        

Context: India is preparing to replace the minimum wage with living wage by 2025 and has sought technical assistance from the International Labour Organization (ILO) to create a framework for estimating and operationalising these.

Living Wage

  • About: The living wage concept entails an income level adequate for sustenance, covering basic needs like shelter and food.
  • Preventing Poverty: Its primary aim is to shield individuals and families from impoverishment, offering them a chance at a decent livelihood.
  • Economic Comparison: Economists propose that a living wage should cap housing expenses at 30% of the total income, ensuring affordability.
  • Above Minimum: In practice, living wages typically exceed legal minimum wage standards, reflecting the higher cost of living.

Minimum Wages

  • About: These are the lowest amount of compensation an employer must pay to workers for their labor, legally safeguarded against reduction through collective agreements or individual contracts.
  • Methods of Setting: Minimum wages can be established through various means such as statutory laws, decisions by competent authorities, wage boards, councils, or industrial and labor courts.
  • Purpose: Minimum wages are intended to protect workers from receiving unreasonably low pay, ensuring fairness and distributing the benefits of progress equitably.
  • Role in Poverty Alleviation and Inequality Reduction: Minimum wages serve as a component of policies aimed at combating poverty and decreasing inequality. 
  • They contribute to promoting equal remuneration for work of equal value, thus addressing disparities, including those based on gender.

Code on Wages

  • About: To amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto.
  • Coverage: The Code will apply to all employees. The central government will make wage-related decisions for employments such as railways, mines, and oil fields, among others.  State governments will make decisions for all other employments.
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