Living Wage vs. Minimum Wage: India’s Shift in Labor Policy

GS-3 Mains

Short Notes or Revision Notes 

Question : Examine the rationale behind India’s proposed shift from a minimum wage system to a living wage by 2025, in collaboration with the International Labour Organisation (ILO).


  • India plans to shift from a minimum wage system to a living wage by 2025 with help from the International Labour Organisation (ILO).

Living Wage vs. Minimum Wage

  • Living Wage:The income needed to afford a decent standard of living for a worker and their family.
    • Defined by ILO as “the wage level necessary to afford a decent standard of living for workers and their families.”
    • Typically higher than the minimum wage.
  • Minimum Wage:The lowest legal wage an employer can pay their workers.

Global Trends in Minimum Wage

  • Several countries have increased minimum wages to combat inflation:
    • UK: 9.8% increase in national living wage.
    • Canada: 3.9% increase in federal minimum wage.
    • Belgium: Minimum wage exceeds ₹2,000 per month.

Living Wage in India

  • Current minimum wage is ₹176/day or more, but:
    • Lacks enforceability across states.
    • Hasn’t increased since 2017, leading to wage disparities.
  • Living wage varies by region: As of 2018, ₹10,300/month was reported for an individual.

Impacts of Living Wage

  • Contractual Staff:Many non-permanent workers currently receive minimum wage.
    • Transition could significantly impact their income.
  • Consumption:Increased wages could lead to higher consumption and economic growth.
  • Inflation:Wage-push inflation could occur, raising overall prices.
  • Income Inequality:Living wages could help narrow the gap between rich and poor.
  • Businesses:Some businesses, especially SMEs, may struggle with increased labor costs.
    • Potential impact on profitability and sustainability.

International Labour Organisation (ILO)

  • Founded in 1919, a specialized UN agency promoting workplace rights and decent work.
  • India is a founding member.
  • Aims to:
    • Promote rights at work.
    • Encourage decent employment opportunities.
    • Enhance social protection.
    • Strengthen dialogue on work-related issues.


  • Shifting to a living wage aims to improve lives of Indian workers, especially contractual staff.
  • It targets poverty reduction and improved well-being.
  • India’s collaboration with ILO for a well-defined system is crucial for successful implementation.






Leave a Reply

Your email address will not be published. Required fields are marked *