Introduction
India has more than five hundred million workers, ninety percent of whom are in the unorganised sector. Wages play a critical role in the life and livelihood of both the organised and the unorganised worker. With this in mind, the Government of India aims to replace “minimum wage” with “living wage” by 2025, signifying a profound shift in its approach to worker welfare. The move comes after the International Labour Organisation 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 transition from minimum wages to living wages is integral to India’s pursuit of its Sustainable Development Goals, particularly Goal 1 of eradicating poverty by 2030. By providing workers with wages that enable them to escape the cycle of poverty, India can make significant strides towards achieving this ambitious goal.
The journey towards ensuring fair wages in India dates back to the enactment of the Minimum Wages Act, 1948, which aimed to establish a basic threshold for wages across various industries. This article aims to shed light on the challenges and opportunities in achieving the goal of implementing living wages in India, a significant move up beyond mere minimum wage.
Understanding the Wage Concepts
The various levels of wage that are commonly discussed are Minimum Wage, Fair Wage, and Living Wage.
Minimum Wage
According to the ILO, Minimum Wage refers to the minimum 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. India currently follows a minimum wage system, in accordance with the Minimum Wages Act, 1948.
The Indian Parliament passed the Code on Wages 2019, which among other laws, subsumes the Minimum Wages Act. Under the new Code on Wages 2019, the National Floor Wage is set by the Central Government which mandates the establishments to set minimum wages no less than the national floor wage. The minimum wage rates may be revised from time to time by the respective State Governments but under no circumstances can it be below the floor wage specified by the Central Government for that particular State or geographical area or be below the existing minimum wage.
Fair Wage
In Hindustan Times Ltd., New Delhi v. Workmen, the Hon’ble Supreme Court defined fair wage as something above minimum wage, in the sense of a wage which is “adequate to cover the normal needs of the average employee regarded as a human being in a civilised society”. The concept of Fair Wage is linked with the capacity of the industry to pay.
Living Wage
Living Wage is defined by the ILO as the wage level 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 normal hours, and raises the possibility of participating in the country’s social and cultural life. It is therefore higher than both a minimum wage and a fair wage.
Tracing the Legacy of Living Wages Over Time
Living Wage under the Constitution: The idea of a living wage is not a recent development in India, as it is already enshrined within Part IV of the Constitution of India, dealing with the Directive Principles of State Policy (DPSP). Article 43 of Part IV which mentions that the State shall endeavour to secure to all workers a living wage etc., and a decent standard of life.
Judicial Observations:
In All India Reserve Bank Employees Association Vs. Reserve Bank of India, Justice Hidayatullah (as he then was) observed that our political aim is ‘living wage’ though in actual practice living wage has been an ideal that has eluded our efforts like an ever-receding horizon and will so remain for some time to come. Our general wage structure has at best reached the lower levels of fair wage though some employers are paying much higher wages than the general average.
Further in Hindustan Antibiotics case (1967) the Supreme Court opined that “The prosperity of the country, in its turn, helps to improve the conditions of labour. By this process, it is hoped that the standard of life of the labour can be progressively raised from the stage of minimum wage, passing through need found wage, fair wage, to living wage.”
Importance of shifting from Minimum Wages to Living Wages
Shifting to living wages can have far-reaching benefits for India’s economy. workers are more productive, healthier, and better able to contribute to economic growth. Moreover, increased purchasing power among workers stimulates demand for goods and services, thereby fueling economic activity and job creation.
Challenges in shifting from Minimum Wage to Living Wage
Disparities in the Cost of Living Among Different States: Implementing a national living wage framework across diverse States with varying costs of living is a formidable challenge. It would require the computation of cost of living in various parts of the country and then arriving at a living wage by region, State or population (eg. metropolitan vs. non-metro) etc.
Financial Pressure on Small and Medium Enterprises (SMEs): While the transition to a living wage is a progressive step, it poses challenges for industries, particularly small and medium enterprises (SMEs). They may face financial strain due to increased labor costs. The impetus may be to move industries out of zones that have a higher living wage and go to areas that have a lower living wage which in turn may benefit overall economic growth but will be a serious burden to the employers.
Enforcement and Compliance: Ensuring compliance with a living wage mandate, particularly in sectors with a high prevalence of unorganised employment, poses a considerable challenge. Strengthening enforcement mechanisms and fostering a culture of compliance are essential.
Conclusion
The concept of “living wages”, rooted in constitutional principles and international labor standards, supports India’s pursuit of sustainable development and human rights. Despite challenges, India’s commitment to harmonising economic growth with social justice through a multi-stakeholder approach can pave the way for inclusive growth and equitable opportunities. Although the Code on Wages 2019, is silent on Living Wage, it does contain a provision for the prescription of a Floor Wage for different geographical locations or States. A Government with political will and mandate of the people with a balanced socio-economic approach can make use of the soon to be enforced Codes on Wages and prescribe suitable floor wages or different floor wages that align with the Living Wage for those particular locations and make the achievement of living wage for its working population, a reality in the near future.
Despite all of this, the fact that a vast majority of workers in India do not fall within the ambit of employment law will likely make enforcement of a living wage, as with a minimum wage, difficult. It will be interesting to see what steps the Government takes to implement its obligations and what changes it will make to the legal framework for this purpose.
-Arvind Moorchung,
Advocate & Associate Partner
-Smrithy Suresh,
Advocate & Associate
