TAG: GS 3: ECONOMY
THE CONTEXT: India is poised to shift from its traditional minimum wage system to a more comprehensive living wage system by 2025.
EXPLANATION:
- This transition signifies a significant departure from the existing framework and aims to address the challenges faced by millions of workers in the country.
- To facilitate this transition, the Indian government is seeking technical support from the International Labour Organisation (ILO).
- The assistance is intended to develop a robust framework for estimating and implementing the living wage system effectively.
- The move aligns with the recent endorsement of the living wage concept by the ILO.
- This endorsement, achieved during a Meeting of Experts on wage policies in February, underscores the global recognition of the importance of ensuring fair wages for workers worldwide.
- The primary objective behind this transition is to accelerate efforts to lift millions of Indian workers out of poverty and ensure their overall well-being.
- This shift is particularly crucial given the large proportion of the workforce employed in the unorganised sector, estimated to be around 90%.
Challenges with Minimum Wage System:
- Despite the existence of minimum wage regulations, challenges persist, including wage payment discrepancies and stagnation in the national wage floor since 2017.
- These issues underscore the limitations of the current system in ensuring adequate compensation for workers across various sectors and regions.
Code on Wages (2019):
- India’s commitment to wage reform is evidenced by the passing of the Code on Wages in 2019.
- This legislation proposes a universal wage floor that will apply uniformly across all states once implemented, addressing the disparities and inconsistencies prevalent in the current wage structure.
Utilizing ILO Assistance for Capacity Building:
- India’s decision to seek assistance from the ILO for capacity building and systemic data collection reflects its commitment to effectively implement the living wage system.
- By leveraging international expertise and best practices, India aims to streamline the transition process and achieve tangible outcomes.
Definition of Living Wage:
- A living wage is defined as the wage level necessary to afford a decent standard of living for workers and their families, taking into account the country’s socio-economic conditions.
- It is calculated based on the cost of essential goods and services required to maintain a reasonable quality of life.
- India’s transition to a living wage system aligns with its broader commitment to achieving the Sustainable Development Goals (SDGs) by 2030. In particular, it contributes to the goal of promoting decent work and economic growth, emphasizing the importance of equitable remuneration for all workers.
Economic Capacity and Growth Implications:
- India’s robust economic growth, evidenced by a growth rate of 8.4%, suggests the country’s capacity to support higher wages.
- By implementing living wages, India aims to not only improve the standard of living for its workers but also stimulate economic growth through increased consumer spending and reduced income inequality.
International Labour Organization (ILO):
- The only tripartite U.N. agency, since 1919 the ILO brings together governments, employers and workers of 187 Member States, to set labour standards, develop policies and devise programmes promoting decent work for all women and men.
- It was created in 1919, as part of the Treaty of Versailles that ended World War I, to reflect the belief that universal and lasting peace can be accomplished only if it is based on social justice.
- The Constitution of the ILO was drafted in early 1919 by the Labour Commission
- It became the first affiliated specialized agency of the United Nations in 1946.
- Its headquarters is in Geneva, Switzerland
- Its founding mission is “social justice is essential to universal and lasting peace”.
- It promotes internationally recognized human and labour rights.
- It received the Nobel Peace Prize in 1969.