Can India Ensure Living Wages at a Time When Workers Struggle for Minimum Wage?

India is reportedly seeking the ILO’s technical support to replace its minimum wage with a living wage by 2025.

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On 13 March, the International Labour Organisation’s Governing Body endorsed an agreement on living wages reached in February during a tripartite meeting of experts on wage policies.

The new definition states that a living wage is "the wage level necessary to afford a decent standard of living for workers and their families, taking into account country circumstances and calculated for work performed during normal hours.”

Interestingly, on 25 March, quoting an unnamed official from the Indian Ministry of Labour, the media reported that India is seeking the ILO’s technical support to replace its minimum wage with a living wage by 2025.

Before we engage in the debate about whether the Indian government can guarantee living wages for workers by 2025, understanding the history of Indian wages is crucial.

India's Wage History

India enacted the Minimum Wages Act in 1948 to ensure workers in low-paid informal jobs received a minimum wage. However, the Act itself didn't specify how minimum wages should be determined.

Since labour and employment fall under the Concurrent List of the Indian Constitution, both the federal and state governments set minimum wages for various occupations. This resulted in a complex system with over 1,900 minimum wage rates across India.

Meanwhile, in 1957, the 15th Indian Labour Conference (ILC) established the first national framework for setting minimum wages. This framework emphasised that minimum wages should be based on the needs of workers to ensure they can meet their basic necessities. This included factors like daily calorie intake, clothing requirements for a family, and housing costs.

Over time, different approaches to minimum wage determination emerged. In 1969, the first National Commission on Labour believed a uniform national minimum wage wasn't practical. Instead, they advocated for regional minimum wages tailored to specific areas within each state. They also highlighted the importance of considering an industry's ability to pay while setting minimum wages.

Finally, in 1991, the National Commission on Rural Labour (NCRL) proposed establishing the National Floor Level Minimum Wages (NFLMW) based on the rural poverty line, with periodic adjustments to reflect inflation. This NFLMW was implemented in 1996, but currently stands at Rs 176 per day and is only an advisory recommendation, not a legally binding requirement.

Minimum Wages Deprived

Critically, the NFLMW's lack of legal enforcement creates significant loopholes in wage protection for Indian workers. The NFLMW may look good on paper, but the reality for workers on the ground paints a different picture. In essence, minimum wage regulations in India are often poorly enforced, leaving many workers betrayed by the system.

During my investigations into forced labour in the Andhra Pradesh shrimp industry in 2022 and 2023, I uncovered a troubling reality regarding wages. Even companies exporting shrimp to the United States were not paying the minimum wage mandated by the Andhra Pradesh government for their workers.

The Indian government stipulates minimum wages in the shrimp industry to range between Rs 504 and Rs 751 per day. However, local and migrant workers I interviewed reported receiving only Rs 300 to Rs 350 daily. Additionally, these workers lacked formal job contracts.

Recruitment happened through middlemen, the pay was based on piecework (amount processed), and most workers preferred daily wages to avoid deductions for benefits from their already meagre income of Rs 300.

I also found that migrant workers in these factories faced additional disadvantages compared to local Telugu workers. While a local worker from a nearby village might receive Rs 300 for an eight-hour shift, a migrant worker would get the same Rs 300 but with Rs 10 or Rs 20 deducted by the middlemen who recruited them. Even though company hostels provided them with shelter, migrant workers were still classified as daily wage earners, receiving no benefits.

Since these workers weren't unionised, they lacked the right to collective bargaining for decent working conditions and fair wages. Interestingly, none of the workers I interviewed were aware of the benefits of unionisation. Although these workers perform industrial work, qualifying them as organised sector employees, their recruitment as daily wage earners without proper procedures pushes them into the unorganised sector. This deprives them of the collective bargaining rights typically associated with organised labour.

In India, as per the Economic Survey, 2021-22, the total number of people working in the unorganised sector is around 43.99 crores during 2019-20. The Ministry of Labour and Employment says that the workers in the unorganised sector constitute about 93 per cent of the total workforce in the country.

In other words, the reality on the ground is that 93 per cent of the country's total workforce - the unorganised workers or those in the informal economy - lack union representation and collective bargaining power. This leaves them deprived of even the minimum wage.

Examining the working conditions of India's vast private sector, particularly among unorganised workers, will reveal signs of forced labour. This concern is underscored by a recent ILO report. The report found that a staggering 86 per cent of forced labour cases involve private actors, and it generates illegal profits of $236 billion annually on a global scale.

An Unfulfilled Dream

Despite the enactment of the Minimum Wages Act in 1948, a staggering 76 years ago, ensuring minimum wages for most Indian workers remains an unfulfilled dream. Regardless of the reasons and complexities presented by the federal and state governments, the implementation of the Act has demonstrably failed on the ground.

The Indian government's pledge to transition from minimum wages to living wages by 2025 faces scepticism given the ongoing challenges in implementing minimum wages effectively.

Living wages, which consider social and economic factors to ensure worker well-being, are inherently higher than minimum wages. This raises concerns about the feasibility of this ambitious plan without addressing the existing gaps in minimum wage implementation.

The ILO living wage agreement stresses the critical roles to be played by empowered wage-setting institutions and instruments, particularly social dialogue and collective bargaining, and stresses that governments and social partners should “ensure the incremental progression from minimum wages to living wages.”

Unfortunately, the ground reality reveals a lack of social dialogue and collective bargaining, even in the context of minimum wage implementation.

In the living wages case, the ILO also sets out several basic principles for estimating living wages, including the use of evidence-based methodologies and robust data that are transparent and publicly available, consultation with social partners and regular adjustments to reflect costs of living changes, and the consideration of regional and socio-economic realities.

Ignoring the socio-economic realities, the Indian government consolidated the 44 labour laws into four Labour Codes. A critical examination of these codes reveals a potential weakening of worker protections, particularly regarding job security, wages, and working conditions.

The ILO also adds that living wages should not be a one-size-fits-all approach and should reflect local or regional differences within countries, adding that a sustainable strategy to promote living wages should go beyond the realm of wage-setting mechanisms alone and include a broader consideration of factors.

Crucially, the Indian government currently lacks a demonstrably sustainable strategy to promote minimum wage compliance.

I would say that the Indian government's pledge to transition from minimum wages to living wages by 2025 is an ambitious goal. While a living wage that factors in worker well-being is certainly desirable, the success of this initiative hinges on addressing current challenges.

The reality in India is that a significant portion of the workforce, particularly in the informal sector, struggles to receive even the minimum wage. Weak enforcement mechanisms and a lack of collective bargaining power for unorganised workers create significant roadblocks.

Therefore, achieving a living wage requires a multi-pronged approach.

Strengthening minimum wage implementation, fostering social dialogue between employers and workers, and improving enforcement mechanisms are crucial first steps. Only then can the promise of a living wage translate into tangible improvements in worker livelihoods.

(Rejimon Kuttappan is an independent journalist, labour migration specialist and author of Undocumented [Penguin 2021]. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)