The concept of the living wage is distinct from, but closely related to, the notion of the much talked about universal basic income
The idea of a living wage for workers is not something new. In India, it has been discussed ever since Independence, along with the concepts of a minimum wage and a fair wage. The minimum wage is usually calculated on the basis of survival needs and minimum calorific requirements. The living wage, on the other hand, is conceived of as being much higher than the minimum wage, with the inclusion of estimates made for spending on education, healthcare, transport and shelter over and above the requirements of food and clothing. The fair wage is usually computed as lying somewhere between a living wage and the minimum wage. The International Labour Organization had pointed out in the India Wage Report of 2018 certain flaws in how minimum wages are calculated in India. Living wages would, obviously, be expected to be significantly higher than the minimum wages prescribed in India for many types of employment. The Bharatiya Mazdoor Sangh, a workers’ union, for instance, wants the living wage to be at least 10% of the highest salary received in the economy. The tricky issue is this: who would pay the living wage? Would it be the government or the direct employer? For the government, the fiscal implications of such a scheme could weigh heavily on the size of public debt. Private-sector employers, on the other hand, would be reluctant to pay higher than necessary wages in fear of lower profits.
The concept of the living wage is distinct from, but closely related to, the notion of the much talked about universal basic income. But both these concepts ensure that everybody in an economy is receiving at least an adequate income for a decent living. In the former, people have to obtain employment for earning a living wage; in the latter, to receive a universal basic income, one need not have to work. The living wage is a morally superior notion as there are no free lunches being passed around. Overall demand in the economy for consumer goods would increase with a less skewed distribution of income. Ideally, direct employers ought to pay a living wage through some fiscal incentives like lower taxes for employers. However, if a worker loses employment, the living wage would be lost too. In such a case, would personal savings suffice? Or would the importance of a social safety net become critical? In an economy where employment or the minimum wage guaranteed is uncertain, the idea of living wages must be contemplated with seriousness.
Source: The Telegraph, 7/02/23
