Types of Wages

Wages can broadly be divided into three categories—Living Wages, Minimum Wages and Fair Wages.

Determination of wage rate is a basic problem of an organisation. This question is an important question from all points of view— economic, social, political, and moral. The central point of all the labour problems in an organisation is the wages and salaries.

This question determines the capacity of the production, the rate of productivity, efficiency of labour, cost of production, sale price of commodity, profits of the organisation and industrial peace in the country. So, the need is to consider the problem very carefully and to take the decision in this regard only after careful analysis of various factors scientifically and psychologically and with human approach.

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Types of Wages

Brief description of these types of wages is as under:

Type # 1. Living Wages:

Living wages means the wages that may be sufficient to provide for the bare necessities as well as certain amenities for the employee. It means the level of wages that may be sufficient to provide for the bare necessities and such amenities that are considered necessary for the well-being of the employee and his family members in accordance with his social status.

Article 43 of the Constitution of India States that “The state shall endeavour to secure by suitable legislation or economic organisation or in any other way to all workers, agricultural, industrial or otherwise work, a living wage, conditions of work ensuring decent standard of life and full enjoyment of leisure and social and cultural opportunities….”

The term Living Wages has been defined as -The Fair Wage Committee Report, “The living wage should enable the male earner to provide himself and his family not merely the base essentials of food, clothing and shelter but a measure of frugal comfort including education for the children, protection against ill health, requirements of essential social needs, and measures of insurance against the more import misfortunes against old age.”

Justice Higgives, “Living wage is a wage sufficient to ensure the workman food, shelter, clothing, frugal comfort, provision for evil days etc., as regard for the skill of an artisan, if he is one.”

Thus, Living Wage must provide not only for the bare necessities, such as—food, clothes and shelter, but also for some comforts and amenities estimated by current human standards such as—travelling, health, education of children, social needs, old age and recreation etc.

Problems of Adequate Wages in India:

Uttar Pradesh Labour Enquiry Committee has described four types of standards of living to determine the problem of adequate wages in India.

These Standards of Living are as Follows:

1. Minimum Subsistence Level:

When an employee gets the remuneration enough only for providing the bare necessities for himself and his family members, is called minimum subsistence level. In this situation, the remuneration of an employee can meet only the bare requirements for himself and his family members.

2. Comfortable Level:

When an employee can provide for all the bare necessities and can enjoy all the amenities, it is called comfortable level, in this case, the remuneration of an employee is so high that he can provide for all the bare necessities and meet all the requirements of comfort for himself and his family members.

3. Poverty Level:

When an employee is unable in providing for bare necessities also for himself and his family members, this situation is known as poverty. In this situation, the remuneration of an employee is less than he requires for providing food, clothes and shelter for himself and his family members.

4. Semi-Comfortable Standard of Living:

When the remuneration of an employee is sufficient for providing the bare necessities and meeting social needs, it is called Semi-comfortable level. In this case the employee can provide for the basic needs of clothes, food, and shelter for himself and his family members. Besides he can meet his social needs also such as—maintenance, education of children, travelling, insurance and recreation etc.

On the basis of above classification, the adequate wage in India can be determined easily. In the present economic conditions of our country, Semi-comfortable level can be taken as the basis of wage determination. The wages of employees should enable them to maintain their efficiency.

Type # 2. Minimum Wages:

According to Fair Wages Committee, “Minimum Wages should provide not only for the bare necessities of a worker. It should also provide for the maintenance of efficiency of the worker. From this point of view, minimum wages must be sufficient to provide for all requirements of education, health and other essential amenities”.

Minimum Wages means the minimum payment to worker so that he may be able in providing for basic needs for himself and his family members and to maintain his working efficiency only. Some other scholars are of the view that minimum wages should also provide for minimum education, medical facilities and other amenities. According to them, minimum wages should ensure a minimum standard of living considering the health, efficiency and well-being of the worker.

What should be the amount of fair wages is a question for which no specific answer can be given. It depends upon the economic, social and geographical factors of the country. Besides, it depends upon the size and paying capacity of the enterprise also.

However, it can be said that minimum wages is the amount that is enough for providing basic needs of the worker and his family and to enable him to maintain his efficiency.

Objects of Minimum Wages:

Important objectives of minimum wages are as under:

1. To maintain the efficiency of workers, particularly in the industries where the workers do not get fair wages.

2. To check the unhealthy competition among entrepreneurs.

3. To discourage the strikes, lock-outs and industrial disturbances so that industrial peace may be maintained.

4. To check the exploitation of workers by the entrepreneurs.

5. To increase the efficiency of workers.

6. To protect the interests of workers, particularly when the workers are not organized.

7. To strengthen labour unions.

8. To help the workers in maintaining and increasing their standard of living.

9. To check the unhealthy competition among the workers.

10. To provide economic and social justice to the workers.

11. To increase the productivity of workers.

12. To improve the management system.

Type # 3. Fair Wages:

It is very difficult to give a precise definition of Fair Wages because it varies from country to country and from time to time. Therefore, it is possible that an amount of wages that is fair for one country at one time may not be fair for another country or for next time. Therefore, fair wages can be determined only after considering the specific circumstances of the industry for which the wages are to be determined.

The term ‘Fair Wages’ has been defined as under:

Encyclopedia of Social Sciences, “Fair wages mean the remuneration which is paid to the workers for the jobs requiring equal efficiency, difficulty and pains.”

Prof. Marshall, “Rate of wages in a particular industry can be regarded as fair wages only when it is almost equal to the wages which is paid in other industries for the works which are of the same caliber and equally difficult and require almost equal efficiency and training.”

Prof. Pigou, “Fair wages is the wages which is paid at the rate which is being paid to the workers of same status in the enterprises of the same type and of near-by areas”.

On the basis of analytical study of above definitions, it can be concluded that Fair Wages is the amount of wages that may provide the basic needs and amenities to the workers according to their social status.

Fair Wage is more than minimum wages. Fair Wage is determined after considering several factors such as the wages paid for similar work in other trades and industries requiring same amount of ability and adjustment, productivity of the labour and paying capacity of the industry. Fair Wage is determined between the lower and upper limits. The lower limit of wage is the minimum wage and the upper limit is the capacity of the industry to pay.

Norms for the Fixation of Minimum Wages:

The 15th Indian Labour Conference considered the question of minimum wage and adopted a resolution, the relevant portion of which is reproduced below:

With regard to the minimum wage fixation it was agreed that the minimum wage was need based” and should ensure the minimum human need of the industrial worker, irrespective of any other considerations. To calculate the minimum wage, the committee accepted the following norms and recommended that they should guide all wage fixing authorities, including minimum wage committees, wage boards and adjudicators etc.

(i) In calculating the minimum wage, the standard of working class family should be taken to consist of three consumption units for earners; the earnings of women, children and adolescents should be disregarded.

(ii) Minimum food requirements should be calculated on the basis of a net intake of 2700 calories, as recommended by Dr. Aykroyd for an average Indian adult of moderate activity.

(iii) Clothing requirements should be estimated at per capita consumption of 18 yards per annum which should give for the average worker’s family four, a total of 72 yards.

(iv) In respect of housing, the norm should be the minimum rent charged by government in any area for houses provided under the Subsidised Industrial Housing Scheme for low income groups.

(v) Fuel, lighting and other, “Miscellaneous” items of expenditure should constitute 20 per cent of the total minimum wage.

While agreeing to these guidelines for fixation of minimum wage for industrial workers throughout the country, the committee recognized the existence of instances where difficulties might be experienced in implementing these recommendations. Wherever the minimum wage fixed went below the recommendations, it would be incumbent on the authorities concerned to justify the circumstances which prevented them from adherence to the norms laid down.

The resolution has been considered as ‘important, as for the first time, it has tried to give correctness to the whole concept of minimum wage. The Wage Boards were asked to keep in view the norms laid down in the resolution while making their recommendations.

However, the committee on the functioning of the system of wage boards reported that the majority of wage boards had not found it feasible to fix the “need-based minimum” of the wage because of one or more of the following reasons:

(i) It would be beyond the capacity of the industry to pay;

(ii) It would result in excessive and abrupt increase in wages;

(iii) It would unduly affect the relativity of wages among industries in the same region; and

(iv) It would be extravagance at the cost of the consumer on whom the burden of increase wages and salaries would fall.

It should, however, be noted that the committee on Fair Wages categorically stated that an industry which was incapable of paying the minimum wage had no right to exist. The Committee was of the definite view that for fixing minimum wages no regard should be paid to the capacity of an industry to pay and it should be based solely on the requirements of worker and his family.

On the other hand, the upper limit of the fair wage, according to the committee on fair wages (C F W) “is equally set by what may be called the capacity of the industry to pay.” It is, thus, obvious that the Committee is of the view that, while fixing the minimum wage no regard should be paid to the capacity of the industry to pay and it should be solely based on the requirements of the worker and his family. But, the upper limit of fair wages should be based solely on the capacity of the industry to pay.

But, the National Commission on Labour was of the view that capacity to pay of the industry should be taken into account, while fixing fair wage, “the need-based minimum wage is also a level of fair wage and represents a wage higher than the minimum obtaining at present in many industries, though it is only the lower reaches of the fair wage. We, therefore, hold that in fixing the need-based minimum, the capacity to pay will have to be taken into account.