Concept of Minimum Wages, Fair Wages and Living Wages

Author: Meenakshi Dixit

college name: Banasthali Vidyapith

Introduction

The concept of minimum wages, fair wages and Living Wages is widely approved and desirable in developing countries majorly. It ensures that no person is exploited by way of unpaid labour and maintaining guaranteed equality in payment of remuneration. The International Labour Organisation (ILO) Protection of Wages Convention, 19491 gives a very wide definition of the term “wages”. It covers the payment made by employer to employee who may be employed on regular, casual, short term, intermittent or seasonal jobs, and trainees. Wages may be synonymously used as remuneration or earnings but it does not include income from self employment such as a stationary owner. There is also a concept of Gross Wages and Net Wages (India Wage Report: Wage policies for decent work and inclusive growth , 2018). The former refers to wages without any deduction of taxes, employee’s contribution to social security benefit, pension scheme and so on. Net wages represent the employee’s disposable income which is left after deducting abovementioned expenses. Therefore, it is essential to ensure that the net wages must be appropriate, otherwise the concept of equitable wages would be illusory.

Minimum Wages

The Committee on Fair Wage has described minimum wages as the wage rate which fulfills criteria of maintaining efficiency of workers apart from mere sustenance. Therefore, it must be such as to provide education, medical requirements etc. This is also called statutory minimum wages. The other is industrial minimum wage which is to be necessarily paid by the employer to be allowed to continue an industry.

Section 2(h) of the Minimum Wages Act,1948 defines wage as remuneration, capable of being expressed in terms of money, paid for fulfilment of contract of employment whether express or implied but does not include value of any house accommodation, light supply, travelling allowance and such others.

This act seeks to prevent exploitation of labours in unorganized sector. It lessens the vulnerability of wages to be decided on basis of free play of market forces. Although it nowhere defines minimum wages but provides for its determination to be done by appropriate government2 and its revision after every five years. It can be in form of minimum piece rate, minimum time rate etc.

Changes brought through ILO conventions

Since its creation in 1919, the ILO adopted various conventions on improvement of wages and protection to labourers. It adopted Minimum Wages Fixing Machinery Convention, 19283 providing for minimum wages particularly in workers employed in trades. Further, it adopted Minimum Wages Fixing Machinery (Agriculture) Convention4 wherein the agriculture and some other sectors were included under protection.

Minimum Wages as Constitutional Guarantee

Article 14, 16, 23, 32 etc mandates protection of interest of workers in unorganized sector. In the case of Daily Rated Casual Labor v/s Union of India5, it was held that daily rated casual labors who were doing the similar work as done by regular workers of the P&T Department were entitled to minimum pay in the pay scale of regular employees. And that the classification of employees into regular and casual for paying ages less than minimum pay is violative of article 14 and 16.

In Sanjit Roy v/s State of Rajasthan6, it has been held that payment of wages lower than minimum wages to the person employed in Famine Relief Work is violative of article 23.

Peoples Union for Democratic Rights v/s Union of India7, there was deduction of rupee 1 per day in wages of workers employed in Asiad Projects in Delhi as a result, workers did not get minimum wages of Rs. 9.25 per day. Justice Bhagwati said that if remuneration for labor or services is less than minimum wages, it amounts to forced labor under article 23 (Right Against Exploitation, 2020).

Fair Wages

The concept of fair wages involves rate of wage which is sufficiently high enabling the worker to maintain his family with adequate food, education, clothing, medical care and so on. It is the average between minimum wages and living wages. It connotates the wage related to the earning capacity and workload, implying that the people in same occupation must be paid equal wages, irrespective of their employment under different enterprises.

In the case of Hindustan Times Ltd. v/s Their Workman8, Justice Hidayatullah, said that fair wages lie between minimum wages which is inevitable and the living wages which is the goal.

In Express Newspapers v/s Union of India9, the validity of Working Journalists Act was challenged which regulated conditions of service of workers in Newspaper industry, in terms of hours of work, leave, fixation of wages etc. it was held that press is not immune from laws of general application. This act is valid as it seeks to ameliorate the conditions of workmen. Justice Bhagwati described fair wages as mean between living wage and minimum wage.

Determination of Fair Wages

The Committee on Fair Wages has observed that it is not possible to assign any definite weightage to any factor for determining fair wages, as the economic and social conditions undergoes variations from time to time. Some of the factors taken into consideration are:

I. Productivity/ performance of the worker

II. Level of National Income and distribution

III. Position of the industry in economy of nation

IV. Prevailing rate of wage in similar occupations

The Fair Labor Association (FLA) is cooperatively working with NGOs, companies etc to improve conditions of factories all around the world. It has developed a workplace code of conduct based on ILO standards and monitors conditions based upon it.

Living Wages

The sweating nature of work implying low pay, long hours and poor working conditions in industries and other unorganized sector raised demand for living wages. It can be defined as standard wage rate sufficient for worker and his family to have a decent living standard in a particular location. It must allow the worker to maintain savings for unprecedented events and also to be able to take part in social and cultural life.

Article 43 of the Indian constitution gives a directive to state to ensure to all workers, agricultural, industrial or otherwise, a living wage, conditions of decent standard of life and full enjoyment of leisure etc.

The ILO 10 and United Nations instruments 11 have recognized living wages as a human right (Telkki, 2015 ). The living wages is a normative concept. In case of All India Reserve Bank Employee Association v/s Reserve Bank of India12, it was observed that living wages is an ideal and will remain so for some time to come but it may be achieved with our persistent efforts.

Former Chief Justice Subba Rao has remarked in case of Hindustan antibiotics ltd. v/s their workman13 that the standard of life of the labor can be progressively raised by shifting from minimum wages & fair wages to living wages.

The determination of living wages varies from region to region and depends on factors such as cost of living/ price of necessities of life, portion of savings/insurance, number of fulltime workers in the household and such others.

Comparative benefits of minimum wages, fair wages and living wages

There are various social and economic benefits. Social benefit allows a worker to have sufficient purchasing power and to fulfill his necessities, which in the long run would prevent him from falling in poverty. Economic benefit implies that the provision of appropriate wages would motivate the worker to take effort and initiative in production, which in turn would increase the national income and growth.

Minimum wages are beneficial as they are statutory obligation and cannot be evaded in any case. Its deprivation would amount to exploitation and the workers have right to enforce it.

Fair wages enable equality in wage rate across occupations that involve similar work as well as equity in wage rate as per the efforts and services rendered. It is also enforceable and judiciary always gives protection against its infringement.

The living wages are applicable on all the nations whether advanced or underdeveloped. It has emerged as an ideal/goal to be achieved. It benefits the workers by providing them with sufficient wages that allow them to secure all the social security benefits and such conditions of work as equitable to organized sector.

Therefore, it is necessary to have healthy wage conditions as it not only eliminates non compliance but also promotes worker’s loyalty to the enterprise, improving worker’s skills, and enhancing stability.

1 Convention No 95

2 Section 3(2) Fixing of minimum wages under act of 1948

3 Convention No. 26

4 Convention no. 99, 1951

5 (1988) 1 SCC 122

6 AIR 1983 SC 328

7 AIR 1982 SC 1943

8 AIR 1963 SC 1332

9 AIR 1958 SC 578

10 ILO Convention 131, 1970 highlights ILO’s view on living wages as determined by considering needs of worker and his family

11 Article 23 of UN universal Declaration of human rights, 1948

12 1966 AIR 305

13 1967 AIR 948