As the name suggests, 'minimum wages
' are the most basic or minimal
amount of remuneration that any employer pays to the wage earner or employees,
for the work which is performed during a specified or given period. The
definition of minimum wages gives a binding characteristic to its operation
i.e., these wages are ought to be paid, regardless of the empirical method which
is employed to fixing such wages.
Broadly, the central tenant to fixing minimum wages is to safeguard the workers
against the exploitative cycle of low pay. Minimum wage may act as means to
protect several small-scale workers who are vulnerable to exploitation because
of lack of knowledge and coordination on part of wage earners.
Secondly, this not only protects the most low-paid or vulnerable workers but
also the worker groups for whom is it necessary to ensuring maintenance of wages
at 'equal pay for equal work' or at 'appropriate level,' like women.
Thirdly, it acts as a 'safety net' or threshold to keep poverty in check, and
aids workers to keep afloat above the poverty line. Lastly, it serves as a
quintessential tool to the macro-economic policy considerations like economic
stability, growth of national objectives, distribution of income etc.
Thus, the demand for fixation of minimum wages, that first arose out of the
distress of the exploitation of wage earners in 'sweated-industry,'
expeditiously spread across the non-sweated industry as well, especially
industries where the workmen were either weakly organized or unorganized. The
International Conference/ Geneva Convention of 1928 prescribed setting up
minimum a 'minimum wage-fixing machinery' for industries where there existed no
arrangement of effective regulation of wages. Article 223-228 of International
Labour Code embodies the spirit of minimum wages.
In fact, the preamble of the legislation adopted by the Indian government i.e.,
the Minimum Wages Act, 1948, concurs with the objectives of Article 224 of
International Labour Code. Furthermore, Part III as well as Part IV of the
Indian Constitution replicates the commitment towards a minimum wage-machinery
and guides the Executive to comply with the same.
The concept of minimum wages encompasses within itself a vertical hierarchy of
wages. Under such hierarchy, the highest standard is set by 'ideal wages'
followed by a 'living wages' which is followed by 'fair wage.' At the bottom
comes minimum wage. Thus, it could be said that basic minimum wage only provides
for the bare subsistence, falling just above poverty line, while other wages
that are above minimum wage provides essential commodities and frugal comforts.
However, recent judicial precedents like Kamani Metals have ruled that
minimum wage should not only cover basic sustenance but other standards like
clothing, healthcare, children education and other amenities that enhance the
viability and productivity of the workmen.
Therefore, the Indian courts are committed towards limiting the gap between the
wages of vertical hierarchy. Nonetheless any sovereign nation or governments
cannot circumvent the inherent element that premeditates the amount of minimum
wage- the financial capability of the nation or simply 'national income.'
Even though the goal is to equate the minimum wage to an ideal wage or living
wage, every nation is constrained by the affordability of setting the standard
of minimum wage to an ideal level due to its prevailing economic conditions.
Thus we could imply that minimum wage of any country is directly proportional to
its national income, and developed nations like France, Canada, United States
etc. enjoy higher average minimum wage in comparison to developing and poor
In comparison to India, Latin American countries roughly use the same criteria
to determine minimum wage. Firstly, it investigates the vital needs of workmen,
secondly by comparing salaries to industry profits (employer's ability to pay),
thirdly by the cost-of-living index and lastly by inquiring into the demands of
economic developments. Latin American countries specifically emphasize on the
first two criteria to establish an equilibrium between interests of employers
Mexico's model of wage determination, that is largely followed by other Latin
American countries, is congruent to minimum wage standard in India as it
concentrates on additional amenities like health care and children education
rather than bare sustenance. As ruled under Hydro (Engineers) Private Ltd.
that determination of minimum wages would account the prevailing cost of
economic commodities, several Latin American countries like Costa Rica, Chile
follow the Mexican model to fix the minimum wage in proportion to cost of
'market basket' i.e., current price of goods and services, that again is
identical to the Indian model.
With regards to the wage setting procedure, India uses Section 5 & 8 of The Code
on Wages, 2019 (successor to Minimum Wages Act, 1948) to employ the procedure
for setting minimum wages. Under the Indian legal position, the legislature has
expressly enumerated a binding legislative policy to determine minimum wage. The
executive/ appropriate government is merely charged with the duty of
implementation of that policy.
The lawmakers in India had foreseen that concept of fixing minimum wages is a
dynamic exercise and the legislature is not equipped with sufficient means to
investigate every industry. Thus, it delegated its powers to the Executive, to
apply its own discretion but within the ambit of set legislative policy, as
established by legislature in the statute. Hence, such a demarcation compliments
the doctrine of separation of powers.
On the contrary wage fixation in Latin American varies from one country to
another. Some employ strict legislative actions while others use an executive
decree, like setting up a specialized agency. Majority countries follow the
Mexican approach i.e., to appoint a National Commission, for setting minimum
These commissions are established under autonomous departments, composed of
representatives and shareholders from all interested parties. Moreover, these
commissions are tasked to periodically review the rates for effective
regulations. Nevertheless, other countries like Dominican Republic follow a
strict legislative driven procedure to fix the wages.
Consequently, the practice of periodic revision of rates under this jurisdiction
becomes redundant and the minimum wages can stay unchanged for many years
despite growing inflations or other changes to macro-economic or social
conditions. It is only when a substantial political pressure or interest is
created upon the government would it act to intervene and revise the minimum
wage by amending the statute. Thus, it's evident that workmen in nations
like Dominican Republic have dishearteningly low incentive to contribute.
Finally, despite the intrinsic objectives of wage policy expressly laid down to
combat low pay, there still subsists problems within the framework that takes
toll on the efficacy of the legislation. Firstly, the problem of
'non-compliance' reduces the effectiveness of wage regulation. It is a general
trend that fixing low levels of wage ensures higher compliances and vice
Countries like India and Costa Rica fall within the latter category, with
minimum wage at approximately 60-70% above median level, while the compliance is
proportionately lower. In India, only two-thirds of workmen are covered
under wage policy. The complex system of industrial classification in
setting of minimum wage, devoid of a universal wage throughout administers
difficulties in administrations and increases unawareness of wage rates.
It was only after MGNREGA (2005) scheme that wage compliance increased by
30%. Another problem is the 'gender inequality' under wage payment, that put
women at a disadvantage. Systemic and sociological organizations of familial
institutions undoubtedly attribute to this problem. In conclusion, one could
infer that we cannot directly influence the minimum wage as the same is directly
dependent on the national economy, however we could eliminate the systemic
inequalities within the framework that reduce its effectiveness.
By employing a more comprehensive compliance method. Penalties for
non-compliance must be more stringent, and primary reliance on judicial remedy,
that is an expensive and time-consuming process, must be reduced. Henceforth,
ensuring that workmen speedily receive all outstanding amounts works as
incentive to encourage workforce and discourages non-compliance on part of
- Singh, Avtar and Kaur, Harpreet, Introduction to Labour and Industrial
Law (2008), LexisNexis Butterworths, Wadhwa Nagpur, New Delhi.
- Bercusson, Brian. "Minimum Wage Objectives and Standards" Comparative
Labour Law 6, no. 1 (1984) pp 67-81.
- Chandra Bhavan Boarding and Lodging & Ors. v The All Mysore Hotel and
Associations. AIR 1970 SC 2042.
- Kamani Metals and Alloys Ltd. V. Their Workmen. AIR 1967 SC 1175.
- Pribram, Karl. "The Regulation of Minimum Wages as an International
Problem" International Labour Review 17, no.3 (1948). pp 317-331
- See Bercusson, supra note 2
- Alburquerque, Rafael. "Minimum Wage Administration in Latin America"
Comparative Labour Law 6, no.1 (1984). pp 57-66.
- AIR 1959 SC 182
- Supra note 3
- See Alburquerque, supra note 7
- Ibid, 66
- Uma, Rani; Belser, Patrick; Oetz, Martin. "Minimum Wage Coverage and
Compliance in Developing Countries" International Labour Review 152, no.3-4
(2013). pp 281-310
- Ibid, 399