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Different Concepts of Wages

A wage is monetary compensation (or remuneration, personnel expenses, labor) paid by an employer to an employee in exchange for work done. Payment may be calculated as a fixed amount for each task completed (a task wage or piece rate), or at an hourly or daily rate (wage labour), or based on an easily measured quantity of work done.

  1. Wages are part of the expenses that are involved in running a business.
  2. Payment by wage contrasts with salaried work, in which the employer pays an arranged amount at steady intervals (such as a week or month) regardless of hours worked, with commission which conditions pay on individual performance, and with compensation based on the performance of the company as a whole. Waged employees may also receive tips or gratuity paid directly by clients and employee benefits which are non-monetary forms of compensation. Since wage labour is the predominant form of work, the term "wage" sometimes refers to all forms (or all monetary forms) of employee compensation.
  3. Wages are also a means of providing income for employees and as a cost of doing business to the employer. In a wider sense, wages mean any economic premium paid by the employer under some contract to his workers for the services delivered by them. In this way wages constitute of financial support, family allowance, relief pay and other benefits. Whereas in the narrow sense, wages are the price paid for the services of labour in the process of production and it count only the wages proper or performance wages.

Origin of Wage

Wage is a reward for the services rendered or remuneration for the work done and it is as old as the society itself. In the primitive days, wages were paid in kind, most common of them was grains and the food. But with the advent of industrialization wages form a complex problem and in almost all industrialised countries it became a sensitive area of public policy. Very soon the quantum of wages assumed a common cause of friction between the employers and the wage-earners.

Frequent disputes between employer and wage-earners resulted in strikes over the demand for wage-increase. The determination of adequate wages that should be justifiably payable to die workmen by the employer, was not merely an economic problem but a multidimensional phenomena, necessarily involving relevant factors like place of industry, prices of the product, living standards, basic needs of die wage-earner and the governmental policy in a given society.

The natural instinct of the employer to keep the wage-bill to a minimum and workers struggle to secure a wage-increase to meet both ends, created a chaotic situation which demanded an immediate State’s intervention to protect the weaker section of the society, namely, workers, in view of its low bargaining capacity.

Meaning and Definition of Wage

According to Section 2(h) of the Minimum wages Act, 1948 the term wages means all remuneration capable of being expressed in terms of money which would if the terms of the contract of employment express or implied were fulfilled be payable to a person employed in respect of his employment or of work done in such employment and includes house rent allowance but does not include-
(i) the value of -
(a) any house accommodation supply of light water medical attendance or
(b) any other amenity or any service excluded by general or special order of the appropriate government;-
(ii) any contribution paid by the employer to any person fund or provident fund or under any scheme of social insurance;
(iii) any traveling allowance or the value of any traveling concession;
(iv) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(v) any gratuity payable on discharge;

Wage Variation / Varieties

Wages levels differ from one to another and relative difference in wage levels is called wage variation or varieties. Hence, there are differences in wage rates. There are various factors like political, behavioural, ethical, social and economic factors on which wage levels depends .There are three types of variations or wage varieties in wage rates.

Regional Variation: Regional Variation means different wage rates in difficult regions for the same work in the same industry. This may be due to several factor such as demand and supply of the workers, cost of living index, standard of living and economic development.

Time Variation: When wage rates changes according to time that means changes in wage rates due to time which is termed as time variation. It is only the economic conditions of the country which determine the different wage rates time to time. In inflationary pressures the wage rates are high, whereas in slump period may be low.

Industrial Variation: When one industry may pay more or different wage rates to its workers in the same region for similar work that is called Industrial Variation. Wages may differ from industry to industry. Various factors such as nature of work, demand and supply of skilled labour, place of industry in the national economy and working conditions in the industry etc influence the wage rates.

Three Types of Wages

Living Wages
Living wages are defined as that wages which are consistent to provide certain facilities as well as some basic necessities to the employee. So, it means that wage level which is satisfactory to provide for the basic necessities and such niceties that are advised necessary for the betterment of the employee as well as his family in accordance with his social status.

Thus, living ages has been defined as follows:
The living wage should enable the male earner to provide himself and his family not merely the basic essentials of food, clothing and shelter but a measure of frugal comfort including education for the children, protection against ill-health, requirement of essential social needs and measures of insurance against old age.

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. So, the government of India has adopted as one of the directives of the principle of state policy to ensure living wages.

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 wages does not mean to fulfill only for the basic necessities of life to employee such as food ,shelter and clothing, but also it include for some comforts, leisure and amenities estimated by current human standards such as health, education of children, travelling, old age, recreation and social needs etc.

Minimum Wages

The term Minimum Wage has not been defined in the Minimum Wages Act, 1948. The minimum wage is the lowest wage in the scale below which the efficiency of a worker is likely to be inspired. The minimum wage includes not only the bare physical necessities but also a modicum of comfort otherwise known as conventional necessities. The Minimum wages must, therefore, provide not merely for the bare subsistence of life but also for the preservation of the efficiency of the worker. For this purpose, the minimum wage must also provide for the same measure of education, medical requirements, and amenities.

Therefore any employer who is unable to pay this minimum wage to workers has no right to exist. Where a person provides labor or service to another for remuneration which is less than the minimum wages, such labor is 'forced labour' within the meaning of Article 23 of the Indian Constitution and thereby entitles the person to invoke Article 32 or Article 226 of the Constitution of India.

The Concept of fair wages was to be dynamic. There is no reason to assume that fair wages fixed years ago should continue to be fair wages for al time, and any fixation of minimum wages, should be taken not as minimum wages but as fair wages because it is above the fair wages once fixed.

Constituents or Components of Minimum Wage

According to Section 4 of the said Act, (Minimum Wages Act, 1948) consists of the following:

  1. (1) Any minimum rate of wages fixed or revised by the appropriate government in respect of scheduled employments under section 3 may consist of:
    (i) a basic rate of wages and a special allowance at a rate to be adjusted at such intervals and in such manner as the appropriate government may direct to- accord as nearly as practicable with the variation in the cost of living index number applicable to such workers;
    (ii) a basic rate of wages with or without the cost of living allowance and the cash value of the concessions in respect of suppliers of essential commodities at concession rates where so authorized; or-
    (iii) an all-inclusive rate allowing for the basic rate the cost of living allowance and the cash value of the concessions if any.
  2. The cost of living allowance and the cash value of the concessions in respect of supplies of essential commodities at concession rate shall be computed by the competent authority at such intervals and in accordance with such directions as may be specified or given by the appropriate government.


Fair wage

Fair wage means which is something more than the minimum wages. It is a mean between the minimum wage and the living wage. So, the lower limit of the fair wage must surely be the minimum wage whereas the upper limit is the fair wage which is capacity of the industry to pay further the comparisons definitely with the average payment of same work in other occupations or trades which requires the same amount of ability. Basically, it is economic position and its future prospects on which fair wage depends.

Further, there are certain factors like minimum wages, capacity of the industry to pay, level of national income and its distribution, productivity of labour, the place of the industry in the economy of the country and prevailing wage rates in the same or similar occupations in the same or neighbouring localities on which fair wage depends.

Fair wages mean the remuneration which is paid to the workers for the jobs requiring equal efficiency, difficulty and pains.

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