Difference between living wage, minimum wage and fair wage

[laji]

What is meant by living wage, minimum wage and fair wage?

[nbm]

Wages have been classified into three categories:
(1) Living wages (2) Minimum wages (3) Fair wages
(1) Living Wages-Living wages has been defined differently by different people in different countries. The best definition is given by Justice Higgins which reads "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". According to Fair Wages Committee Report: "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." Thus living wages means the provision for the bare necessities plus certain amenities considered necessary for the wellbeing of the workers in terms of 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 a living wage, conditions of work ensuring a decent standard of life and full enjoyment of pleasure and social and cultural opportunities. Thus, Government of India has adopted as one of the directives of the principle of slate policy to ensure living wages.
(2) Minimum Wages—The minimum wage may be defined as the lowest wage necessary to maintain a worker and his family at the minimum level of subsistence, which includes food, clothing and shelter. When the government fixes minimum wage in a particular trade, the main objective is not to control or determine wages in general but to prevent the employment of workers at a wage below an amount necessary to maintain the worker at the minimum level of subsistence.
Minimum wage in a country is fixed by the government in consultation with business organisations and trade unions. The law relating to the minimum wage either states definitely the wage considered to the minimum or the determination of the wage left to an administrative commission which from time to time determines the minimum wage according to the varying economic conditions, e.g., variation in the price level should be compensated with the variation in the wage rates because the prime aim of the minimum wage low is just to cover "minimum living cost." The authority entrusted with the task of fixing of minimum wage should consider such factors as local economic conditions, transportation cost and the size of the units in the industry in fixing minimum wages.
The Government of India passed a Minimum Wage Act in 1948 under which farm labourers were to be paid a minimum wage between 66 paise and Rs. 1.50 per day, keeping in view local costs and standards of living. Since conditions in various parts of the country were different, the law allowed different rates of wages to be fixed in a poor country such as India. In practice, it was very difficult to enforce minimum wages effectively. Fortunately, the recent inflationary situation had pushed up the rural wages much above the minimum wages fixed by law.
Minimum wages legislation is supposed to have the following benefits:
(i) These laws prevent unscrupulous employers from exploiting ignorant persons who possess very little bargaining power.
(ii) These abolish the competition of the lower strata of workers with the upper grades and tend to prevent depressing of wages.
(iii) The productivity of industry is increased by foreign employers to use the most efficient production methods and the most modern equipment, in order lo enable employees to earn the living wage. But at the same time, the workers are stimulated to increase his efficiency in order to hold his job.
(iv) Employers with high standards are protected against underselling by competitors with low standards.
But some critics of the minimum wage assert that it is impossible for a group of men to control the wages of labour by law because wages depend upon the supply and demand of labour. Minimum wages are a heavy burden to the society because persons unable to earn a living wage will be unemployed whereas earning of small wage is preferred to idleness or living on charity. However, basically, minimum wage laws are not wrong if they are wisely framed and applied. It is perfectly feasible to fix a minimum wage and forbid employment below that figure. Some industries that cannot profitably pay the wages fixed may be forced to wind up because of the financial burden. But, then, what is the use of an industry if it cannot even pay a living wages to its workers and it is better to dispense with it. Industries that can pay a living wage should, if necessary be forced to do so. The difficulties to be encountered are rather those of practical operation. The administration of the modern industry is very tedious due to the complexity of the wage system. However, if the wage limit is fixed at the very lowest minimum, the risk is slight.
(3) Fair Wages—A fair wage is something more than the minimum wages. Fair wage is a mean between the living wage and the minimum wage. While the lower limit of the fair wage must obviously be the minimum wage, the upper limit is the capacity of the industry to pay fair wage compares reasonably with the average payment of similar task in other trades or occupations requiring the same amount of ability. Fair wage depends on the present economic position as well as on its future prospects. Thus the fair wages depends upon the following factors :
(1) Minimum Wages
(2) Capacity of the industry to pay
(3) Prevailing rates of wages in the same or similar occupations in the same or neighbouring localities
(4) Productivity of labour
(5) Level of national income and its distribution.
(6) The place of the industry in the economy of the country.