Page 146 - DMGT106_MANAGING_HUMAN_ELEMENTS_AT_WORK

Managing Human Element at Work

Notes Minimum Wage

The National Commission on Labour describes living wage as “a measure of frugal comfort
including education of children, protection against ill health, requirements of essential social
needs and some insurance against the more important misfortunes”. Thus according to this
definition living wage provides for a bare physical subsistence and for the maintenance of
health. On the other hand, minimum wage includes not only living wage but also provides
for some measure of education, medical requirements and amenities. In other words,
“minimum wages” provide a worker with physical subsistence, maintenance of health,
requirements of essential social needs and some measure of education for self and for
children.
The National Commission on Labour states the first claim is of the worker for a basic
minimum wage irrespective of any other consideration. Thus, the minimum wage prescribes
the lower limit; the upper limit will be set by the capacity of the industry to pay.
Fair Wage

The Committee on Fair Wages felt that between the two limits, the actual wage would
depend on:

(i) The productivity of labour;
(ii) The prevailing rate of wages;
(iii) The level of national income and its distribution;
(iv) The place of industry in the economy of the country; and
(v) The degree of unionization of labour in the industry.

Thus, fair wage is something more than the minimum wages. It is the wage fixed by
considering several factors such as wage rate prevailing in other industries in the location,
similar industries, ability of the firm to pay wages, etc.
Wages and Productivity

Wages should be linked to productivity because an industry’s capacity to pay would be
determined by productivity. Furthermore, a raise in productivity provides legitimacy to the
claims of labour for a higher wage.
Productivity is measured by VAM (value added by manufacture). VAM is not the result of
the effort of labour alone. Along with labour, capital, technology and management also
contribute towards productivity. Therefore, it would be totally incorrect to link the entire
productivity to labour alone. The National Commission on Labour disclosed that in the first
decade of planning, labour did not benefit from the gains in productivity of the industry.
However, in the next two decades, a part of the gains in productivity was shared with labour,
though in a disproportionate manner.
6.3.5 Failure of the National Wage Policy

Although several commissions have deliberated on the need for evolving a National Wage
Policy, so far there is not enough evidence towards its emergence. There is all round failure
in implementing minimum wages in the private sector. There still exist inter-industry and
inter-occupational differences in wages. Further, there is the failure to restrain the increase
of wages and salaries in the public sector far in excess of the raise in consumer price index.
Even though the National Wage Policy has failed on many counts there is still a sufficient
degree of consensus on the objectives of National Wage Policy.

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