Concepts of wages

(minimum wages,
fair wages, living
wages, Need-based
minimum wages)
DR. RAVI YADAV
Wage concepts are crucial in ensuring fair compensation for workers
and maintaining economic stability. The primary wage concepts
include Minimum Wage, Fair Wage, Living Wage, and Need-Based
Minimum Wage. Each of these concepts serves distinct purposes and
addresses different aspects of worker compensation.
Minimum Wage

Definition: The minimum wage is the lowest amount that employers

can legally pay their employees. It acts as a wage floor, protecting
workers from exploitation and ensuring they earn enough to maintain a
basic standard of living.
Significance: It helps reduce income inequality, maintains fair labor
practices, and contributes to economic growth by increasing
consumer spending.
Challenges: Critics argue that raising the minimum wage can lead to
job losses and increased costs for businesses, particularly small ones.
Fair Wage

Definition: Fair wages are compensation that is proportional to the

efforts required for a role, based on industry standards and market
rates. It is generally higher than the minimum wage but lower than the
living wage.
Significance: Fair wages promote job satisfaction, increase employee
retention, and foster sustainable business growth by aligning
compensation with the value workers bring to their roles.
Impact: It helps reduce social inequality by ensuring that workers are
compensated fairly for their contributions.
Living Wage

Definition: A living wage is the income needed for workers and their
families to afford basic needs like food, housing, healthcare, education,
and transportation. It varies by location due to differences in the cost
of living.
Significance: Living wages are crucial for reducing poverty and
inequality. They ensure that workers can maintain a decent standard of
living and contribute to economic development.
Global Interest: The International Labour Organization (ILO) has
endorsed living wage policies, emphasizing their role in social justice
and economic development.
Need-Based Minimum Wage

Definition: The need-based minimum wage is set based on the

essential requirements for a worker and their family to maintain a
basic standard of living. It includes costs for food, clothing, housing,
and other necessities.
Significance: This wage ensures that workers can meet their basic
needs, promoting dignity and social responsibility. It empowers the
workforce by enhancing job satisfaction and productivity.
Components: The calculation involves assessing food, clothing,
housing, education, and medical expenses to determine a wage that
supports a decent life.
 Minimum Wages Act, 1948

The Minimum Wages Act, 1948, is a landmark legislation in India aimed at regulating
and stabilizing minimum wages to prevent the exploitation of workers. It applies to
the whole of India and covers certain scheduled employments, excluding
unscheduled industries.
The Minimum Wages Act applies to workplaces with over 1,000 employees and
regulates hourly pay, time and piece rates, overtime, and weekly holidays. It
ensures wages cover basic needs, healthcare, and education, though it does not
formally define "minimum wage." The Act categorizes earnings into minimum wage,
fair wage, and living wage, with fair wage being higher and considering family needs.
Living wages extend beyond necessities to include social security and insurance.
Violations can lead to a maximum six-month jail term. Wage distinctions vary based
on economic conditions, making classification complex.
 Key Features of the Act

Applicability: The Act applies to scheduled employments, which include both

non-agricultural and agricultural sectors. The Central and State Governments
have the authority to notify scheduled employment and fix minimum wages.
Wage Fixation: Minimum wages can be fixed at a time rate, piece rate,
guaranteed time rate, and overtime rate. The wage may include a basic wage
and a cost-of-living allowance.
Payment Methods: Wages must be paid in cash, though payment in kind is
permissible under specific conditions approved by the government.
Overtime and Rest Days: The Act provides for overtime wages and
remuneration for rest days.
Key Supreme Court Rulings
Bhikusa Yamasa Kshatriya v. Sangamner Akola Bidi Kamgar Union (1958) –
The Bombay High Court upheld the validity of committees and advisory
boards under the Act, ruling that they do not infringe constitutional
guarantees.
N.M. Wadia Charitable Hospital v. State of Maharashtra (1986) – The
Bombay High Court ruled that setting different minimum wages for different
localities is constitutional and does not violate the principle of equality.
Bijay Cotton Mills Ltd v. State of Ajmer – The Supreme Court emphasized
that employers should not object to minimum wages as they serve the public
interest by ensuring fair pay.
 As per the Minimum Wages Act, 1948, the
definition of "wages" is

“Wages” means all remuneration, capable of being expressed in terms of

money, which would be payable to a person employed in respect of his
employment or work done.
However, wages do not include:
◦The value of housing, light, water, or medical facilities provided by the
employer.
◦Any employer contribution to pension, provident fund, or social insurance
schemes.
◦Any travel allowance or concession.
◦Any special expenses incurred by the employee due to the nature of work.
◦Any gratuity payable upon termination of employment.
Section 2(y) Codes of Wages 2020
Wages" refer to all forms of remuneration (salary, allowances, or other payments)
expressed in monetary terms, payable to an employee for their work, including:

Basic Pay

Dearness Allowance

Retaining Allowance (if any)

The definition excludes the following:

▪ Bonus (if not part of employment terms)

▪ Value of housing, utilities, medical services, or other amenities
▪ Employer contributions to pension/provident fund and accrued interest
▪ Conveyance/travel allowance
▪ Special expenses reimbursement

▪Remuneration under a court order/settlement

▪Overtime allowance
▪Commission
 Fixing of Minimum Rates of
Wages
Authority to Fix Minimum Wages
◦ The appropriate Government (Central or State) fixes minimum wages for employment categories
listed in Part I and Part II of the Schedule.
◦ It may set wages for the whole state or specific regions/classes within the state.

Review and Revision

◦ Minimum wages must be reviewed at intervals not exceeding five years.
◦ If not reviewed within five years, the existing wages remain in force until revised.

Employment Threshold for Fixation

◦ If an employment sector has less than 1,000 employees across the state, the government may not fix
minimum wages.
◦ If the number later rises to 1,000 or more, wages must be fixed immediately after such a finding.
 Fair wages v minimum wages
Definition and Legal Status
◦ Minimum Wages: Legally mandated lowest wages employers must pay (e.g., Minimum Wages Act,
1948).
◦ Fair Wages: Higher than minimum wages but lower than living wages, determined through industry
capacity and collective bargaining.

Purpose
◦ Minimum Wages: Prevents exploitation and ensures a basic standard of living.
◦ Fair Wages: Ensures equitable pay based on industry profitability and labor productivity.

Calculation
◦ Minimum Wages: Based on labor productivity, skill level, and inflation adjustments.
◦ Fair Wages: Determined by industry capacity to pay, national income distribution, and market wage
trends.
Role in Industrial Peace

Minimum Wages
◦ Prevents Exploitation: Ensures workers are not underpaid, reducing
dissatisfaction.
◦ Basic Standard of Living: Supports worker well-being and economic stability.

Fair Wages
◦ Equitable Compensation: Reflects industry profitability and worker
productivity.
◦ Reduces Labor Disputes: Promotes harmony by ensuring wages are
perceived as fair.
Relevant Laws and Frameworks
◦ Minimum Wages Act, 1948: Mandates minimum wages for
scheduled employments in India.
◦ Code of Wages, 2019: Consolidates labor laws, introduces a national
floor wage.
◦ Collective Bargaining Agreements: Helps establish fair wages
through negotiations between employers and workers.
Minimum Wages: Legal Framework (Minimum Wages
Act, 1948), Supreme Court Cases

Section 5: Employers must not pay less than the prescribed

minimum wages [Code on Wages, Section 5].
Section 6: The government is responsible for fixing minimum
wages based on skill level and geographical area [Code on
Wages, Section 6].
Section 9: The Central Government sets the "floor wage",
ensuring minimum wages are not below this level [Code on
Wages, Section 9].
Fair Wages vs. Minimum Wages: Differences and Role
in Industrial Peace

Section 7: Minimum wages include basic wages,

cost-of-living allowances, and other cash benefits [Code
on Wages, Section 7].
Section 42: The Advisory Board ensures fair wages by
consulting employers, employees, and experts [Code on
Wages, Section 42].
 Living Wages
Constitutional Basis
◦ Rooted in Directive Principles of State Policy (DPSP), particularly Article 43.
◦ Article 43: State shall ensure workers receive a living wage for a decent standard
of life.
◦ DPSPs are not legally enforceable but guide policy-making.
Floor Wage Under Code on Wages, 2019
◦ Section 9: Introduces floor wage for uniform national standards
◦ Bridges gap between minimum wages & living wages
Judicial & Legal Framework
◦ Courts have interpreted DPSPs as essential for worker welfare.
◦ Paying below minimum wage could be considered forced labor.
◦ Code on Wages, 2019: Establishes a universal wage floor across all
states.
Challenges in Implementation
◦ Regional disparities in cost of living.
◦ Employers' capacity to pay higher wages.
◦ Need for reliable data collection and a structured framework.

Future Directions
◦ Government working with ILO for a structured living wage framework.
◦ India aims to replace minimum wages with living wages by 2025.
◦ Aligns with Sustainable Development Goals (SDGs) to eradicate poverty by
2030.
Wage Disparities in India
Organized vs. Unorganized Sectors

Wage Levels: Organized sector workers earn significantly higher wages due to
government regulations, while unorganized sector wages are often irregular and below
set standards.

Growth Trends: Wages grew faster in the unorganized sector (1993–2012), but absolute
wages remained lower.

Job Security: Organized sector jobs offer better job security and benefits, while
unorganized workers face precarious employment conditions.
Public vs. Private Sectors

Wage Premium: Public-sector workers earn about 10% more than private-sector
workers in similar roles, with a higher premium for women and low-skilled workers.

Wage Disparities: Public sector wages are 62%–102% higher than formal private sector
wages and 164%–259% higher than informal sector wages.

Trends: Private-sector wages have been growing faster than public-sector wages,
leading to the private-sector wage bill surpassing the public sector since FY20.

.
Urban vs. Rural Areas

Wage Gap: Urban wages are more than twice rural wages (2011–12), but the gap has been
narrowing due to urbanization and structural changes.

Convergence: Urban-rural wage gap declined from 70% (1983) to 11% (2010) due to
improvements in education and skills.

Sectoral Impact: Rural wages depend on agriculture, while urban wages are driven by
higher-productivity industries like manufacturing and services.
Key Observations

Wage inequality remains high but is improving over time.

Gender disparities persist, with women earning less than men across all sectors.

Urbanization and education have helped reduce wage gaps between rural and urban
areas.

Need for targeted policies to bridge wage gaps and promote equitable economic growth.
Gender Pay Gap & Caste-Based Wage
Disparity

India faces persistent challenges in both gender pay gaps and caste-based wage
disparities, despite legal frameworks and policy interventions. Recent data from PLFS
and ILO reports highlight systemic inequalities, with notable progress in some areas
offset by ongoing structural barriers.

Gender Pay Gap

Current Status
◦ India’s gender pay gap improved from 48% in 1993–94 to 28% in 2018–19 but widened to 35%
during the pandemic due to disproportionate wage losses for women.
◦ In 2023, women earned 73% of men’s wages on average, with sectors like technology showing
gaps of 29% (rising to 40% in senior roles).
Key Drivers
◦ Occupational Segregation: 60% of rural women work in informal
sectors (e.g., agriculture, domestic work) with weak wage-law
enforcement. Urban women dominate lower-paid roles in education
and healthcare.
◦ Career Interruptions: Maternity and caregiving duties reduce
women’s lifetime earnings by 20–30%.
◦ Negotiation Bias: Social norms discourage women from salary
bargaining, lowering starting pay and raise
Legal Framework
Code on Wages (2019): Prohibits gender-based wage discrimination
and ensures equal pay for equal work12.
Constitutional Mandates: Article 39(d) (equal pay) and Article 15
(non-discrimination)27.
Affirmative Policies: MGNREGA boosted rural women’s wages, while
schemes like Stand-Up India promote female entrepreneurship
Caste-Based Wage Disparity

Current Status

Deprived castes (SCs/STs/OBCs) earn 15–30% less than upper castes, even with similar
qualifications34.

During COVID-19, lower-caste workers faced heavier job losses due to

overrepresentation in informal roles3
Structural Barriers
Discrimination: Caste networks influence hiring and promotions,
perpetuating wage gaps
Educational Access: Lower-caste families struggle with remote
learning, worsening labor market inequality
Occupational Segregation: Marginalized groups are concentrated in
low-wage, informal jobs (e.g., sanitation, construction)
Policy Interventions
◦ Reservation System: Quotas in education and government jobs for
SCs/STs/OBCs.
◦ Anti-Discrimination Laws: SC/ST Prevention of Atrocities Act
criminalizes caste-based bias.
◦ NREGA: Provided 40% of employment to SC/ST workers, raising
rural wages
PLFS 2020–21: Highlighted pandemic-driven wage stagnation for
women and lower castes
ILO India Wage Report (2023):
◦ Rural casual female workers earn the lowest daily wages (₹104).
◦ Gender wage gap in urban areas is 34%, driven by occupational segregation.

EPW Study (2024): Found that 60% of caste wage gaps stem from
labor market discrimination, not skill differences
Challenges and Recommendations
◦Enforcement Gaps: Weak implementation of wage laws and
caste-based quotas.
◦Data Limitations: Inconsistent tracking of intersectional
disparities (e.g., caste-gender overlap).
◦Policy Priorities: Strengthen pay transparency, expand
childcare support, and penalize workplace discrimination
Code on Wages, 2019
Objectives

Universal Minimum Wage Protection – Extends minimum wage benefits to all workers,
covering over 500 million employees.

Statutory Floor Wage – Introduces a baseline wage determined by the central

government, ensuring a minimum standard of living.

Timely Wage Payments – Mandates prompt wage payments with wage slips, reducing
wage theft.
key Provisions

Uniform Definition of Wages – Standardized wage definition across all labor laws to
prevent disputes.

Simplified Wage Structures – Reduces the number of minimum wage rates from
~1,915 to a maximum of 12 per state.

Regular Wage Review – Minimum wages reviewed every five years, adjusted
biannually for inflation.

Ban on Wage Discrimination – Strengthens equal pay provisions, ensuring gender

equality.
Implications for Wage Rationalization
Reduces Wage Inequality – Establishing a floor wage can decrease
income disparities.
Supports Vulnerable Workers – Benefits women, casual workers, and
informal sector employees.
Boosts Economic Growth – Ensuring fair wages increases aggregate
demand and fosters economic development.
 Air India v. Nargesh Meerza (1981) AIR
1829, SCR (3) 438

Bench: Justice Y.V. Chandrachud, Justice A.P. Sen, Justice D.A. Desai,
Justice O. Chinnappa Reddy, Justice Baharul Islam
Date of Judgment: 28 August 1981
Facts of the Case:

◦ The case was filed by Nargesh Meerza and other air hostesses against Air
India challenging the discriminatory service conditions for female cabin
crew.
◦ Air India’s service regulations stipulated that an air hostess would retire
upon attaining the age of 35 years, marriage within four years of service,
or upon first pregnancy—whichever was earlier.
◦ The petitioners argued that these regulations were arbitrary,
discriminatory, and violative of fundamental rights under Articles 14, 15,
and 16 of the Indian Constitution.
◦ Male flight pursers in Air India were not subjected to similar conditions, leading
to claims of gender-based discrimination.
Issues Raised:

◦Whether the retirement and termination conditions

imposed on air hostesses violated Articles 14, 15, and 16
of the Constitution.
◦Whether the rule preventing marriage within four years of
service and compulsory retirement at 35 was
discriminatory and arbitrary.
◦Whether termination on the ground of pregnancy violated
fundamental rights.
judgment:

Violation of Article 14 (Right to Equality): The Supreme Court ruled that the conditions for air
hostesses were arbitrary and violated Article 14 as they lacked reasonable justification.
Violation of Article 15 (Prohibition of Discrimination): The court held that the conditions were
discriminatory on the basis of sex and violated Article 15.
Marriage Rule: The restriction on marriage within four years of service was deemed
unreasonable and struck down.
Pregnancy Clause: The court found the termination of service on the ground of pregnancy to be
“manifestly unreasonable”, unconstitutional, and violative of Article 14 and Article 21 (Right to
Life and Personal Liberty).
Retirement Age: The court upheld the provision allowing termination at the age of 35 but
provided flexibility for extension.
Significance of the Judgment:
The case was a landmark ruling in promoting gender equality in employment.
It reinforced that service conditions must be fair and justifiable, particularly concerning female
employees.
The decision set a precedent for future cases concerning employment rights and gender justice
in India.
Conclusion:
The Supreme Court’s ruling in Air India v. Nargesh Meerza struck down arbitrary service
conditions imposed on air hostesses, reinforcing the constitutional principles of gender equality
and fairness in employment. The judgment remains a significant milestone in the evolution of
women’s rights in the Indian workforce.
Challenges in Implementing
Wage Rationalization
Ambiguities in Interpretation – Unclear definitions and wage calculations lead to compliance
issues.
· Lack of Awareness – Employers and employees, especially in the unorganized sector, are not
well-informed about wage codes.
· State-Level Discrepancies – Inconsistent implementation across states creates regulatory
fragmentation.
· Exclusion of Agricultural Workers – A large workforce segment remains outside the wage
rationalization framework.
· Floor Wage vs. Minimum Wage Gap – States may set lower wage standards, defeating the
purpose of wage rationalization.
· Weak Enforcement – Inadequate monitoring, reduced surprise inspections, and corruption
hinder compliance.
Global Best Practices

Capacity Building – Training programs (e.g., Germany) enhance awareness and

compliance.

Effective Monitoring – Anti-corruption measures for labor inspectors (e.g., Brazil)

improve enforcement.

Worker Empowerment – Collective bargaining and wage transparency strengthen labor

rights.

Public Support Campaigns – Persuasion strategies encourage voluntary employer

compliance.
India’s Approach & Recommendations
Clarify Ambiguous Provisions – Prevent misinterpretation and ensure
uniform application.
Increase Awareness Programs – Educate employers and employees
on wage laws.
Strengthen Enforcement – Improve labor inspector training and
resources.
Expand Wage Coverage – Include agricultural workers in the wage
code framework.