This essay is related to the concept of minimum wages, various theories and principles of minimum wages and the arguments for and against a country adopting a minimum wages. By using India as an example, we described how the minimum wages is being implemented in the country and also described what are the advantages and disadvantages from adopting that implementation and how such implementation will affect the country. Minimum wages refers as minimum amount of payment which employee has right to receive. It includes basic wages and various types of allowances. Purpose and objective of the concept of minimum wages is to protect the employees for unduly low payment. Its main objective is to provide minimum wages to the all employees who are working in the organized sector. There are also various advantages and disadvantages of the concept of minimum wages.
Minimum wages have been defined as “the minimum amount of salary which employer will be liable to pay to the employees for the work performed during the given period of time, which is fixed amount it can’t be reduced by any agreement or contract between employer and employee” (Webb, 2009). Purpose of minimum wages is to provide minimum amount of remuneration to the employee for their performance, protect employee against low remuneration, reduces discrimination among employees on the basis of age and gender, overcome poverty and it will also reduce bargaining (Singapore Minimum Wage, 2019). There are various factors which affect the effectiveness of minimum wages such as industry in the economy, migrant worker, agreements and contracts and the extent to which company can afford protection to all the employees for maintaining employment relationship. It affect positively on the employment. Firstly minimum wages concepts were implemented in New Zealand in 1894. Minimum wages includes basic salary and other allowances but it does not include travelling, housing and food allowances. Basic salary is calculate by dividing 12 x monthly basic rate of pay by 52 average number of days an employee is required to work in a week. According to the demand and supply model, when there is increase in the minimum wage then there will be decreases the employment of minimum wage employees (Yah & CHEW, 2009). It effects on employment, distribution of remuneration among low paid worker and high paid worker, worker’s skills, prices, profits, on-the-job training and the distribution of income among low income families and high income families (Marginean, 2013). There is National Wages Council which guides and provides all information related wages. Implementation of minimum wages is only relevant if it is above the market wages. It is decided by the federal government.
Following are the benefits while implementing Minimum Wages Laws:
Following are the disadvantages while implementing minimum wages laws:
In India, Minimum wage is being implemented according to the Minimum Wages Act, 1948. This act passed by the Indian Parliament, fixes the minimum wage for the workers, both skilled & unskilled and it is applicable to the whole India (India’s Minimum Wage Structure: A Brief Explainer, 2017). It is also implemented as per Indian Constitution. Its objective is to fixing a minimum rate of wages for all the companies where employees are unorganized and have more than 1000 workers and controlling the exploitation of workers in the companies. It is set by the tripartite committee according to the cost of living index which depends on various factors such as consumption, basic requirement and education etc. and it is differ for skilled, unskilled and semi- skilled workers. Under this act, both state and central government fix the wages as per their own scheduled. So, the wage rate is no single uniform for all states because of various differentiating factors in all states. If worker does not get minimum wage from the company then he has a right to claim on the employer within 6 months under section 20 of Minimum wages act, 1948. There is also penalties for the industry regarding non- payment of wages to their workers. As per section22 punishment is imprisonment up to 5 years or fine Rs. 10000/- or both (Minimum Wages, 2019).
Minimum wages act, 1948 is being implemented in India for providing minimum wages to the workers and protecting them. There are several benefits of this act such as it helps in boosting the GDP or economic growth of the country, reduce poverty, reduce their cost towards social welfare programs and increase the level of consumption. India also faced many issues such as increases in unemployment rate, inflation rate and unfair determination of minimum wages due to poor implementation and enforcement of the Minimum wages act, 1948. So, India should increase the awareness of the act among workers through various ad Campaign at social media platforms.
Hence, the concept of minimum wages is essential for every country because it will help in increasing the GDP or economic growth of the country. Its main purpose is to protect the individuals from the low amount of remuneration. In India, there is Minimum Wages Act, 1948 applicable and its aim is to provide wages to the every worker for their performance during given period of the time. There is not specific amount mentioned in this act, so it is applicable according to the states. India faced so many issues from such implementation such as increasing unemployment and inflation rates, reduce poverty, improving economic growth etc. If minimum wages is being applied by the country then there will be various benefits by such implementation. It will help in reducing poverty, increasing the consumption level and productivity for the businesses so it will directly contribute to the GDP of the country, job security for the employees, cost control, better utilization of resources, increase incentives for the workers and decreasing the cost of government towards various incentives and subsidiaries which government provide to the poor people for helping them. But it also have some negative impact such as unemployment, increase in inflation level because of increasing in the price of products by the government, increase outsourcing, lack of quality of employees, lack of effectiveness of the companies, may increase corruption, employer does not pay high than minimum wages to the higher skilled workers, decrease efficiency level of workers and increase the cost of investment for the businesses.
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Mullen, T. (2018). The Best Argument Against Minimum Wage Laws: You Don't Own Other People. Retrieved February 28, 2019, from FEE: https://fee.org/articles/the-best-argument-against-minimum-wage-laws-you-dont-own-other-people/
Nadhanael, G. (2019). Recent Trends in Rural Wages: An Analysis of Inflationary Implications. Retrieved February 28, 2019, from Reserve Bank of India: https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=2846
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Webb, S. (2009). The Economic Theory of Legal Minimum Wage. Journal of Political Economy, 20(10), 973-998.
Yah, L. C., & CHEW, R. (2009). Wages And Wages Policies: Tripartism in Singapore. Singapore: World Scientific Publishing Co. Pte. Ltd.
Zaccarelli, B. H. (2011). Minimum Wages-Maximum Dignity: A Manager's Guide To Affirming The Worth Of All Employees. United State of America: iUniverse, Inc. Bloomington.
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