istinction/ Difference Between Minimum Wages and Fair Wages

No. Minimum Wages Fair Wages

1) The Term “Minimum wage” Literally Fair Wage is more than minimum
Means “The minimum payment, an wage but less than the living wage.
employer has to give to an
employee for a particular work, i.e,
the lowest limit, below which wages
cannot be allowed to sink”

2) Section 3 of the Minimum wages Act Fair wage is fixed, taking into
provides for different minimum rates consideration, the present economic
of minimum wages for different position and further prospects of the
localities. Industry.

3) Components/ Constituents of To Determine fair wage, Following

Minimum Wages - factors are taken into Consideration -

(i) a basic rate of wages and a 1) The Productivity of Labour

special allowance at a rate to be
adjusted at such intervals and in 2) The Prevailing rates of wages in
such manner as the appropriate the same industry for similar
government may direct to accord as occupation in the same neighboring
nearly as practicable with the locality
variation in the cost of living index
number applicable to such workers 3) the Level of national income and
(hereinafter referred to as the "cost its distribution; and
of living allowance"); or
4) The place of Industry in the
(ii) a basic rate of wages with or economy of the Country
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.
(Section 4 of Minimum Wages Act)
 4) The Minimum Wage must, therefore,
provide not merely for the bare
substance of life but also for the
preservation of the efficiency of a
worker. For this purpose, the
minimum wage must also provide
for the same measure of education,
medical requirement, and amenities.
The Concept of fair wages, therefore,
involves a rate sufficiently high
enable the worker to provide a
standard family with food, shelter,
clothing, medical care and education
for children appropriate to his status
in life but not at a rate exceeding the
wage-earning capacity of the class of
establishment concerned.

Labor Productivity
What Is Labor Productivity?

Labor productivity measures the hourly output of a country's economy.

Specifically, it charts the amount of real gross domestic product (GDP)
produced by an hour of labor. Growth in labor productivity depends on three
main factors: saving and investment in physical capital, new technology, and
human capital.
KEY TAKEAWAYS

 Labor productivity measures output per labor hour.

 Labor productivity is largely driven by investment in capital,

technological progress, and human capital development.

 Business and government can increase labor productivity of workers by

direct investing in or creating incentives for increases in technology and
human or physical capital.
The Importance of Measuring Labor Productivity

Labor productivity is directly linked to improved standards of living in the form

of higher consumption. As an economy's labor productivity grows, it produces
more goods and services for the same amount of relative work. This increase
in output makes it possible to consume more of the goods and services for an
increasingly reasonable price.
Growth in labor productivity is directly attributable to fluctuations in physical
capital, new technology, and human capital. If labor productivity is growing, it
can usually be traced back to growth in one of these three areas. Physical
capital is the tools, equipment, and facilities that workers have available to use
to produce goods. New technologies are new methods to combine inputs to
produce more output, such as assembly lines or automation. Human capital
represents the increase in education and specialization of the workforce.
Measuring labor productivity gives an estimate of the combined effects of
these underlying trends.
Labor productivity can also indicate short-term and cyclical changes in an
economy. If the output is increasing while labor hours remains static, it signals
that the labor force has become more productive. In addition to the three
traditional factors outlined above, this is also seen during
economic recessions, as workers increase their labor effort when
unemployment rises and the threat of lay-offs looms to avoid losing their jobs.
Policies to Improve Labor Productivity

There are a number of ways that governments and companies can improve
labor productivity.

 Investment in physical capital: Increasing the investment in capital

goods including infrastructure from governments and the private sector
can help productivity while lowering the cost of doing business.

 Quality of education and training: Offering opportunities for workers

to upgrade their skills, and offering education and training at an
affordable cost, help raise a corporation’s and an economy's
productivity.

 Technological progress: Developing new technologies, including hard

technology like computerization or robotics and soft technologies like
new modes of organizing a business or pro-free market reforms in
government policy can enhance worker productivity.