The Minimum Wage Security Jurisprudence

Definition of minimum wage can be seen in the following light that is;

“The minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract.”¹

This definition basically shows the binding force of minimum wage laws and not necessarily considering the way in which they are fixed or applied in a particular economy. There can be immense ways through which minimum wage can be set – by framing a law or statute for the same, by formation of a board for regulation of such wage or by forming tribunals to decide a fair share to be given to the deserving. The same can also be done by providing legal backing or force to formulations of collective voice or agreements.

The primary idea underpinning minimum wage is that no one should be denied a fair day's compensation for work. It attempts to protect the rights of employees with regard to their median wage and the quantity of money they get for their unskilled labor. Minimum wages may also be seen as a means of reducing poverty and inequalities among people. This may also be seen as a conduit that supports equal compensation for equal effort, regardless of differences in gender, age, color, etc.

History of Minimum Wage

The minimum wage laws can be seen to find their validity from the Ordinance of Laborer’s which was a document passed by King Edward III in around 1349 A.D. in England. The same was passed to set a maximum wage for workers and has a similarity only in one aspect with the current concept of minimum wage, which is, it fixed a level for the wages of workers which is also the task of the current minimum wage laws. However, the initiation was rather opposite to the current concept. Though the law was framed to set sort of ceiling on the highest level of wage to be paid, it ultimately turned into a set of principles guiding to set living wage for workers. The amendment in 1389 A.D. did the change to the earlier ordinance. It can also be seen that the Justice of Peace which brought the concept of maximum wage also brought the formal principle of setting a minimum wage. Later the same was formalized in 1604 by king James I for the textile workers. Thus, there can be seen the various stages through which the law of minimum wage went through before becoming a formal law. Even at its later stages the same was applied to a few sectors.

However later when the concept of laissez-faire entered into formation of policies there came disfavor towards controlling or regulating the wages, this happened largely when the capitalist thoughts affected the European countries and the west. This resulted in a huge labor unrest in early 19^th century and attempts were made to control the payments made to laborers through trade unions. John Stuart Mill states that as there was this labor unrest faced in the industries it remains fair to depart from the laissez- faire policy to regulate the wages that such workers received.²

It was in the year 1890 that proper and modern legislation pertaining to minimum wage were formulated in the countries of New Zealand and Australia.³ The aim for bringing minimum wage and uproar for the same was to remove the concept of sweat shop workers and labor and controlling the same. Such shops and industries employed lots of women and many young men and provided them with what can be termed as substandard pay. Minimum wage laws were thus brought in to remove such atrocities where the employer had much more power which was capable enough to kill even the bargaining power of the large number of employees. However, time and changing situations changed the focus to helping people become more sufficient and ensure that everyone at least get the wages that can fulfil the basic needs as per the time.

Lastly, the congress speech of Franklin D. Roosevelt seems to be necessary in discussing the history of minimum wage where he said that every American "fair day's pay for a fair day's work” ⁴

Identification and Quantification of the Concept of Wage

In economics, wage can be defined as the amount paid to a person for his/her active physical/mental participation in the process of developing or producing something.⁵ There has been a necessary and healthy discussion already been done by various economist over the concept of wage and is a heated topic even now as to deciding what can be a fair pay for a particular work, the reason for the same is attributed to labor being the most important branch of the production process. This stands to be the reason that Karl Marx termed labor as “creator of all value”. However, the labor itself cannot wholly complete the task that is necessary to be carried on for the completion of the production process and therefore there stands a share which is to be provided form the fund allocated for the production activity and the same is termed to be “wage”.

There are types of wages which function in the market in real practice these are –

• Piece Wages - This kind of system takes into account the amount of work done by a person and is calculated on the basis of units produced.
• Time Wages – In this kind of system the time for which the worker has worked decides his/her wage. It is a basic system which in general terms is also known as daily wage system.
• Cash Wages – This is the division of wage system on the method or mode of payment of wages. In such a system salary is provided in terms of cash and not kind.
• Wages in Kind – It is a system in which cash payment is not done and the wages are paid to the workers s in terms of goods. This is a popular system in rural areas.
• Contract Wages – This is a system in which the wages are pre-decided for the whole lot of work. This kind of system is a more systematic and modern form of wages.

Moreover, the concept of wage can be seen through the division of wages into two –

• Nominal Wages – This is the actual total amount of money received by the worker for his/her input in the complete production process.
• Real Wages – This wage means the conversion of the actual wage or the money wage in terms of the utility goods that can be purchased through such actual monetary wages. These show the advantages of these efforts a person put in to earn those pennies which further decide the status, luxury and necessary commodities in a person’s life.⁶

Perspectives on Minimum Wage vis-à-vis Gig Economy

There lie various perspectives in relation to minimum wage not only on whether to raise the bar for minimum wage or not but also on whether there should be the concept of minimum wage in the first place. There lies socialist perspective of minimum wage, the libertarian perspective of minimum wage and also the way the makers of our constitution thought on the concept of minimum wage or fair wages.

Socialist Perspective – “Freedom in a capitalist society always remains about the same as it was in ancient Greek republics: Freedom for the slave-owners, democracy for an insignificant elite minority, democracy for the rich- that is democracy of the capitalist state”.⁷ These were the words of one of the greatest revolutionaries and socialist thinkers Lenin and when he says so he meant that freedom from the clutches of such a capitalist state or protection from such practices, of the majority working class is necessary. Such words clearly show the need that socialist showcase for fixation of minimum wage level so that the working class can be protected from autocratic rule of the elite class. Socialists believe that the fair and at least a bare minimum amount may give a sense of security and dignity that at least they do not have to worry about what food they will have for their next meal and such worries which can indirectly turn a person futile or just a worker and not a homo sapiens in its true sense. Further they also feel that those of who feel that a high minimum wage rather a minimum wage that is necessary for a dignified survival is going to put burden on the economic balance of payments are living in such a system that cannot even guarantee basic and decent living standard to everyone. Further the socialists believe in a economy based or place based minimum wage system and not a universal system in which the country as a whole follow the same minimum wage standards. Socialism philosophy believes in redistribution of the concentrated wealth to the people who are true backbone for production of such wealth.⁸ Lastly as Karl Marx said in his dictum related to minimum wage “To each according to his needs, from each according to his ability.”⁹ Thus the socialist view which has high consideration for good of the proletariats considers minimum wage to be a sine qua non for development of the economy as a whole.¹⁰

Libertarian Perspective – The libertarian principle holds liberty as their basic and founding principle.¹¹ This philosophy believes in maximization of political liberty and autonomous decision making, further implanting an emphasis on freedom to make individual judgments and choices.¹² The libertarian principle in direct senses believe that increasing the set of skills a person has is the most crucial and best way for a person to get a job and a decent pay. The libertarians further believe in the freedom of economy as well thus defying the fact that forcing the job giver to fix the wages according to law and not set of skills would do any good to the economy. Though this philosophy accepts that the minimal level of minimum wages is very little for survival however the emphasis of followers of this philosophy continues to be on a freedom-based approach to the market of labor and wages.

Constitutional Perspective – The constituent assembly while framing the constitution of our country widely and largely discussed the perspectives which were necessary at that point of time for the protection of laborers from the clutches of zamindars and land owners. Shri S. Nagappa while speaking in the constituent assembly meeting on 21^st Nov. 1949 spoke about the necessity of having a minimum wage for the workers. He was majorly concerned with the interim period under which a capitalist government may be enshrined to control the affairs of the state and in such a scenario it becomes necessary for the protection of workers by providing them the minimum share they deserved through law. He said “Under the Directive Principles you have been good enough to direct the country and the provincial Governments to see that the wage-earner is given his minimum wages. He is protected from the exploitation of industrialists, capitalists or agricultural capitalists. I think the country will be benefited by this.”¹⁴ Further, Shri Alladi Krishnaswami Ayyar also discussed the necessity of minimum wage, however he was more inclined towards court’s interpretation of the law on minimum wage and was concerned with the timely development of the law as per the need of economy of the country and its development. He said that in some cases the fixing of minimum wage may be considered as an infringement of personal liberty as it should be on the laborer to have a right to enter into a contract whatever he feels beneficial for himself.

However, he himself felt the necessity to have minimum wage laws in our country as he said

“It may prove fairly alright if only the Judges move with the times and bring to bear their wisdom on particular issues.”¹⁵

Lastly, article 7(a) of International Covenant on Economic, Social and Cultural Rights discusses the right to minimum wage. It deems that the right to fair, just and bare minimum wage and remuneration stands a necessary and primary condition for just treatment of workers. The article not only includes wages and salaries but also ever direct and indirect remuneration that is received by the workers.¹⁶ “It is clear that the reference to a ‘minimum’ is to ensure that the article sets out the basic requirements for remuneration which in no case should limit efforts to improve the level of remuneration above those standards.”¹⁷ Thus the international covenant gives a major portion of its frame to the discussion of fair treatment of labor and workers the greater chunk of which includes minimum wages and fair remuneration to all. Further it also talks about application of principle of equity in providing remuneration to the workers, when it discusses that the remuneration has not to be equal only when same work is done by the workers but also when the work of equal value is done.¹⁸

The discussion above makes it clear that there can be both ways in which laws pertaining to minimum wage can be interpreted. The free-market philosophers are always of the stand that such a regime is going to put an indefinite burden on the employers to provide a fixed wage even to the workers who are underperforming but cannot be removed due to lack of trained workforce in that particular field. Further the economists also claim that an increased minimum wage may result in layoffs or slower hiring rates. Further rather than increasing employment at the lower unskilled levels this might result in an increased unemployment as employers, to remove their burden might shift to a more machine-oriented production tactics which would reduce their burden. Further it is also said that “the minimum wage is an unfunded mandate that falls on business shoulders.”¹⁹ Thus the proponents who are against minimum wage laws require the state to be a more libertarian one and the one that allows an open contract between the employer and employed to decide their own terms.

However, in almost all scenarios it becomes clear that the pros have always outweighed the cons and the research also shows that in all probabilities a minimum wage promotes and motivates even the unskilled set of workers to do better as far as the work is concerned. To quote Jeremy Bentham who said that a state that functions for greatest good of greatest number is worthy of being called a state in true sense thus through this principle it can be fully ascertained that it is a necessity of time to protect the workers and keep their good in the mind before formulating any of the policies so that everyone can be benefitted and be happy in true sense.

Views are personal.

1 ILO: General Survey concerning the Minimum Wage Fixing Convention, 1970 (No. 131). Also See, the Minimum Wage Fixing Recommendation, 1970 (No. 135), Committee of Experts on the Application of Conventions and Recommendations, 2014.

2JOHN STUART MILL, PRINCIPLES OF POLITICAL ECONOMY, (1848).

3Starr & Gerald, Minimum wage fixing: an international review of practices and problems (2nd impression (with corrections) ed.). Geneva: International Labor Office.1 (1993).

4 81 Cong. Rec. 4960 (1937) (statement of Pres. Franklin D. Roosevelt, "Our Nation, so richly endowed with natural resources and with a capable and industrious population should be able to devise ways and means of insuring to all our able-bodied men and women a fair day's pay for a fair day's work").

5 http://www.economicsdiscussion.net/wages/wages-definition-types-and-other-details/7450.

6Id.

7Vladimir Lenin on Capitalist state and hindrance to development of workers.

8Jonathan Chenjeri, The Minimum Wage and the Big Picture, Feb. 19, 2015.

9 Karl Marx, aspect on minimum wage.

10 www.cato.org/publications/commentary/minimum-wage-socialism.

11 Boaz & David (January 30, 2009). "Libertarianism”. Encyclopedia Britannica.

12 Woodcock & George, Anarchism: A History of Libertarian Ideas and Movements. Peterborough, Ont., Broadview Press. 16 (2004)

¹³ Shri S. Nagappa (Madras: General), constituent assembly debates (proceedings) - VOLUME XI, Monday, the 21st November 1949.

¹⁴ Shri Alladi Krishnaswami Ayyar (Madras: General), C.A.D. (proceedings)-VOLUME VII Monday, the 6thDecember 1948.

¹⁵Art.1(a), ILO Equal Remuneration Convention 1951 (No. 100). ¹⁶TravauxPréparatoires A/2929 (1955), para.5. Craven, op,228. ¹⁷ Covenant and CESCR General Comment No. 20. Article.2.