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Meaning Of Minimum Wages

 Meaning of Minimum Wages, Benefits of Minimum Wages

    Minimum wage is that wage which provides not only for the bare sustenance of life but also for the preservation of the efficiency of the worker. It is the minimum that must be paid to the worker to cover his and his family’s bare necessities including some measure of education, medical and other amenities. Prof. Dobb defines a minimum wages as “the standard rate which a trade union attempts to establish by collective bargaining.”

   The demand for the fixation of a minimum wage arose to forbid the payment of unduly low wages in sweated trades, i.e. trades in which work was done by hand for long hours and under unhealthy conditions. Slowly, it has been extended to even non-seated industries where labour is not properly organised and where wages are exceptionally low. These days a national minimum wage for all kinds of occupations has been predetermined by law.

Benefits of Minimum Wages

  1. Increase in National Income

    Fixing minimum wages are “unambiguously advantageous to the national dividend,” according to Prof. Pigou. Minimum wages will so increase the incomes of workers that their consumption expenditures will increase which will in turn lead to an expansion of the consumers’ goods industries and via acceleration principle to the capital goods industries. All this will tend to stimulate occupations, productivity and national earnings.

  1. For industry

    Minimum wages prove beneficial both to the employers and the community by increasing the efficiency and productive capacity of the industry. Higher wages by raising the standard of living increase efficiency and even the bargaining power of the workers. Thus higher wages by raising productivity encourage employers to adopt better techniques of production and weed out the inefficient employees.

  1. Industrial Peace

    Minimum wages, if related to the cost of living, as in the case in advanced countries, tend to reduce labour unrest and maintain industrial peace.

  1. Revenue Exploitation

    Minimum wages for sweated trades tend to remove exploitation of workers by employers. But there is the fear of unemployment if the workers do not have a strong trade union. The employers may recruit new workers and turn out the existing workers.

  1. Profit Squeeze

    In industries where the demand for workers in inelastic, it is not possible for employers. But there is the fear of unemployment if the workers do not have a strong trade union. The employers may recruit new workers and turn out the existing workers.

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