Type of Wages

according to economic theory, wages are defined broadly as any economic compensation paid by the employer to his laborers under some contract for the services rendered by them. There are: minimum wage, living wage, and fair wage.  

Minimum Wage

A minimum wage is one which has to be paid by an employer to his workers irrespective of his ability to pay. Minimum wage is fixed by the Government based on the principle of that 1. Average family earning of worker. 2.  The minimum food requirements of 2,700 calories per adult. 3. Minimum requirement of clothing.  4. Minimum requirement of housing and 5. Minimum requirement of fuel, energy and other miscellaneous items.

Fair Wage

Fair wage is the wage which is above the minimum wage but below the living wage. The lower limit of the fair wage is obviously the minimum wage: the upper limit is to be set by the capacity of the industry to pay. Thus, fair wage depends on different variables affecting wage determination. Such factors are labour productivity prevailing wage rates, the level of national income and its distribution and the capacity of industry to pay. At present, the concept of fair wages is followed by the most business organisations.

Living Wage

A living wage is one which should enable the earner to provide for himself and his family not only the bare essentials of food, clothing and shelter but a measure of frugal comfort including education for his children, protection against ill-health, requirements of essential social needs and a measure of insurance against the more important misfortunes including old age.  Living wage is more than the concept of minimum wage. Such a wage is determined keeping in view the national income and paying capacity of industrial sector.