Professional Documents
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LESSON 8:
INTRODUCTION TO THE THEORY
OF WAGES
MANAGEMENT
Learning Objectives
Wages
Wages in the widest sense mean any economic compensation
paid by the employer under some contrast to his workers for
the services rendered by them. Wages, therefore, include family
allowance, relief pay, financial support and other benefits.
But, in the narrower Sense wages are the price paid for the
services of labor in the process of production and include only
the performance wages or wages proper. They are composed of
two parts - the basic wage and other allowances.
The basic wage is the remuneration, by way of basic salary and
allowances, which is paid or payable to an employee in terms of
his contract of employment for the work done by him.
Allowances, on the other hand, are paid in addition to the basic
wage to maintain the value of basic wages over a period of
time.
Such allowances include holiday pay, overtime pay, bonus and
social security benefits. These are usually not included in the
definition of wages.
However, in India, different Acts include different items under
wages, though all the Acts include basic wage and dearness
allow come under the term wages. For example, under the
Workmens Compensation Act, 1923, Section 2 (m), wages for
leave period, holiday pay, overtime pay, bonus, attendance
bonus, and good conduct bonus form part of wages.
Under the payment of wages act, 1936 section 2 (VI) any
award of settlement and production bonus, if paid, constitutes
wages.
But under the Payment of Wages Act, 1948, retrenchment
compensation, payment in lieu of notice and gratuity payable
on discharge constitute wages.
The following type of remuneration, if paid, do not amount to
wages under any of the Acts:
(i) Bonus or other payments under a profit-sharing scheme
which do not form a part of the contract of employment.
(ii)Value of any house accommodation, supply of light, water,
medical attendance, traveling allowance; or -payment in lieu
thereof or any other concession.
(iii) Any sum paid to defray special expenses entailed by the
nature of the employment of a workman.
(iv) Any contribution to pension, provident fund, or a scheme
of social security and social insurance benefits.
Skilled Labor
These are workers who have received specialized training to do
their jobs. They have developed and honed a special skill and
may or may not need to be licensed of certified by the state.
Some examples of skilled labor are: carpenters, plumbers,
electricians, business executives and managers, artisans,
accountants, engineers, police, mechanics, etc. These may be blue
or white collar workers.
Unskilled Labor
These are workers who have received no special training and
have few specific skills. As our society has grown into an
increasingly technological one, the members of this group have
developed more and more skills. A mechanic, for example, used
to be considered unskilled labor.
Today that is no longer the case. Mechanics require a great deal
of skill and training to work with todays modern engines.
Examples of unskilled laborers are construction workers,
sanitation and custodial workers, painters, factory assembly line
workers, etc. These are blue collar workers.
Professionals
Arguably the elite of the labor grades, these are those workers
who need an advanced degree to do their jobs. The three
primary groups of professional are doctors, lawyers and
teachers. These are white collar workers.
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Theory of wages
There are two key theories that explain why salaries are the way
they are in a particular field. These two theories are:
1.Traditional Theory of Wage Determination
3 5
MANAGEMENT
COMPENSATION
COMPENSATION
MANAGEMENT
Case Study
suggestion?
How will his ideas fit into the existing pattern of public
union policy?
Can you suggest a promising innovative approach
Assignments
1. Explain the importance of the theory of wages.
2. State the difference between blue collar, white collar and pinkcollar employees.
3. What are the different types of theory of wages? Explain in
detail.
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