THE DISTINCTION BETWEEN WAGES AND SALARIES1
| Date | 01 June 1956 |
| DOI | http://doi.org/10.1111/j.1467-9485.1956.tb00812.x |
| Published date | 01 June 1956 |
| Author | Hilda R. Kahn |
THE DISTINCTION BETWEEN WAGES
AND
SALARIES
’
I
WHAT
precisely do the terms
‘
wages
’
and
‘
salaries
’
mean?
Does
the first include the second? If there is a distinction, what is it?;
what are the criteria
for
making it?; and is it worth making? These
questions are not infrequently asked
;
what follows is an attempt to
contribute to their elucidation in the light particularly
of
official usage.
A
wage, according to
The Shorter Oxford
English
Dictionary,
is a
‘
payment to a person for service rendered
;
now especially the amount
paid periodically for the labour or service
of
a
workman or servant
*.
A salary is there defined as a
‘
fixed payment made periodically to a
person as compensation for regular work
;
now usually for non-manual
or
non-mechanical work
’.
Both salaries and wages include payment
in
kind as well as in cash, and their recipients must be employees,
i.e.
persons in employment under a contract of service. It is, first,
employed in the broad sense of reward for personal effort; it has
this connotation
in
Romans,
vi,
23:
‘The wages of sin is death.’
Leaving morals aside, wages in this wide sense refers, broadly speaking,
to
the financial reward of the factor of production Labour,2 and
includes salaries, emoluments and stipends as well as wages
in
its more
restricted second meaning. This latter, as a first approximation that
we are about to verify, relates only to the rewards
of
manual labour.
Economists have tended to use the term in its first ‘all-embracing’
sense, though, as Professor Dickinson has pointed out,
‘
economic
writings on “wage” matters bristle with other usages’.3 Going
back to Adam Smith, most economists have been led to define
wages as any and all incomes derived from personal services, apart
from saving and risk-bearing
;“
they have not, therefore, found it
necessary to define the term in contradistinction to salaries, or to
treat the latter as a separate entity.
‘
Wages’ appears to be used in
two
chief senses.
I
wish
to
thank Professors
A.
K.
Cairncross and A.
D.
Campbell,
Mr.
D.
J.
Robertson and
Dr.
B.
Wootton
for
much valuable help received in
connection with this paper. Assistance from the Central Statistical Office is
also gratefully acknowledged.
ZThe fact that wages and salaries may contain an element
of
non-labour
income and that, similarly, a proportion
of
labour income is received by
persons outside the wage and salary categories,
e.g.
working proprietors, need
not
be
examined in
our
particular context.
Z.
C. Dickinson,
Collective
Wage
Determination
(1941),
p.
11.
“
Ibid.,
pp. 11-12.
126
THE DISTINCTION BETWEEN WAGES AND
SALARIES
I1
127
What light does official usage throw on all
this?
There
is
in
fact
no
one uniformly-accepted definition clearly differentiating the two
categories.
Wages Councils Legislation.
For
the purposes of the Wages
Coun-
cils Act of 1945 a
'
worker
'
is
specifically described as
'
any person
who has entered into
or
works under a contract with an employer,
whether the contract be for manual labour, clerical work
or
otherwise
'.5
In
other words, the Act is an illustration of wages being used officially
in its wide 'all-embracing' sense, and salaries are in practice dealt
with by quite a number of the Councils. Wages Councils in the retail
trade, for instance,
fix
the pay of clerks and cashiers
;
the Hairdressing
Undertaking Wages Council lays down rates
for
managers and
manageresses, receptionists and manicurists, while the Wages Boards
set
up
under the Catering Wages Act
of
1943 again deal
inter
aliu
with occupations such as canteen supervisors and
chefs de cuisine.6
It is of course true that the majority of Councils
fix
minimum rates
for genuine wage-earners only, but this seems to be in the main because
the salaried grades in these fields are relatively insignificant.
In
the
Wages Councils and analogous legislation then we have definite
examples of the term
'
wages
'
being used
in
the broad first sense
mentioned in
our
introductory section.
i.e.
applied to the workers
operating a particular service irrespective of whether they are manual
or
non-manual.
The Department of Inland Revenue.
The Inland Revenue, before
the war, distinguished between wages and salaries, because from
1928
up to the introduction of Pay-As-You-Earn in 1944 they were assessed
on different bases, wages
on
current, and salaries
on
the previous year's,
earnings.
In
classifying employees into wage-earners and salary-earners
the Inland Revenue was guided by
(a)
the
nature
of
the work,
i.e.
whether manual
or
non-manual, and
(h)
the
period
by which the worker was paid
:
if
he was remuner-
ated by the week
or
shorter period. he was a wage-earner:
alternatively, he was treated as salaried.
On
this latter point, the Revenue had the guidance of the Income Tax
Act, 1918, Section
237,
'
Interpretation
',
which included the following
definition
:
'
"
Weekly wage-earner
"
means a person who receives
wages which are calculated by reference to the hour, day, week
or
any
period less than a month at whatever intervals the wages may be paid,
or
who receives wages, however calculated, which
are
paid daily,
Wages Councils Act.
1945,
Ch.
17.
Sect.
23.
'
Sce
Time
Roles
of
Wowr
(inn
Holm
of
Labour,
Is!
April
1955
(H.M.S.O.,
1955).
for
full
details.
To continue reading
Request your trial