Labour force plays an important role in the process of producing goods and services which contributes to growth and development of an economy. But labourers are often subjected to exploitations. Capitalists, industrialists and entrepreneurs build their fortune on the sweats of labour force while workers remain deprived. Islamic code of life does not support such behavior on the part of employers and provides, instead, a humane system of wage determination so that goods and services produced by the combination of the factors of production are distributed among the factors justifiably, and this leads to equitable distribution of income and wealth in society as well. The issue of determining wages comes under the domain of factor pricing. Let us see how factor pricing is viewed in Islamic code of life. There are three general normative principles of factor pricing in Islam. These are as follows:
Justice: The first principle of pricing of factors of production is justice. Islam requires one to be just in all his/her dealings. Besides, it is ordained clearly that a person will receive what he works for and, therefore, justice in factor pricing is to fix a price which corresponds to the factor’s contribution in production process. The word ‘corresponds’ has been used instead of ‘equals’ to imply that factor pricing does not have to be ‘exactly equal’ to its contribution, but it should correspond to it. The closer, however, the price is to contribution, the closer it is to justice.Humanity: Labour (human) service is not treated as a saleable commodity in Islamic code of life, since labour is an inseparable attribute of mankind who is, in fact, the vicegerent and the best creation of Allah (SWT). A free man cannot be sold like a commodity and so is its attribute (service) which is inseparable from him. The owner of a land can separate it from him to sell its service (i.e., to rent it out), but a man has to take his whole existence to the place of work to render human service. Allah (SWT) has made this arrangement of employment (getting work done in exchange of a return) to provide mutual co-operation among people by rendering service to each other in order to keep the world going in accordance with the law of nature given by Him. So, there must be human touch in receiving and giving this mutual cooperation.
Scarcity: This refers to supply relative to demand conditions, that is, to market forces. If gold is very scarce compared to its demand, its higher price is not unethical. If land is abundant, it may be cheap. This pertains to the interplay of demand and supply forces in determination of factor prices. This interplay, however, should be within the reasonably acceptable range of justice and humanity.
In pricing the human factor of production, labour, one must follow these general normative principles of factor pricing (justice, humanity and scarcity).The role of justice and humanity will be primary and that of market forces secondary in determining the price of labour. It should be mentioned here that the inclusion of humanity principle adds some extra considerations to the problem which are not taken into consideration in the conventional economic systems. The important considerations are as follow: First, there should be a man-to-man brotherly employer-employee relationship in overall behaviour, and not like a man-to-material relationship. Second, the work load and working conditions should be humanly acceptable; there is a humane limit to work load of a man, which may not be true for material things. Third, an employer should guarantee the basic needs (food, clothing, medical-care etc.) of the brother employee.
All these considerations tend to amount to ensure a reasonable wage or a humane minimum wage to meet basic needs. This should not, however, lead to confusion that Islam requires one to pay his employee a salary to meet entire basic needs of his family even if it is higher than his contribution in production process. What it means is that if justice and scarcity principles pull the wage rate into two opposite directions, the humanity principles will come in and strengthen the human-and-contribution aspect of the matter.
The question of basic needs may be elaborated a bit further. A prophetic tradition may be interpreted to imply a wage that satisfies the basic needs of employees. “Those are your brethren whom Allah has put under you and hence you should provide them with food that you eat and clothing that you wear” (Bukhari). An employee has to support his dependants, if any, from his earnings. It is, therefore, a moral duty on the part of an employer to pay enough to meet the employee’s basic needs subject to the maximum of the value of his contribution in the production process; otherwise, the entrepreneur cannot continue his enterprise. But it is not wise to push the wage rate up to the full value of his contribution in the production process. Therefore, minimum wage legislation may be adopted in an Islamic economy to correspond to the satisfaction of basic needs of employees subject to the condition that a minimally acceptable per unit profit will be left for entrepreneurship and capital. If this is not enough to satisfy basic needs, the amount of deficit will be paid from the social security funds developed by Zakat and other revenues meant for relatively worse-off population. The amount required to meet the basic needs will be determined by the cost of a modest living of an average size family in the relevant society.
The writer is Professor Emeritus and Vice Chancellor (acting) of Asian University of Bangladesh