In recent years, the ILO has been swamped with demands from governments and social partners on minimum wage fixing. Since 2010, we have worked with more than 30 countries on this issue, from large countries like China, Mexico and South Africa, to smaller ones such as Bulgaria, Cape Verde and Cambodia.
The trend shows no signs of slowing.
Germany adopted a national minimum wage in 2015 and South Africa is currently considering replacing its current system of minimum wages in some sectors with a more encompassing national minimum wage.
A strong message also emerged from this year’s International Labour Conference where a new resolution on decent work in global supply chains encouraged the ILO to promote the ratification and implementation of the Minimum Wage Fixing Convention, 1970 (No. 131) among other international labour standards.
That is precisely what Malaysia has just done by becoming the first ASEAN member state, and 53rd country overall, to ratify the Convention. Hopefully, many other countries will follow its example.
The increasing demand for ILO advice on minimum wages has encouraged us to develop, together with other ILO colleagues in Geneva and around the world, a new web-based policy guide on minimum wages.
The Minimum Wage Policy Guide provides a resource for governments, employers, workers and anyone else interested in good practices for minimum wage adjustment
It is grounded in empirical evidence, takes a balanced approach and reflects the diversity of international practices and choices that different countries do and can make according to local preferences and circumstances. It does not seek to foist a one-size-fits all solution on all countries.
It does, however, emphasize a few key principles of good practice. Here are three examples:
1. Minimum wages should be set by governments in full consultation with social partners, who should all be on an equal footing.
Sounds like the usual ILO advice? Well, think about what happens when workers or employers are not consulted or involved. The result typically includes a mix of minimum wages set at wrong levels, a lack of ownership, low compliance, frayed industrial relations and potentially demonstrations or strikes.
When it comes to minimum wage fixing, social dialogue can help find the balance between the legitimate needs of both workers and enterprises.
2. Take an evidence-based approach
We all know that adopting or increasing minimum wages is, in most instances, a political decision. But it should still be a decision based on empirical evidence.
What are the needs of workers and their families? What are the possible economic, social and employment effects of minimum wages set at different rates? Careful studies are needed to respond. Ex-post monitoring of the effects of minimum wages is also a key element of an evidence-based system.
3. Ensure broad coverage and don’t forget enforcement
Minimum wages should cover workers who are most vulnerable to low pay, including domestic workers, home workers and workers in agriculture. Countries should also progressively extend minimum wage protections, in law and in practice, to workers in the informal economy through the process of formalization.
But without compliance, a minimum wage is just a number on a piece of paper. A minimum wage that is set too high, or a system that is too complex with too many rates, will inevitably be difficult to enforce.
But when wages are set at an adequate level, compliance can be strengthened through measures that raise awareness, strengthen the capacity of social partners to protect workers, empower labour inspectors and prosecute infractions.
The ILO’s role in advising and assisting governments, employers and workers
These three principles – full consultation with social partners, an evidence-based approach, and broad coverage with strong enforcement – are central to an effective minimum wage system. But there are many other principles to take into account as well, which are also covered by the minimum wage policy guide.
It provides a resource for governments, employers, workers and anyone else interested in good practices for minimum wage adjustment. In the meantime, the ILO will continue to work closely with a range of countries around the world to provide advice and assistance to improve wage-setting practices.