Minimum wage systems and

practices around the world

Patrick Belser
Senior Economist
ILO Geneva
Belser@ilo.org

Date: Wednesday / 05 / February / 2020

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Outline of the presentation

1. What is a 2. What is a 3. Country

minimum wage good, adequate practices from
and what are minimum wage around the world
some of its main system? A view
benefits? from the ILO

Advancing social justice, promoting decent work

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What is a minimum wage?

“The minimum amount of remuneration

that an employer is required to pay wage earners
for the work performed during a given period,
which cannot be reduced by collective agreement
or an individual contract”

MINIMUM WAGES MUST HAVE

THE FORCE OF LAW
Advancing social justice, promoting decent work
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Recent literature shows that
adequate minimum wages can:
• contribute to dignity at work, and a decent living standard

• ensure a level playing field for sustainable enterprises

• support the economy by putting money in the pockets of

consumers

• reduce inequality, pay gaps, and promote social cohesion

• contribute to a productive workforce as opposed to

demotivated workers
Advancing social justice, promoting decent work
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However, policy design is crucial. If poorly
designed Minimum wages can:

• lead to high rates of non-compliance

• increase informality or unemployment

• threaten the existence of sustainable enterprises

Advancing social justice, promoting decent work

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Outline of the presentation

1. What is a 2. What is a 3. Country

minimum wage good, adequate practices from
and what are minimum wage around the world
some of its main system? A view
benefits? from the ILO

Advancing social justice, promoting decent work

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The ILO Centenary Declaration for the

Future of Work
calls on ILO member States to strengthen the
“institutions of work”, including through “an
adequate minimum wage, statutory or
negotiated”

https://www.ilo.org/global/about-the-
ilo/mission-and-objectives/centenary-
declaration/lang--en/index.htm

Advancing social justice, promoting decent work

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In many countries statutory minimum
wages coexist with negotiated ones

Wage floors set through collective

bargaining qualify as minimum wages
provided that collective agreements are
legally binding (not necessarily
extended)
(General Survey, Report of the Committee of Experts on the
Application of Conventions and Recommendations, 2014)

Advancing social justice, promoting decent work

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ILO & minimum wages in historical perspective:

• The preamble of the 1919 ILO Constitution

calls for “the provision of an adequate living
wage”

• The 1944 Declaration of Philadelphia calls

for “a just share of the fruits of progress to
all, and minimum living wage to all
employed and in need of such protection”

Advancing social justice, promoting decent work

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Most relevant ILO Conventions:

• ILO Minimum Wage Fixing Machinery

Convention, 1928 (No.26)

• ILO Minimum Wage Fixing Machinery

(Agriculture) Convention, 1951 (No.99)

• ILO Minimum Wage Fixing Convention,

1970 (No.131)

Advancing social justice, promoting decent work

 What is an adequate minimum wage 11

system? 5 key dimensions

1. Full consultation with social partners

2. Broad legal coverage, including those who need it most

3. An “adequate” level taking into account needs of workers

and their families, and economic factors

4. Adjusting the rate from time to time

5. Measures to ensure effectively application

Advancing social justice, promoting decent work

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Outline of the presentation

1. What is a 2. What is a 3. Country

minimum wage good, adequate practices from
and what are minimum wage around the world
some of its main system? A view
benefits? from the ILO

Advancing social justice, promoting decent work

More than 90 % of ILO member States 13

have a minimum wage system

The number of rates varies by country
14
 The U.S. federal minimum wage = 7.25$ / hour, but
different rates are possible at State-level or City-level

California: 12 US$/hour

New York : 12.50 – 15.00 US$

US$/hour

Source:
https://www.dol.gov/whd/minwage/america.htm
In Brazil, the federal minimum wage in 2019 was 998 R. 16
per month, but higher in Rio de Janeiro for examples
 In China, there is no national minimum wage: the rate 17
varies across and within Provinces

Qinghai
1’500
Yuan

Shanghai
2’480
Yuan
In Indonesia, there is no national minimum wage: 18
there are many rates defined within Provinces
In Costa Rica, there are occupational rates 19
 The U.K. has minimum rates that vary by age 20

Advancing social justice, promoting decent work

In practice, different countries have different systems 21
 1. Although a majority of countries set statutory minimum 22
wages only after consultation with social partners, these
consultations are not always effective
• In many countries, consultation takes place within tripartite minimum wage
commissions or in country-specific institutions

• In some countries, there is no legal obligation to consult social partners. In

other countries, the consultation is a formality and does not make a
genuine effort to take into account the concerns and arguments of the
social partners, is not undertaken before a decision is taken, or is not
carried out on the basis of timely and relevant information

• Consultation does not imply the conclusion of an agreement between the

various partners

Advancing social justice, promoting decent work

 2. Coverage: Many are excluded from legal protection 23

Advancing social justice, promoting decent work

3. The level of minimum wages 24
The level of minimum wages in Asia 25
The level of minimum wages in Europe 26
The level of minimum wages in Latin America 27
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4. The minimum wage should be adjusted from time to time

Advancing social justice, promoting decent work

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The erosion of the real value of the federal minimum
wage in the U.S.

Advancing social justice, promoting decent work

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The steady increase of the minimum wage in Brazil

Advancing social justice, promoting decent work

 5. How to promote the effective application 31

of minimum wages?

• A clear definition of the minimum wage

• Labour inspections

• Dissuasive sanctions

• Information campaigns

• Training activities

Advancing social justice, promoting decent work

Thank you !
Further reading

https://www.ilo.org/global/top
ics/wages/lang--en/index.htm