Implementation Experiences of selected Asian Countries amp Case of India Rupa Korde Faculty Economics Area FLAME University Pune India Sunny Wadhwaniya Research Associate Indian Institute of Management ID: 795888
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Slide1
Trends in Minimum Wage Laws and
Implementation Experiences of selected Asian Countries(& Case of India)
Rupa KordeFaculty, Economics AreaFLAME University Pune, India
Sunny WadhwaniyaResearch Associate,Indian Institute of ManagementAhmedabad, India
Biju VarkkeyFaculty, HRM AreaIndian Institute of ManagementAhmedabad, India
www.iima.ac.inwww.flame.edu.inwww.paycheck.inwww.wageindicator.org
Slide22Introduction
Why Minimum Wage matter?
An effective tool to reduce wage inequality and poverty To safeguard the income and provide decent standard of living to low skilled workersMinimum Wages Legislations are crucial:
Protection for low-wage workersEnsure payment of fair wagesProvide a basic floor wageInstrument of macroeconomic policy
The Concept: Minimum WageThe 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 (ILO).
Slide3Select Literature Review
1
Jones 1997;
Strobl & Walsch, 2001
They note that the presence of legal mechanisms does not guarantee an effective implementation of minimum wage policy in a country. In order to have an effective implementation of the minimum wage policy, the traditional top down approach, found in most legal mechanisms should
be avoided2Raustiala & Slaughter, (2002) The authors argues that if the implementation of minimum wage legislation is effective, it will automatically lead to a better compliance of minimum wage legislation in a country
3
Benassi
(2011)
Has
identified and evaluated various MW implementation schemes.
Emphasised that the issue of MW implementation is considered important both at the academic and political levels.
Pointed
out the
documenting the issues faced during implementation and compliance of the policies are ignored.
4
Ra, (2014)
Has presented major trends and issues of MW implementation in major South-East Asian
countries.
The major finding of the study is; political and non-economic factors do play a major role in the implementation of MW
regulation.
5
Bhorat
, (2014)
Identified
one of the major issues related to enforcement and compliance of minimum wage regulation is ‘
measuremen
t’
particularly the measurement of noncompliance and enforcement.
The study suggests that there should be an index of minimum wage violation which would enable policymakers and
researchers to analyse the level and depth of non-compliance.
However, better compliance and enforcement is very difficult when minimum wage regulations are complex.
6
Varkkey (2015)
The study looks at the implementation of MW
A
ct in India.
It notes that
the implementation of the MW act is problematic because of its highly complex structure, albeit the fact that
there are institutional
mechanisms to ensure payment of wages, but the effectiveness of those mechanisms is rather
questionable.
Slide4Many Asian countries are largest single contributor to global growth (60% as per ADB, 2017). In spite of
such unparalleled growth, labour advocates are struggling to ensure protection of workers’ rights, including providing them with minimum wageVast differences in the minimum wage policies and regulations, as well as implementation difficulties. Hence, in most of Asian countries, minimum wage systems have been a subject of debate and criticism owing to its complicated structure. The major reason for such complexities may be found in the foundation of minimum wage systems, i.e. minimum wage fixing procedure and criteria used.
Large body of research on the trends in implementing minimum wage regulation in developing countries. The studies covered few parameters - hence they’ve failed to provide a holistic solution. Few studies (Upadhyaya,2012; Ra,2014; Ford, 2017) have addressed the aforementioned issues in Asian Countries. This gap in literature has prompted our study.
Comparative analysis of minimum wage laws and implementation mechanisms in Asian Countries under the WageIndicator project, i.e. including Cambodia, China, India, Indonesia, Pakistan, Sri Lanka and Vietnam are covered. Research Gaps
Slide5Methodology
Used data / information available from
WageIndicator.org Minimum Wage DatabaseInputs from Country Teams from 7 countries covered in this studyDesk research by
Paycheck India teamDichotomous Coding (Y / N) for each parameter under consideration
Development of a grid
www.wageindicator.orgwww.paycheck.in
Slide6Evolution of Minimum Wage Legislation in Asian Countries
Sri Lanka
India
PakistanVietnam
CambodiaIndonesia
China19411948196119941997
2003
2004
Sri Lanka Wage
Ordinance Board
India Minimum
Wages Act
Pakistan Minimum
Wage ordinance
Vietnam
Labour Code
Cambodia Labour
Law provision on Minimum
Wage
Indonesia
Legislation on
Minimum
Wage
China Provision
on Minimum
Wage
2016
2017
2018
2012
2018--National Minimum Wages Act No. 3Budgetary Relief Allowance of workers Act No.4The Code on Wages Bill Sindh Labour Policy Vietnam Labour Code (amended) National minimum wage law --
Slide7Minimum Wage fixing method in Asian Countries
Slide8Parties involved in Minimum Wage Fixing and Adjustment
Minimum Wage
Fixing Body
Role of Social
PartnersCountries
Minimum Wages fixed by GovernmentMinimum Wages fixed by specialized bodiesOther procedures(Collective Bargaining) No obligation to consulting partnersAfter direct consultation withsocial partnersAfter recommendation / advice from social partners
Slide9Specialized bodies involved in Minimum Wage Fixing Process
Country
Specialized Bodies Involved
Cambodia
Labour Advisory Committee (tripartite)
ChinaChina Entrepreneur Association All-China Federation of Trade Unions
India
Advisory Board and Committees (bipartite)
Indonesia
National Wage Council (Provides national wage policy advice - tripartite)
Provincial Wage Councils (Advise provincial governors, who determine minimum wages - tripartite)
District/City Wage Councils (Advise provincial governors, who determine provincial minimum wages - tripartite)
Pakistan
Provincial Minimum Wages Boards (bipartite)
Sri Lanka
Wages Boards (Workers in certain trades)
Remuneration Committees (tripartite)
Vietnam
National Wages Council (tripartite)
Source: Varkkey, Korde & Singh,2016
Slide10Criteria for Minimum Wage fixing in Asian Countries:
Criteria considered in determining the level of Minimum Wages
(ILO Minimum Wage Fixing Convention, 1970 (No.131,Article :3)
The Criteria for Fixing
Slide11Legal Criteria for Minimum Wage fixing in Asian Countries:
Cost of living
index
Level of
Wages
Needs of
Workers &
their families
Level of
Employment
Social
Security
Benefits
Productivity of
Labour
Enterprises' ability to pay
No set
criteria
Slide12Frequency of Minimum Wage Adjustment:
Annual Adjustment
Every 2 years or moreFlexible
ILO Convention No. 131 (Article 4): -
Minimum Wages should be "adjusted from time to time”ILO Minimum Wage Fixing Recommendation, 1970 (No. 135) :- “Minimum wage rates should be adjusted from time to time to take into account changes in the cost of living and other economic conditions.” In principle, this revision can take place “either at regular intervals or whenever such a review is considered appropriate in the light of the variations in a cost-of-living index”. Present status of selected Asian Countries
Slide13Some Interesting Facts about Minimum Wages in Asian Countries:
In
India
the MW is set as per piece rate, monthly, daily and hour rate.It is decided on a central, regional, & sectoral level.India has about 1700 MW rates.Pakistan are MWs at provincial &occupational level.China does not have a national MW rate, instead MWs are set at province & sectoral level.
In
Sri Lanka
, MWs are set as per sector & industry by Wage Boards
Sectors that are not under the Wage Boards are not covered by MWs
MWs have not been revised for almost a decade
In
Indonesia
, provincial MW is set based on the negotiations & agreements between three key actors, i.e., corporate organizations, trade unions & the Governor.
In
Cambodia
, MWs are set for all apprentices, probationary & regular workers.
MW only for garment & footwear sector
In
Vietnam
, there are two types of MWs; general MW for public servants & armed forces and the regional MW for private & other sectors.
Since, 2010, Vietnam has a universal coverage of MWs for all workers; including informal
workers.
Slide14Reforms in Minimum Wage framework in India
Case study of Wage Code Bill, 2017
Slide15Conclusion
There are sufficient commonalities and differences that could be observed in the minimum wage fixing criteria and procedures among the seven countries.
Even though Asian countries share some commonalities in terms of minimum wage fixing methods and background, diversity exists among them at various levels.The one positive trend seen in all countries is that they believe in minimum wage to be a powerful labor market stabilizing tool and have adopted suitable methods that allow labor and employer representation in the fixing process.The negative trend of this is seen in the
declining involvement of Trade Unions along with the fading use of collective bargaining as the mechanism for minimum wage fixing.
Slide16Thank You
Rupa
KordeFaculty, Economics Area
FLAME University Pune, Indiarupa.korde@flame.edu.in
Sunny WadhwaniyaResearch Associate,Indian Institute of ManagementAhmedabad, Indiapaycheckdata@iima.ac.in
Biju VarkkeyFaculty, HRM AreaIndian Institute of ManagementAhmedabad, Indiabvarkkey@iima.ac.inwww.iima.ac.inwww.flame.edu.in
www.paycheck.in
www.wageindicator.org
Slide17I
ndicators
D
escription
Countries
History of development and the colonial backgroundNot all the seven countries share the same colonial backgroundIndia and Sri Lanka are early adopters of minimum wage system China being possibly among the last adopters of minimum wage system
Presence of
multiple
wages
Different wage rates
for different regions
China & Indonesia
Different wage rates for different sectors and occupations
Cambodia
Regional, Sectoral and Occupational wage rates
India, Pakistan and Sri Lanka
Setting of minimum
wage rates
MW is fixed by Government or bi/tripartite bodies
China, Cambodia, Indonesia, India, Pakistan, Sri Lanka
Collective bargaining
India and Pakistan
Criteria for fixing
minimum wage
Needs of workers and their families
Cambodia, Indonesia
Cost of living
Cambodia, China, India, Indonesia, Pakistan, Sri Lanka
Level of wages and income in the country
Cambodia, China
Social Security benefits
Cambodia, China
Economic development
Cambodia, China, Indonesia, Pakistan
Inflation rate
Cambodia, China
level of employment
Cambodia, China, Indonesia
Periodicity of minimum
wage revision
Annual Adjustment
-
Once every two years
China, Pakistan
Specific time period for adjustment
Cambodia
Once in five years
India
No Schedule frequency of adjustment identified
Indonesia, Sri Lanka
Commonalities and Differences in
selected Asian countries:
Source: Varkkey, Korde & Singh,2016