Trends and Policy Considerations Bangkok, 16 June 2015 Matt - - PowerPoint PPT Presentation

Labour standards in global supply chains A programme of action for Asia and the garment sector

Wages in Asia and the Pacific: Trends and Policy Considerations

Bangkok, 16 June 2015

Matt Cowgill, Chief T echnical Adviser ILO Regional Office for Asia and the Pacific, Bangkok Email: cowgill@ilo.org

Wage employment is increasingly important in Asia and the Pacific

Source: ILO Key Indicators of the Labour Market, 2015.

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Global wage growth remaıns below pre-crısıs rates

2.8 3.1 1.2 1.6 2.2 1.0 2.2 2.0 2.1 2.4 0.5 0.7 1.4 0.1 1.3 1.1 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2006 2007 2008 2009 2010 2011 2012 2013 Annual growth (per cent) Global Global - without China

Note: Global wage growth is calculated as a weighted average of year-on-year growth in average monthly real wages in 130 countries, covering 95.8% of all employees in the world (for a description of the methodology, see Appendix I). Source: ILO Global Wage Report 2014/15

Wages growth is highly uneven across sub-regions

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2 4 6 8 10 2006 2007 2008 2009 2010 2011 2012 2013 Growth in nominal average wage (per cent) East Asia South Asia South East Asia & the Pacific Arab States

Source: ILO Key Indicators of the Labour Market, 2015.

Wages are unequally distributed within countries

Note: Data refer to 2013 (Indonesia, Malaysia, and Sri Lanka), 2012 (Cambodia, India, Singapore, and Viet Nam), 2011 (Japan and New Zealand), 2010 (Australia, Korea, rep. of, Lao PDR, Maldives, and Thailand), 2009 (United Arab Emirates). Source: ILO: ILOSTAT; ILO: Global Wage Database 2014/15, based on national statistics; ILO, ADB: ASEAN Community 2015: Managing integration for better jobs and shared prosperity (Bangkok, 2014).

2 4 6 8 10 12 14 16 18 20 22 Japan Australia Lao PDR Viet Nam Cambodia Korea, Rep. of Maldives Philippines Malaysia Sri Lanka Thailand India Indonesia Singapore UAE Wage inequality, latest year (90:10 ratio)

Wages are unequally distributed between men and women

* Based on average daily wage or salary earnings received by regular wage and salaried employees (activity status codes: 31, 71, 72) of age 15 to 59 years, multiplied by 313/12. **Based on an establishment survey with broad coverage; refers to full time employees. Source: ILO: Global wage Database 2014/15, based on national statistics; ILO: ILOSTAT.

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10 30 50 70 90 110 Nepal (2008) Pakistan Korea, Rep. of (2014) Australia New Zealand United Arab Emirates (2009) Japan Maldives (2009) Cambodia (2009) India (2012) Singapore (2014) Indonesia (2013) Macau, China (2014) Iraq (2007) Occupied Palestinian… Taiwan, China Sri Lanka (2014) Lao PDR (2010) Qatar (2014) Mongolia Samoa (2012) Myanmar (2008) Jordan (2010) Hong Kong, China (2013)** Viet Nam Lebanon (2009) Malaysia Oman (2010) Thailand Saudi Arabia (2014) Timor-Leste (2010) Philippines (2014) Average wage of women, relative to men's wage Gender wage gap

Large gaps in labour productivity between countries

Source: ILO KILM (Trends Econometric Models), 2015.

20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 Nepal Myanmar Cambodia Papua New Guinea Bangladesh Viet Nam Lao PDR Pakistan India Philippines Fiji Indonesia China Thailand Mongolia Sri Lanka World Lebanon Malaysia Iraq New Zealand Korea (The Rep. of) Oman Japan Australia United Arab Emirates Saudi Arabia Singapore Labour productivity in selected countries in Asia and the Pacific, 2015 (output per worker, constant 2011 PPP US$)

Average wages and productivity are strongly correlated

Nepal Pakistan Cambodia Indonesia Viet Nam Philippines Thailand Mongolia China Malaysia Hong Kong, China Korea, Rep. of New Zealand Singapore Japan Australia Lao PDR $30 $60 $120 $240 $480 $960 $1,920 $3,840 $7,680 1 500 3 000 6 000 12 000 24 000 48 000 96 000 Average monthly wages, log scale Annual labour productivity, log scale

Source: ILO Global Wage Database, based on national labour force surveys (wages) and ILO Employment Trends Database (labour productivity). All data are for 2012, other than Pakistan (2011) and Nepal (2008)

ILO Global Wage Report calls for a comprehensive policy approach

• Market distribution policies that affect wages

and wage distribution directly, including: minimum wages, collective bargaining, promoting equal pay across groups and promoting job creation.

• Fiscal redistribution through taxes and social

transfers, including progressive taxation, in-work benefits, and direct support to low-income households (such as cash transfers, or public employment opportunities).

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The elements of wages policy

“MW zone” “Collective bargaining zone”

• The objective of wage policies should be “to ensure a just share of the

fruits of progress to all and a minimum living wage to all employed and in need of such protection” (ILO 2008 Declaration on Social Justice for a Fair Globalization).

Minimum wages should remain targeted at the lowest-paid employees, to eliminate “unduly low pay” For workers above the minimum, collective bargaining promotes average wage increases that are broadly in line with increases in labour productivity and contributes to a fair and stable share of GDP for labour compensation.

Most countries have a minimum wage

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Arab States Asia and the Pacific Africa Americas Europe and Central Asia Total Proportion of countries with at least

• ne minimum wage in the private sector

Collective bargaining coverage is low in many countries in the region

Source: ILO Stat. See www.ilo.org/ilostat for full source list.

The ILO’s approach to minimum wages

• ILO takes no position on the appropriate level or increase in the

minimum wage

• ILO aims to:

– Support national stakeholders to build institutions consistent with C131 – Encourage and assist stakeholder to move towards regular adjustment in line with agreed rules and criteria

• ILO provides:

– Technical assistance – Capacity building – Information

• ILO is guided by:

– Minimum Wage Fixing Convention, 1970 (No. 131) – Minimum Wage Fixing Recommendation, 1970 (No. 135)

Minimum wages in garment-producing countries

100 200 300 400 500 600 700 800 900 1000 1100 Sri Lanka Bangladesh Pakistan Cambodia India Viet Nam Mexico Egypt Tunisia El Salvador Thailand Indonesia Peru Malaysia Philippines Morocco China Guatemala Honduras Panama Turkey Hong Kong, SAR Korea, Rep. US dollars per month (at market exchange rates)

Minimum wage per month for unskilled garment workers in USD (2015)

Lowest relevant rate applicable to unskilled garment workers Highest relevant rate applicable to unskilled garment workers

Source: ILO ROAP, based on national sources.

T

• pics to consider
• What should be the role and purpose of minimum wages?
• What social and economic criteria should be taken into account?
• What data should be used to measure those criteria?
• What institutional arrangements should be used to set and adjust

minimum wages, and what should be the role of the tripartite stakeholders?

• What are some strategies to ensure compliance?
• Who should be covered by the minimum wage?
• How often should minimum wages be adjusted?

The role of the minimum wage

• “Minimum wage fixing should constitute one element in

a policy designed to overcome poverty and to ensure the satisfaction of the needs of all workers and their families.” (ILO Recommendation 135, Article 1)

• What other elements are potentially important?
• Collective bargaining, including for salary scales
• Social security and tax policy
• Benefits in kind (eg. health care)

Criteria for determining minimum wages

a) the needs of workers and their families; b) the general level of wages in the country; c) the cost of living and changes therein; d) social security benefits; e) the relative living standards of other social groups; f) economic factors, including the requirements of economic development, levels of productivity and the desirability of attaining and maintaining a high level of employment.

Involvement of social partners

• There should be “full consultation with representative
• rganisations of employers and workers concerned” regarding the

“establishment, operation and modification” of minimum wage

• machinery. This consultation should cover:

a) the selection and application of the criteria for determining the level of minimum wages; b) the rate or rates of minimum wages to be fixed; c) the adjustment from time to time of the rate or rates of minimum wages; d) problems encountered in the enforcement of minimum wage legislation; e) the collection of data and the carrying out of studies for the information of minimum wage fixing authorities.

Non-compliance is higher than in some other developing countries

Source: Rani, U., Belser, P., Oelz, M. and Ranjbar, S. 2013, 'Minimum Wage Coverage and Compliance in Developing Countries', International Labour Review, vol. 152, no.3-4. Indonesian data source is SAKERNAS 2009.

4.8% 9.4% 20.2% 20.7% 29.8% 32.9% 39.0% 43.8% 47.1% 49.9% 50.8% 0% 10% 20% 30% 40% 50% 60% Viet Nam Mexico Brazil Mali Peru Costa Rica India Philippines South Africa Turkey Indonesia Wage earners paid below MW

Non-compliance with MW (late 2000s, formal and informal sectors)

Potential strategies to improve compliance

• Potential strategies include:

– Persuasion (interpersonal or societal) – A participative minimum wage setting process – A simple minimum wage system – Information campaigns – Training seminars – Strong labour inspectorate – Access to complaints procedures (individual and collective) – Compensation for underpayment, with minimal waiting time – Legal penalties for underpayment – Public naming and shaming

Source: Benassi, C. 2011, ‘The Implementation of Minimum Wage: Challenges and Creative Solutions’, GLU Working Paper No. 12, Global Labour University, International Labour Organization.

Who should be covered?

Source: Rani, U., Belser, P., Oelz, M. and Ranjbar, S. 2013, 'Minimum Wage Coverage and Compliance in Developing Countries', International Labour Review, vol. 152, no.3-4. Indonesian data source is SAKERNAS 2009.

95.30% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% India South Africa Peru Indonesia Costa Rica Brazil Mali Mexico Philippines Turkey Viet Nam Wage earners covered by MW legislation

Coverage of MW

How regularly should minimum wages be adjusted?

Nominal MW - Scenario 1 (five-yearly adjustment) Nominal MW – Scenario 2 (annual adjustment) 50 100 150 200 250 2000 2005 2010 2015 Index (2000 = 100)

Labour standards in global supply chains A programme of action for Asia and the garment sector

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