More on Minimum Wage in Asia ~ IYCW ASPAC

Wednesday, November 17, 2010

More on Minimum Wage in Asia

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Minimum wage in Asia

Minimum Wage

Minimum wage is the minimum amount that must be paid to the majority of the workers of a country, generally on an hourly, daily or monthly basis and which is ideally fixed in such a way as to cover the minimum needs of the worker and his/her family, in light of the prevailing national economic and social conditions.

The facts on minimum wages:

There is legislation regarding minimum wage fixing in more than 90% of countries.
The level of the minimum wage in the lowest 20% of countries that have a minimum wage is US$57 per month, less than the two-dollar a day poverty line.
The level of the minimum wage in the highest 20% of countries that have a minimum wage is US$1185 a month, about US$40 a day. This results in a ratio of 1 to 21 between the lowest and the highest minimum wage countries.
In 10% of countries, the minimum wage represents less than one-fourth of GDP per capita, a very low figure per se. On average, the minimum wage represents two-thirds of GDP per capita.
The median minimum wage in the world is US$213 a month or US$7 a day: 50% of countries have minimum wage rates below this figure.

How is the minimum wage fixed?

A single minimum wage is set for the whole country (or by region) and is determined by the state or a tripartite body (or, in very rare cases, by collective bargaining) in 61% of the countries.
Sectoral and/or occupational minimum wages are set by the government or by a tripartite body in 21% of the countries.
Sectoral and/or occupational minimum wages are set through collective bargaining in 8% of the countries.
A combination of two or three of the above systems of minimum wage fixing in 11 % of the countries.

The History of the minimum wage

Minimum wages were first proposed as a way to control the proliferation of sweatshops in manufacturing industries. The sweatshops employed large numbers of women and young workers, paying them what were considered to be substandard wages. The sweatshop owners were thought to have unfair bargaining power over their workers, and a minimum wage was proposed as a means to make them pay "fairly." Over time, the focus changed to helping people, especially families, become more self sufficient. Today, minimum wage laws cover workers in most low-paid fields of employment.

The minimum wage has a strong social appeal, rooted in concern about the ability of markets to provide income equity for the least able members of the work force. An obvious solution to this concern is to redefine the wage structure politically to achieve a socially preferable distribution of income. Thus, minimum wage laws have usually been judged against the criterion of reducing poverty.

Although the goals of the minimum wage are widely accepted as proper, there is great disagreement as to whether the minimum wage is effective in attaining its goals. From the time of their introduction, minimum wage laws have been highly controversial politically, and have received much less support from economists than from the general public. Despite decades of experience and economic research, debates about the costs and benefits of minimum wages continue today.

The classic exposition of the minimum wage's shortcomings in reducing poverty was provided by George Stigler in 946:

Employment may fall more than in proportion to the wage increase, thereby reducing overall earnings;
As uncovered sectors of the economy absorb workers released from the covered sectors, the decrease in wages in the uncovered sectors may exceed the increase in wages in the covered ones;
The impact of the minimum wage on family income distribution may be negative unless the fewer but better jobs are allocated to members of needy families rather than to, for example, teenagers from families not in poverty;
The legal restriction that employers cannot pay less than a legislated wage is equivalent to the legal restriction that workers cannot work at all in the protected sector unless they can find employers willing to hire them at that wage.

Direct empirical studies indicate that anti-poverty effects in the U.S. would be quite modest, even if there were no unemployment effects. Very few low-wage workers come from families in poverty. Those primarily affected by minimum wage laws are teenagers and low-skilled adult females who work part time, and any wage rate effects on their income is strictly proportional to the hours of work they are offered. So, if market outcomes for low-skilled families are to be supplemented in a socially satisfactory way, factors other than wage rates must also be considered. Employment opportunities and the factors that limit labor market participation must be considered as well. Economist Thomas Sowell has also argued that regardless of custom or law, the real minimum wage is always zero, and zero is what some people would receive if they fail to find jobs when they try to enter the workforce, or they lose the jobs they already have.

Who is covered and who is excluded?

The vast majority of wage workers in the world are legally covered by minimum wage legislation. This is obvious from the examples of China, where virtually all wage workers are covered, and of India, where numerous unskilled occupations in the unorganised (or informal) sector are covered. Brazil also has universal coverage, while in countries where the minimum wage is fixed through collective bargaining, such as Denmark or Germany, the coverage level is generally high (respectively 90 and 70% of all workers are covered in these two countries).

Yet, not all categories of wage workers are covered by minimum wage legislation. Amongst these, the situation of domestic workers and farm workers is of particular importance because they often form the bulk of poor workers. In some countries, domestic workers are entitled to minimum wage protection (Brazil, China), sometimes at a reduced rate (Chile, Lesotho), while in others, they are left without protection (Indonesia, Republic of Korea, Morocco, Tunisia, Sri Lanka). The same is true for farm workers who benefit from minimum wage protection in India, Guatemala and South Africa, but not in Botswana, Cambodia or Malaysia.

In general the earnings of workers in Asia particularly in South and Southeast Asia are very low in both the formal and informal sectors. Here are some of our results of wage research:

No	Working	Philippine	Indonesia	India	Japan	Australia
1	Male earns	180.34	91.68	94.01	1754.02	4937.22
2	Female	158.02	101.07	81.63	2098.57	4236.55
3	Formal	218.94	96.56	123.44	2232.83	4731.19
4	Informal	108.38	-	88.79	1489.94	1650.00
5	Shift	259.45	99.95	129.43	1922.49	4350.00
6	Non shift	142.14	91.48	88.11	2124.57	4651.92

With the wages received by workers at this time, it is very difficult for them to meet basic needs such as food, drink, clothing and housing especially for those who are married. If a decade ago the wage a worker can meet a family's life, but on this day wages of a laborer can no longer meet the needs of the workers themselves. At the same time, prices of daily needs soared far exceed their wage. The next result is that the purchasing power become very weak and is many of them suffering from financial deficit.

The above situation lead to poor nutritional intake levels of the society, the health level decreases - the price of medicines is also very expensive - plus it costs a hospital very unreasonable. Workers and families become resistant to the disease and being not productive. On the policy side, until now the countries in Asia have not fully provide health insurance for the community. In general, society live in very low quality of life followed by the high cost of national education. Clearly the workers and their children do not have the ability to achieve porridge higher education (diploma / university).

The series of woes is the cheap wages scenario capitalist rulers who deliberately impoverish and ignorant people. Today, workers are still poor and not a few unemployed in Asia.

IYCW ASPAC

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Wednesday, November 17, 2010