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Minimum Wage Comparison, Asian Countries Series -June 2012

Part 1: Official Representation of Minimum Wages

Ahmedabad, Amsterdam

June 2012

 

In at least 7 Asian countries there is a formal minimum wage system in place: they all pay attention to it, one way or the other.

 

These 7 countries were compared in terms of

  • number and types of minimum wage rates
  • minimum wage coverage
  • special provisions for certain groups
  • sectors or groups excluded from this type of protection.

 

Types of minima

The countries compared, i.e. Cambodia, China, India, Indonesia, Pakistan, Sri Lanka and Vietnam differ in occurrence and types of minimum wage. There can be a uniform national minimum wage, and at the other extreme there can be different rates at the district or city level even. Also the legal base for minimum wages varies considerably: India, Indonesia, Pakistan and Sri Lanka have special minimum wage laws. Cambodia, China and Vietnam make do with legal provisions and/or a labour code. Also, the setting of minimum wages differs a great deal. In some countries minimum wages are set tripartite by representatives from workers, employers, and the government, while in others they are set by executive decree or legislative actions.

 

Rates per region, occupation, industry, skills

Thus in most countries more than one single minimum wages exist. A handful of criteria are used to set the levels. In India and Pakistan minimum wage rates are determined regionally, by states or provinces. Similar determination is followed by Indonesia and Vietnam. In Indonesia the geographical criterion is leading: each region is given the power to frame their own minimum wages. In addition to the geographic criterion India, Indonesia, Pakistan and Sri Lanka also determine minimum wage rates at the occupation level. Only Sri Lanka and Vietnam determine minimum wage rates at industry level. All countries, except Cambodia and Indonesia, determine minimum wage rates at the sector level too. India and Pakistan in addition may determine their minimum wage rates according to skills required. Use of multiple criteria helps to decentralise the institution and make it relevant to specific target groups. But very complex systems may arise in the process – and they do. And on top there are special provisions, as well as exceptions to the national rule.

 

Special groups

China does not have special minimum wage provisions for any specific categories of labour. India and Pakistan are the only countries included in this study with special minimum wage provisions and laws for specific groups like domestic workers, trainees, youth and piece-rate workers. Cambodia has specific minimum wage rates only for piece-rate workers. Indonesia has special minimum wage rates for contract labour, piece-rate workers and for workers on probation. Sri Lanka is the only country which has considered separate minimum wage rate for disabled workers. It also has special minimum wage provisions for domestic trainees and piece-rate workers. Vietnam has specific minimum wage rates for employees on probation, trainees/apprentices and workers who have received some vocational training.

 

Unprotected workers

Though all 7 countries have some form of minimum wage, its applicability across the labour market is not complete. There are some loopholes in the system of each country, except China. In Cambodia public servants and domestic workers are excluded from minimum wage protection. This leaves the most vulnerable section of society unprotected. In India disabled persons are not covered. In Indonesia the entrepreneurial class is prohibited from paying less than the minimum wage. But if a private company is not in a position to pay minimum wage, it is exempted by law. In Pakistan public servants and unskilled workers are excluded from minimum wage protection. And in Vietnam too, like in Cambodia and Pakistan, public servants are excluded. Only in China, there are no exceptions made for special groups.

 

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This report is the first part of a series which covers various aspects of minimum wage in Asian countries. The countries under scrutiny are different in many respects, but they all have a national WageIndicator operation, which generates the data on which this study is based. The present Official Representation of Minimum Wages will be followed up by parts on Minimum Wage Fixation, Legal Compliance and Minimum Wage Rate Comparison. The series is prepared by the Indian Regional Office of WageIndicator Foundation and the Indian Institute of Management Ahmedabad.

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