The Minimum Wage as a Tool to Combat Discrimination and Promote Equality *.
Wages can be considered from different angles--as a living to sustain the workers and their families, as the price of a production factor, and as a social practice through which social identities are constructed and reproduced. Some tension always exists between those different approaches and discussion of the impact and trade-offs of minimum wages has generated heated debates. Some schools of thought explain inequalities in remuneration by emphasizing labour supply factors (such as level of education, skills or seniority) and treat discrimination as a residual or as a phenomenon having occurred prior to or outside the labour market. Others focus on the functioning of the labour market as structured by the power relations operating in the economy and society at large. Here discrimination is embedded in the functioning of the labour market itself and leads to its segmentation and to occupational segregation. Labour market institutions and policies--such as a minimum wage--can reinforce or offset the effects of inequalities in power. Most countries--whether developed, developing or in transition--have adopted some minimum wage regulations. These normally take the form of either a single national minimum wage or a system of legally backed industry or region minima set by employers and workers. Critics of a national minimum wage argue that because of differences in the levels of wages and cost of living, the relative value of a national minimum wage will vary across regions and sectors within a single country. On the other hand, a system of minima differentiated by industries, skills and/or regions is likely to dilute the potential of a minimum wage to address discrimination embedded in labour market institutions and may accentuate the wage differentials. Wage floors are part of broader policy agendas and as such may be used for various purposes, but their primary objectives are: --to achieve greater fairness by restricting the degree of wage inequality; --to fight poverty by guaranteeing a minimum level of earnings to workers; --to avoid exploitation by reducing the power imbalance in employment relations between employers and vulnerable groups of the workforce; --to shape work incentives through coordination with the tax and welfare systems (Gregg, 2000). By setting a floor to the wage structure, the establishment of a minimum wage is of paramount importance to the workers at the bottom of the occupational hierarchy. Women, migrants and other groups discriminated against on the grounds of ethnic or national origin, age, disability or health, inter alia, (1) are directly affected, as they are disproportionately represented among the low-paid and are more likely to remain in low-paid jobs (ILO, 2003). This Perspective highlights a few contentious issues in the context of the minimum wage as a tool to combat discrimination and promote equality in the world of work. Coverage As regards coverage, the crucial issue is which workers and which sectors of activity are covered by minimum wage regulations, and which are excluded. In principle, minimum wages cover all forms of wage work, including non-standard forms of work and homework. In practice, however, if enforcement is weak, minimum wages may apply only to workers in the formal sector or on standard employment contracts. This issue is likely to be more important in developing countries (where the formal sector is small) than in developed countries. The relevance of a minimum wage policy in developing countries has been questioned on the grounds that most of the working poor do not receive a wage but are self-employed. However, evidence suggests that the minimum wage sets a reference target for earnings and shapes wage norms in the informal economy, too. It has been observed that compliance with minimum wage regulations among small and low-productivity enterprises operating in the informal economy was more widespread than earlier assumed. Employers appear to comply more readily with a minimum wage than with the payment of other remuneration components, such as bonuses or overtime (van der Meulen Rodgers, 1999; Grimshaw and Miozzo, 2003). Particular groups and activities may be kept out of minimum wage regulations altogether. When wage floors take the form of industry minima, coverage is frequently incomplete and various low-wage sectors are left uncovered. Most low-wage workers are concentrated in particular firms (e.g. small enterprises) and sectors (e.g. services, building industry, etc.), where the organization and representation of workers are weaker. Migrants, part-timers, and domestic servants are workers often excluded from minimum wage coverage. Effective coverage of wage floors is also influenced by the level at which the wage is set and the extent of enforcement (see below). The impact of minimum wages on employment It has frequently been assumed that minimum wages would lead to a lower level of employment in the formal sector and result in higher unemployment and/or in the expansion of employment at lower wages in the informal economy. The issue has generated much controversy, and empirical studies are inconclusive. Some studies find negative employment effects, particularly for groups such as young people (Neumark and Wascher, 1999) or persons with disabilities, and other studies show the employment effects to be weak or even reversed (Card and Krueger, 1995). Overall, evidence shows that the employment effects differ between countries, are generally small in industrialized countries, and vary both during implementation of the minimum wage policy and over the business cycle. The mechanism whereby a minimum wage has an impact on employment is complex and depends on many factors, such as relative level of the wage, the structure of the labour market and the economic environment. The impact depends on the ability of enterprises to absorb labour cost increases through lower profits or higher product prices; it also depends on the extent of employers' monopsony power. Labour markets do not operate under conditions of perfect competition; they experience substantial frictions because it is costly for workers to change jobs and for employers to find workers. (2) Bargaining power between contracting parties is unevenly distributed and employers (either collectively or individually) may be able to take advantage of the specific labour supply conditions associated with certain groups of workers (e.g. women's domestic roles impose constraints on their time and mobility; migrants may have poor command of the local language; persons with disabilities may be less mobile or need an adapted environment, etc.). The closer a worker's earnings are to the minimum required to meet his/her basic needs, the wider the scope for coercion and exploitation in the employment relationship. The monopsony explanation allows for the wage structure to be set as much by social norms as by organizations' ability to pay or labour market supply and demand conditions. And in the context of surplus labour, social norms acquire greater importance in fixing the wage structure. These social norms vary for different groups and reflect in part the social organization of the economy, including the family economy (Rubery, 2003). Trade-offs between groups Because of their varying impact on different groups of workers, the effects of a minimum wage may be more important on the composition of employment than on the overall level of employment. It is often argued that, by cutting down their job opportunities in the formal sector, a minimum wage operates to the detriment of disadvantaged groups such as workers with disabilities, young people, older workers, etc. The trade-off effects between groups depend on several factors: the elasticity of employment with respect to the demand for goods and services, whether the wage structure reflects relative productivity or social disadvantage, and households' family labour supply function. On the one hand, there could be a shift in demand from formal-sector low-wage workers to workers in informal or illegal segments of the economy. This could generate increased demand for specific groups of disadvantaged workers--though at lower wage rates. On the other hand, a rise in minimum wages could push firms to reorganize their work processes and increase productivity either through a more drastic selection in recruitment and training, leading to the possible exclusion of some disadvantaged workers, or by substituting capital for labour, which could entail lay-offs among workers in particular segments of the workforce. Changes in relative demand may also occur if the minimum wage brings workers with different productivity levels on to the same wage rate. For example, workers with disabilities may be adversely affected unless incentives to promote their employment are provided. When those changes reflect the employers' perceptions of the relative productivity or commitment of different groups of workers rather than their actual performance, then that leaves room for discrimination to be practised (ILO, 2003). (3) Strong regulation and norms for the standard labour force may strengthen the power of employers over groups of workers outside standard employment relations or workers displaced towards the informal economy. Those groups of workers become vulnerable to low wages and poor employment conditions as jobs are offered at unfavourable terms, despite the advantages and greater profitability these work arrangements bring to employers. One instance may be women who undertake part-time work, flexible work or home work to fit around their domestic responsibilities. Focusing on one group of workers tends to underestimate the substitution effect between groups (e.g. between formal-sector workers and illegal immigrants, young people and female workers, etc.). Minimum wage and gender equality (4) By establishing comparable wages across sex-segregated occupations and dissimilar workplaces, minimum wage legislation can potentially address the extent to which discrimination is embedded in the overall structure of pay and rewards. It can thus be an effective device to reduce male-female earnings differentials. When equal pay legislation was introduced in developed countries, much of the improvement in women's pay came from the equalization of minimum rates between women and men in sector-level collective agreements (Rubery, 2003). (5) Six categories of causal factors explain gender pay differences associated with disadvantage and discrimination: (i) "component wage" (women are assumed to be secondary earners or to have access to family subsidies); (ii) powerful employer (assumed or actual women's domestic responsibilities restrict the employment options offered to women); (iii) weak representation (women are under-represented in the decision-making instances of employers' and workers' organizations); (iv) job segregation (women and men tend to be found in different occupations); (v) social value placed on different types of skills (low value for care work in the wage economy); and (vi) social hierarchies (processes which maintain, reproduce and reinforce man's dominant role in the wider society). Table 1 presents those causes and their implications for minimum wage policy, and table 2 reviews the advantages and disadvantages of minimum wage policies for promoting gender pay equity. It should be noted that minimum wages will help establish comparable wages across dissimilar and often sex-segregated workplaces only if the wage is set at a level above the one prevailing in female-dominated segments. Setting the minimum wage at the right level (6) The level of the minimum wage determines who is affected and in what numbers. (7) The choice of a minimum wage rate and the method used to set it will vary according to the objectives of the minimum wage policy. A desire simply to eradicate the most extreme cases of exploitation may produce a lower rate than attempts to tackle inequality and enable the low-paid to achieve earnings and living standards closer to the average. The eradication of extreme cases of exploitation requires a wage rate adequate to cover the subsistence needs of disadvantaged workers. In practice, most minimum wage levels are calculated on the assumption that recipients (e.g. women, young people or pensioners) have additional resources from other sources, or that they are willing to accept a standard of living below the level the dominant population group considers acceptable (e.g. migrants). The introduction of a minimum wage may compress the lower end of the wage distribution, hence reduce or even eliminate differentials between the lowest paid. (8) But if employers and organized workers try to maintain differentials to reward effort, responsibility and seniority, minimum wages and their increase will entail knock-on or "ripple" effects higher up the wage distribution. The impact of the minimum wage on inequality in earnings will then be weakened. (9) The problem is setting the level of a minimum wage sufficiently high that it brings about improvement in the situation of low-paid workers without generating adverse employment or inflation effects. Where a minimum wage is thought to be too low to influence wages in the formal sector, its effect may be felt in the informal economy and by female workers. Better returns to work in the informal economy can reduce pressure on families to provide more work hours, including those of children (Rubery, 2003). (10) To be effective a minimum wage must be uprated. This can be done either through regular updating and linking to a consumer price index or by comparison with a reference wage. (11) Here, however, there is a risk of the minimum wage being "hijacked" and exploited over time as a device for macroeconomic management and public expenditure control, rather than as a redistributive tool to protect the low-paid and to promote equality. (12) Therefore, when fixing a minimum wage, a variety of objectives and pressures must be accommodated, or even resisted. Inevitably, the final decision is influenced by political considerations. Trends in the relative level of minimum wages may thus reflect the changing balance between the different uses made of the minimum wage as a policy instrument. (13) The minimum wage as a policy tool Like all policy instruments, there are both potential advantages and limitations attached to the minimum wage. Implementation and enforcement Minimum wages are relatively simple to implement. Though in theory it is easy to determine the extent of compliance and to report violations, enforcement can be costly and many countries have limited resources to devote to labour inspection. In practice, enforcement is more difficult when there is a shortage of jobs and strong employer power, and some groups (e.g. women or illegal migrants) are willing to work for lower wages. Furthermore, employers can find subtle ways of reducing the hourly wage without violating the statutory minimum--for example, by extending working time or by reducing training schemes. In developing countries, the excess of labour supply, the low level of legal awareness, workers' lack of bargaining power, the weak voice of disadvantaged groups in society and vulnerable groups' need to work whatever the wage, all contribute to weak enforcement of minimum wages. (14) It is easier to implement increases in minimum wages at times of sustained economic growth than in a recession. During a recession, the power of the minimum wage to protect the most vulnerable groups is likely to be weakened. At such times, the number of wage earners with an income around the level of the minimum wage increases and the conditions of work deteriorate when fixed wage increases do not reflect the prevailing economic situation in real terms (Infante et al., 2003). Minimum wage policies and other equality policies Although the minimum wage can address discrimination issues by protecting vulnerable workers at the bottom of the wage scale and influencing the wage structure, it cannot tackle all forms of discrimination, particularly as regards hiring, promotion, training, etc. Complementary policies are needed to promote equality at work. Minimum wages have more immediate and universal effects as, potentially, they apply to all low-paid workers, while equality policies depend on specific action at the workplace or the sector level. Minimum wage policies mostly affect "bad" or marginal enterprises, while equality policies are implemented by "good" employers. Both types of policy are complementary, not substitutes. (15) General policies--such as minimum wage legislation--need to be supplemented by targeted measures (at enterprise, community or national level), in order to address specific problems of pay inequality related to job segregation and aspects of the pay structure affecting disadvantaged groups. Subsidized employment for workers such as persons with disabilities may mitigate the displacement effects mentioned above. General (16) and targeted policies have their own advantages and disadvantages. Which set of policies to prioritize or which policy mix to select will depend on the conditions prevailing in a particular society. The minimum wage and flexibilization of labour markets As part-time jobs, casual work and spells of unemployment have increased, so have the discrepancies between workers' annual earnings. While the minimum wage has proved to be efficient at controlling the development of wage inequalities in countries such as France, its impact on the control of income inequalities has considerably declined over recent decades. This weakening is due to rising unemployment and the growing diversity in working times and in family situations. (17) This growth in job precarity hits groups discriminated against first and strongest, hence the links between discrimination, employment and poverty (ILO, 2003). (18) As employment is developing in tertiary activities and small enterprises, and as employment status assumes a greater variety of forms, the question of representation becomes more pressing. Groups suffering from discrimination are often not organized, or are under-represented within the traditional institutions of social dialogue. The minimum wage and social dialogue The advantages of involving the social partners in determining the minimum wage include ensuring greater compliance with the regulations, keeping inflation low and finding the best compromise between the interests of workers, employers and the need for economic development. If universally applicable, the minimum wage can reduce incentives towards the fragmentation of organizations and towards subcontracting within a country. (19) This may help ensure better representation of all segments of the workforce. Conclusion Potentially, the minimum wage can improve the position of groups discriminated against by reducing the incidence of low pay and promoting pay equity. Its effectiveness depends on the level of the wage, the employment effects on different groups of workers and the extent of its enforcement. As with any policy tool, the actual effects of minimum wages vary according to the context in which the policy is being implemented and the political will and agenda supporting its implementation. The issues raised by the minimum wage are rooted in the principles of decent work. Equity considerations should be incorporated into minimum wage policy, in order to protect vulnerable groups against the erosion of minimum wages for general economic policy. More attention should be paid to: the types of minimum wage system likely to promote pay equity; those workers who are excluded; the guarantees built into the uprating system to maintain the minimum wage in real or relative terms; enforcement mechanisms; and rates of underpayment. The minimum wage alone cannot address all types of discrimination, and should be supplemented with measures targeting the specific needs of different vulnerable groups. But implementing a minimum wage for all workers may help establish a more egalitarian ideology, in which differences according to types of worker can no longer be legitimated. | |
Table 1. Causes of gender pay inequality and
their implications for minimum wage policy
Cause of gender pay inequality Potential impact on pay
Dependence on income sources Employers' pay policies reflect
other than own wages for sub- social expectations: pay family
sistence: women are assumed wage in male jobs; component
to be seeking second income wage in female jobs. Reinforced
and to have access to family by women's limited access to un-
subsidies, so only a component employment benefits.
wage may be paid; women less
likely to have access to
unemployment benefits because of
employment discontinuity, which
increases pressure to take low
wage job.
Powerful employers: women's Employers may act as monopsonists,
assumed and actual domestic keeping wages and employment
responsibilities restrict low so as not to spoil the market.
employment options by time/space. Standard employment contracts
may restrict the range of jobs
where it is possible to work
flexible/reduced hours.
Weak representation: women have Women are found in less organized
traditionally had less access sectors and are less represented
to both wage employment and the within organized sectors. Lack
public arena, including trade of direct representation among
union organization and politics. women has reduced attention
paid to gender issues in
collective bargaining.
Job segregation: women confined Job segregation can provide
to specific labour market a basis for differences in wages
segments. not covered by equal pay for same
work laws or equal pay for work
of equal value (if segregation
results in employment in different
firms). Job segregation may lead
to crowding effects; lower wages
and lesser incentive for
productivity enhancements in the
crowded sector.
Social valuation of skills: Care work has been considered
women's role as care-providers low-skilled and has been largely
has not been highly valued in invisible. Skills are not
the wage economy; transfer of validated by labour market
care work to wage economy has institutions (training systems
been based on this low valuation. or pay structures).
Social hierarchies: women paid Employers are socialized in same
less than men so as not to society; employment policies
challenge man's dominant role and practices reflect acceptance
in wider society. of gender hierarchies. Couples
who wish to change gender division
of labour are constrained by
limited opportunities for female
partner, irrespective of abilities
or domestic commitments.
Cause of gender pay inequality Impact of minimum wage
Dependence on income sources Raises floor to wage structure
other than own wages for sub- towards wage necessary to cover
sistence: women are assumed reproduction costs of single
to be seeking second income adult; reduces subsidies by
and to have access to family family-wage employers of
subsidies, so only a component component-wage employers.
wage may be paid; women less
likely to have access to
unemployment benefits because of
employment discontinuity, which
increases pressure to take low
wage job.
Powerful employers: women's Minimum wage may raise
assumed and actual domestic employment as well as wages;
responsibilities restrict may reduce penalty of seeking
employment options by time/space. non-standard jobs.
Weak representation: women have If universally applied, minimum
traditionally had less access wage provides some substitution
to both wage employment and the for the representation of the non-
public arena, including trade or weakly organized within the
union organization and politics. wage determination system.
Job segregation: women confined Minimum wages could reduce the
to specific labour market wage gap between the female-
segments. dominated and the male-dominated
sectors and establish a new floor
for women's wages when seeking
employment outside the crowded
sector.
Social valuation of skills: Minimum wage could reduce gap
women's role as care-providers in value between traditional wage
has not been highly valued in work and care work.
the wage economy; transfer of
care work to wage economy has
been based on this low valuation.
Social hierarchies: women paid Minimum wage may be basis
less than men so as not to for beginning to challenge gender
challenge man's dominant role hierarchies, but a minimum wage
in wider society. will need to be built upon to
generate higher earnings
opportunities for women, enabling
a change in gender hierarchies.
Conditions for improvement
Cause of gender pay inequality under a minimum wage
Dependence on income sources Minimum wage should be set above
other than own wages for sub- component wage level, approximat-
sistence: women are assumed ing reproduction cost of single
to be seeking second income adult.
and to have access to family
subsidies, so only a component
wage may be paid; women less
likely to have access to
unemployment benefits because of
employment discontinuity, which
increases pressure to take low
wage job.
Powerful employers: women's Minimum wage needs to cover
assumed and actual domestic workers in non-standard jobs
responsibilities restrict defined by time and space (part-
employment options by time/space. time, home work etc.) and needs
to be set above monopsony wage
level.
Weak representation: women have Minimum wage coverage must ex-
traditionally had less access tend to non- or weakly organized
to both wage employment and the groups; the wage level set needs
public arena, including trade to redress the undervaluation of
union organization and politics. wages caused by inequalities in
representation and organization
between different groups of
workers.
Job segregation: women confined Wage must be set above the
to specific labour market prevailing rate in the female-
segments. dominated crowded sector.
Coverage must extend to
feminized sectors.
Social valuation of skills: Minimum wage should cover
women's role as care-providers domestic and other forms of
has not been highly valued in care work in the wage economy,
the wage economy; transfer of including the informal economy,
care work to wage economy has e.g. childminding.
been based on this low valuation.
Social hierarchies: women paid Minimum wage must be set above
less than men so as not to minima in female-dominated sectors
challenge man's dominant role to start process of challenging
in wider society. established hierarchies.
Source: Rubery, 2003. table 1.
Table 2. Advantages and disadvantages of minimum
wage policies for promoting gender pay equity
Costs of
Coverage Effectiveness implementation
Advantages
Covers all low-paid Changes external Simple to understand
women, from whom market wage for women. and can be enforced by
costs of employee awareness,
discrimination are even in informal
highest. sector.
Can extend to groups Can provide a Costs may be borne
often not included mechanism for regular by whole community,
within collective increases in pay. through higher prices
bargaining or and may even be skewed
organizations' towards the wealthier
internal pay consumers of services.
hierarchies. Therefore acts as a
good redistributive
tool.
Applies to all Can be used as a
disadvantaged groups, numeraire for social
not just women. benefits, thereby
integrating wage and
social security policy.
Disadvantages
Some low-paid women May be set at a very Could cause wage
may be excluded for low level if not inflation if leads to
administrative and differentiated by compensating claims.
other reasons sector or skill.
(homeworkers, part-
timers, informal Effectiveness over Underpaid workers may
sector workers, etc.). time depends on not have the power to
mechanism for complain.
indexation.
Either may be Workers close to
difficult to enforce minimum may bear
in small firms or may the cost, if skill
promote informal sector differentials
growth. squeezed.
Link to social security
may lead to erosion of
real value of wage if
there are public
spending cuts.
Coverage Side effects/spin-offs
Covers all low-paid Reduces incentives to subcontracting.
women, from whom
costs of
discrimination are
highest.
Can extend to groups Can complement and reinforce gender
often not included pay policies; reduces wage dispersion,
within collective and gender pay gap smaller where
bargaining or wage dispersion narrower.
organizations'
internal pay
hierarchies.
Applies to all Can provide basis for reducing extensive
disadvantaged groups, hours of work necessary to achieve subsistence
not just women. income. By setting a universal norm, could
help to establish an ideology where pay
differentiated by demographic/social
group is no longer legitimated.
Some low-paid women Hours of work may be adjusted to
may be excluded for offset costs.
administrative and
other reasons May be used as a tool of macro-
(homeworkers, part- economic management; this objective
timers, informal may conflict with gender pay equity
sector workers, etc.). objective.
Source: Rubery, 2003, table 4.
| | * This Perspective was written by Janine Rodgers, formerly of the ILO InFocus Programme on Promoting the Declaration on Fundamental Principles and Rights at Work; and Jill Rubery, Professor of Comparative Employment Systems, Manchester School of Management. The ILO InFocus Programme on Promoting the Declaration on Fundamental Principles and Rights at Work commissioned background studies to support the preparation of the first Global Report of the Director-General of the ILO on the elimination of discrimination in employment and occupation--Time for equality at work (ILO, 2003). Three research papers on minimum wages were produced and published in the DECLARATION Working Papers Series: Pay equity, minimum wage and equality at work, by Jill Rubery; Minimum wages in Latin America: Identifying the employment and pay equity effect, by Damian Grimshaw and Marcela Miozzo; and Minimum wage policies in China: The gender pay gap and the urban/rural divide, by Fang Lee Cooke and Jill Rubery. Much of this Perspective draws on those working papers. (1) Discrimination in employment and occupation is defined as treating people differently and less favourably because of certain characteristics, such as their sex, the colour of their skin, their religion, political belief or social origin, irrespective of their merit or the requirements of the job. Discrimination in remuneration occurs when the main basis for the determination of wages is not the content of the work performed, but the personal attributes of the person performing the work (ILO, 2003, pp. 15 and 47). (2) Research on monopsony in labour markets has shifted from models based on the domination of small numbers of employers to newer models based on labour market frictions, such as job search and job differentiation models (Manning, 2003). (3) Perceptions, rather than objective facts, about the abilities or attitudes ascribed to individuals belonging to a particular group generate discrimination in the workplace and in the labour market (ILO, 2003, p. 15). (4) Based on her analysis of the gender pay gap presented in this section, Professor Rubery has developed a common framework for understanding the sources of pay inequality among groups suffering discrimination or social disadvantage, who include not only women but also illegal migrants, rural migrants, young people, old people as well as those discriminated against on the basis of race/ethnicity and class/caste (Rubery, 2003). (5) It should be noted that though a higher minimum wage is likely to improve the position of the low-paid, this does not necessarily translate into a narrower gender pay gap, as this may occur either through the levelling-up of female wages or the levelling-down of male wages (or both moving in the same direction but at a different pace). In the 1990s, gender pay equity improved across Latin America but examples of both scenarios were found (see Grimshaw and Miozzo (2003); also ILO (2001)). (6) The ILO's Minimum Wage Fixing Convention, 1970 (No. 131) identifies four criteria for the determination of the adjustment of the level of the minimum wage: the needs of workers and their families, the capacity of the firms to pay, the level of incomes and other wages in the economy. and the requirement of the economic development of a particular country. (7) In OECD countries, between 5 and 12 per cent of the workforce were minimum wage earners in the 1990s (OECD, 1998). In France, minimum wage jobs are mostly in the tertiary sector, essentially in small enterprises, and in sectors seldom covered by collective agreements, and most such jobs are held by women (CSERC, 1999). In the United States, 70 per cent of workers on minimum wages are adults (aged 20 or more); a disproportionate number of black Americans and Hispanics are minimum wage earners compared with their share of the total population close to half the minimum wage earners work full-time and another third work between 20 and 34 hours per week (Center for Policy Alternatives, 2003). (8) Cross-country studies have shown that in countries where wage dispersion is smaller, the male/female pay gap tends to be narrower (Blau and Kahn, 1996). (9) In some countries (e.g. Brazil), the minimum wage is itself the unit of reference for other wages. (10) A contrario, if a rise in wages leads to the displacement of adults, this could in theory lead to an expansion of child labour. (11) Such as the average or median wage. For example, the Low Pay Unit in the United Kingdom suggests a formula of uprating based on full-time male median earnings. Male earnings are used to avoid further entrenching existing structural pay inequalities in a measure that should be tackling them. Full-time earnings are used to tackle the substantial inequality between full- and part-time pay. Overtime pay is included in the benchmark of weekly male earnings used, as it makes up a large part of manual workers' earnings (Low Pay Unit, 2002). (12) For an analysis of the use of the minimum wage to stabilize the economy in Latin American countries, see Grimshaw and Miozzo (2003). In Argentina and Mexico, the costs of using the minimum wage as a stabilization policy device seem to have outweighed the benefits. (13) Levels of minimum wage vary widely across the world, even between countries at similar levels of development. In the 1990s, minimum wages amounted to 50-70 per cent of average earnings in most European countries, 33 per cent in the United States (Dolado et al., 2000) and between 22 per cent and 40 per cent in Latin America (Grimshaw and Miozzo, 2003). (14) See, for example, the study on China by Cooke and Rubery (2003). (15) For a more elaborate discussion of the respective advantages and disadvantages of minimum wages and pay equity policies, see Rubery (2003). (16) Minimum wage policy may be integrated into social security policy and used to reduce poverty traps and to prevent employers seeking subsidies from the State through in-work benefits (to be eligible for which beneficiaries must be in work). Then it becomes a permanent feature of employment and welfare policy. Pension entitlements may also be linked to minimum wages, and an improvement in the minimum wage for wage workers may have beneficial effects for pensioners. (17) See Conseil superieur de l'emploi, des revenus et des couts (1999). (18) The minimum wage has been called a blunt instrument which does not permit targeting. Its adequacy as an anti-poverty instrument has been questioned, as it does not take account of the amount of employment, the number of family earners, non-wage income and many other factors determining family earnings. However, recent multi-country research has shown a negative relationship between the real and the relative levels of the minimum wage and the incidence of poverty in both developed and developing countries (Saget, 2001). (19) See Rubery (2003). References Blau, Francisco D.; Kahn, Lawrence, M. 1996. "Wage structure and gender earnings differentials: An international comparison", in Economica (London), Vol. 63, No. 250S, pp. S29-S62. Card, D.; Krueger, Alan B. 1995. Myth and measurement: The new economics of the minimum wage. Princeton, NJ, Princeton University Press. Center for Policy Alternatives. 2003. State issues: Increasing the minimum wage. Washington, DC. Downloadable on: http://www.stateaction.org/issues/workcompensation/minwage [visited 13 Nov. 2003]. Conseil superieur de l'emploi, des revenus et des coots (CSERC). 1999. Le SMIC, salaire minimum de croissance. Paris, La Documentation francaise. Cooke, Fang Lee; Rubery, Jill. 2003. Minimum wage policies in China: The gender pay gap and the urban/rural divide. DECLARATION Working Paper. Geneva, ILO. Dolado, Juan; Felgueroso, Florentino; Jimeno, Juan F. 2000. The role of the minimum wage in the welfare state:An appraisal. IZA Discussion Paper No. 152. Bonn, Forschungs-institut zur Zukunft der Arbeit/Institute for the Study of Labor. Gregg, Paul. 2000. "The use of wage floors as policy tools", in OECD Economic Studies (Paris), No. 31, 2000/2, pp. 133-146. Grimshaw, Damian; Miozzo, Marcela. 2003. Minimum wages in Latin America: Identifying the employment and pay equity effect. DECLARATION Working Paper. Geneva, ILO. ILO. 2003. Time for equality at work: Global Report on the Follow-up to the ILO Declaration on Fundamental Principles and Rights at Work 2003. Report of the Director-General (Report I (B)), International Labour Conference, 91st Session, 2003, Geneva. --. 2001. 2001 Labour Overview. Lima, ILO Regional Office for Latin America and the Caribbean. Infante, Ricardo; Marinakis Andres; Velasco, Jacomo. 2003. Minimum wage in Chile: An example of the potential and limitations of this policy instrument. Employment Paper No. 52. Geneva, ILO. Low Pay Unit. 2002. The Low Pay Unit formula for the minimum wage. London. Downloadable on: http://www.lowpayunit.org.uk/minwage/NMWminwageformula02.shtml [visited 14 Nov. 2003]. Manning, A. 2003. The real thin theory: Monopsony in modern labour markets. Centre for Economic Performance Discussion Paper No. 564. London, London School of Economics. Meulen Rodgers, Yana van der. 1999. Protecting women and promoting equality in the labor market: Theory and evidence. Policy Research Report on Gender and Development Working Paper Series No.6. Washington, DC, World Bank. Neumark, David; Wascher, William. 1999. A cross-national analysis of the effects of minimum wages on youth employment. NBER Working Paper No. 7299. Cambridge, MA, National Bureau of Economic Research. OECD. 1998. Employment Outlook 1998. Paris. Rubery, Jill. 2003. Pay equity, minimum wage and equality at work. DECLARATION Working Paper. Geneva, ILO. Saget, Catherine. 2001. "Poverty reduction and decent work in developing countries: Do minimum wages help?", in International Labour Review (Geneva), Vol. 140, No. 3, pp. 237-269. |
|
