Determining minimum wages for workers

Topics: Minimum wage, Employment, Wage Pages: 6 (1660 words) Published: October 20, 2013

VOL 20 NO 157 REGD NO DA 1589 | Dhaka, Saturday, October 19 2013 Top of Form
Bottom of Form Determining minimum wages for workers
Bangladesh should consider a law for fixation of minimum wage and establish a permanent wage board which will study productivity and skills of the workers based on expectations and economic condition and other social, political and market environments, writes M S Siddiqui

Determination of wages and salary is one of the most important phases of employee-employer relationship. It differs in different economies, regions and cultures. It depends on a number of country-specific factors, such as labour market conditions and variation in workers' productivity across occupations, industries, regions etc. The policymakers need to reconcile two opposite kinds of considerations. 

There are conflicting ideas surrounding the minimum wage. A moderate minimum wage is seen playing an important role in ensuring fair wages paid and bolstering the incomes of families with low-wage workers. On the other hand, high minimum wages can destroy the jobs and have a limited impact on poverty on families having no working members. 

A fully enforced minimum wage to stabilise living standards do increase cost of production. In return, lay-off and prices will rise which hinder a country's world competitiveness. Therefore, striking a balance between optimal level of economic expansion and appropriate employment is needed while pegging standards of living.

Wage needs to be high enough to secure some socially-accepted standard of living. On the other, it should not be too high in order not to price low-productivity workers out of employment. Evidence demonstrates that such a balance can be struck if the minimum wage is set at a moderate level so that it does not cause significant employment losses, while keeping low-paid workers out of poverty. 

Adam Smith (1776) stated in The Wealth of Nations that labour must receive a suitable share from the benefit from his or her contribution so that he/she can live properly in the society. The minimum wage should not be thought of as an effective tool to reduce poverty as it is not well-targeted at the poor. Instead it should be viewed as a tool to ensure a more fair distribution of wages. Hence, setting the minimum wage is a delicate balancing act.

A fair calculation of minimum wages cannot be worked out unless it is based on regular, reliable and timely statistics on a variety of data items, including income, wages, prices and the characteristics of wage-earners like skills and sex. Analysis of minimum wages inevitably raises contentious theoretical, empirical and policy issues. Bangladesh has no statistics, particularly any study on productivity and skills of workers.

The concept of minimum wage is expressed in the provisions of the 1928 International Labour Organisation (ILO) Convention on the minimum wage. But this aim may be reached in different ways. The intended objectives of establishing minimum wages are to prevent the exploitation of workers by employers, to promote a fair wage structure, to provide a minimum acceptable standard of living for low-paid workers and, eventually, to alleviate poverty, especially among working families (ILO, 1992).

The ILO defined minimum wage as the lowest level of remuneration permitted which in each country has the force of law and which is enforceable under threat of penal or other appropriate sanctions. 

The United Nations has many conventions and declarations regarding minimum wages. Article 7 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) states remuneration must be adequate to provide workers with a decent living for themselves and their families. Article 7 of the ILO Convention No. 131 on Minimum Wage Fixing (1970) explains all signatory member- states of ILO are required to implement minimum wage...
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