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.

Global wage growth remaıns 3 below pre- crısıs rates Annual growth (per cent) Global 3.5 3.1 Global - without China 3.0 2.8 2.5 2.4 2.2 2.2 2.1 2.0 2.0 1.6 1.4 1.5 1.3 1.2 1.1 1.0 1.0 0.7 0.5 0.5 0.1 0.0 2006 2007 2008 2009 2010 2011 2012 2013 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 Growth in nominal average wage (per cent) 10 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 -2 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 UAE Singapore Indonesia India Thailand Sri Lanka Malaysia Philippines Maldives Korea, Rep. of Cambodia Viet Nam Lao PDR Australia Japan 0 2 4 6 8 10 12 14 16 18 20 22 Wage inequality, latest year (90:10 ratio) 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).

Wages are unequally distributed between men and women 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) -10 10 30 50 70 90 110 Average wage of women, relative to men's wage Gender wage gap * 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.

Large gaps in labour productivity between countries Singapore Saudi Arabia United Arab Emirates Australia Japan Oman Korea (The Rep. of) New Zealand Iraq Malaysia Lebanon World Sri Lanka Mongolia Thailand China Indonesia Fiji Philippines India Pakistan Lao PDR Viet Nam Bangladesh Papua New Guinea Cambodia Myanmar Nepal 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 Labour productivity in selected countries in Asia and the Pacific, 2015 (output per worker, constant 2011 PPP US$) Source : ILO KILM (Trends Econometric Models), 2015.

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

9 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).

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

Most countries have a minimum wage Total Europe and Central Asia Americas Africa Asia and the Pacific Arab States 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Proportion of countries with at least one 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 Minimum wage per month for unskilled garment workers in USD (2015) Korea, Rep. Hong Kong, SAR Turkey Panama Honduras Guatemala China Morocco Philippines Malaysia Peru Indonesia Thailand El Salvador Tunisia Egypt Mexico Viet Nam India Cambodia Pakistan Lowest relevant rate applicable to unskilled garment workers Bangladesh Highest relevant rate applicable to unskilled garment workers Sri Lanka 0 100 200 300 400 500 600 700 800 900 1000 1100 US dollars per month (at market exchange rates) Source: ILO ROAP, based on national sources.

T opics 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 organisations 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 Non-compliance with MW (late 2000s, formal and informal sectors) Indonesia 50.8% Turkey 49.9% South Africa 47.1% Philippines 43.8% India 39.0% Costa Rica 32.9% Peru 29.8% Mali 20.7% Brazil 20.2% Mexico 9.4% Viet Nam 4.8% 0% 10% 20% 30% 40% 50% 60% Wage earners paid below MW 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.