Minimum wage a step forward for democracy and sustainable development


This week the Myanmar government has announced a new daily minimum wage of K4,800 for workers.  Arguments will be heard that the new rate is too high or too low from employers and workers alike.  But we should not lose sight of the positive impact the minimum wage is already having on the reduction of poverty and inequality on one hand, and the strengthening of democracy and social dialogue on the other. 

Myanmar’s introduction of a minimum wage in 2015 was an early landmark for labour market reforms.  Although Myanmar has not ratified the International Labour Organization’s Minimum Wage Convention 131, its Minimum Wage Law largely reflects its requirements.  Foremost among these is that the minimum wage is set through an open and transparent process of tripartite social dialogue between the government, representative employers and workers’ organisations.

Over the past year, a tripartite National Minimum Wage Committee has undertaken nationwide consultations to review the level set in 2015, resulting in the announcement this week.

Setting the minimum wage requires a complex balance of many factors, including the needs of the workers and their families, promoting productive and sustainable enterprises, attaining high levels of employment, and ensuring competitiveness in the regional economy.  The minimum wage is a single tool for multiple and seemingly contradictory objectives.

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But in the two years since the minimum wage was first introduced, ILO research suggests it is already producing some early but positive results in terms of reducing poverty and inequality.

Firstly, it is important to remember the minimum wage is a minimum; a marker against which employers and workers can agree higher wages on the basis of their skills and productivity.  Already we can see the median wage, the value that divides the workers by two groups of 50 percent, has increased from K3,500 to K4,000.

Secondly, the overall distribution of wages has become more even, with those at the bottom of the ladder moving up towards the median.

Third, although the minimum wage is only enforceable in the formal sector, we can see a “lighthouse effect” by which it is increasing daily wages in the informal sector as well.

From the gender point of view, the gap between the average wages received by men in relation to women has decreased from 25 percent in 2015 to 12 percent in 2017. The minimum wage has also helped younger workers and those with lower skills.

After decades in which there was no clear reference point for the labour market, every employer and employee now has a unified signal for how much they should be paid, which in turn can be the basis of collective bargaining for wage and productivity gains.

Of course, huge challenges remain for giving the minimum wage universal effect.  Wide disparities exist between urban centres like Yangon and the largely rural economy in different states and regions.  The labour inspection system is under-resourced and over-stretched.  And while the government now conducts a regular labour force survey, much more detailed and current data is needed to analyse trends.

The government has rightly given priority to implementation of the minimum wage in its new Myanmar Sustainable Development Plan, in pursuit of the 2030 Sustainable Development Goals. To support this, the government should invest in a monitoring mechanism that can track its application and impact and provide an evidence base for future reviews.

But for now, Myanmar should be congratulated for adopting a minimum wage system as a step to advancing sustainable development and decent work.  And deciding something as complex as the minimum wage through tripartite social dialogue is a positive step in building a new democratic culture in Myanmar.

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