Guaranteeing minimum wage

To achieve greater equity and promote social justice, governments in many developing countries intervene in labour markets to protect the real wages of particular groups of workers. The most common method, minimum wage legislation, has been an important influence on real wages in manufacturing, but its significance has declined since the early 1980s and real wages have declined substantially as a result. However, in Africa and parts of Asia, governments will come under increasing pressure to reactivate such legislation once their economies adjust and expansion resumes. This may have the result of reducing employment in the formal sector. Research shows that on average a 1% increase in the real wage tends to reduce employment by about 0.03 to 0.04%.

In the 1950s and 1960s several African governments raised wages in regulated sectors temporarily faster than the growth of labour productivity. In some Latin American countries with high inflation, minimum wages, in conjunction with the indexation mechanism, continue to exert an influence on the level and structure of wages in manufacturing.

Article 4 of the European Social Charter (Revised) (Strasbourg 1996) provides: With a view to ensuring the effective exercise of the right to a fair remuneration, the Parties undertake: 1) to recognise the right of workers to a remuneration such as will give them and their families a decent standard of living; 2) to recognise the right of workers to an increased rate of remuneration for overtime work, subject to exceptions in particular cases; 3) to recognise the right of men and women workers to equal pay for work of equal value; 4) to recognise the right of all workers to a reasonable period of notice for termination of employment; 5) to permit deductions from wages only under conditions and to the extent prescribed by national laws or regulations or fixed by collective agreements or arbitration awards. The exercise of these rights shall be achieved by freely concluded collective agreements, by statutory wage-fixing machinery, or by other means appropriate to national conditions.