What is the minimum wage?
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Minimum wages have been defined as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract” [1]. This definition refers to the binding nature of minimum wages, regardless of the method of fixing them.
The purpose of minimum wages is to protect workers against unduly low pay. They help ensure a just and equitable share of the fruits of progress for all, and a minimum living wage for all who are employed and in need of such protection. Minimum wages can also be one element of a policy to overcome poverty and reduce inequality, including those between men and women, by promoting the right to equal remuneration for work of equal value.
How are minimum wages set across the world?
Minimum wages can be set by statute, the decision of a competent authority, a wage board, a wage council, or by industrial or labor courts or tribunals. Minimum wages can also be set by giving the force of law to provisions of collective agreements. Minimum wages can also be set by giving the force of law to provisions of collective agreements. Only 17 countries (about 10% of those with minimum-wage systems) set their rates by statute, which can make them more difficult to update. In at least 115 countries, the central government sets minimum wages by regulation, order, or decree, typically pursuant to some authorizing law. In about three-quarters of those countries, government action is supposed to come only after input from workers’ and employers’ organizations—ranging from unspecified “consultations” to formal recommendations from structured minimum wage boards or commissions.
In Belize, minimum wages are set pursuant to recommendations by the Wages Council as per the Minimum Wages Council Act. Some countries (15 in total) rely on collective bargaining between unions and employers’ organizations to set wage levels, including minimum wages. Such negotiations typically take place at the sector or industry level, and the resulting agreements generally have the force of law.
Minimum wage commissions typically include representatives of workers and employers, often joined by government officials and sometimes independent economic experts or representatives of civil society. In Belize, the Wages Council Act allows for the appointment of independent council members and experts to facilitate revisions and adjustments to the minimum wage rate. In March 2022, the Ministry of Rural Transformation, Community Development, Labour and Local Government established a Minimum Wage Task Force to spearhead and oversee the implementation of the proposed minimum wage increase under Plan Belize.
How countries set their minimum wages
Source: DeSilver, Drew. “How the U.S., other countries differ in setting minimum wage.” Pew Research Center, 20 May 2021, https://www.pewresearch.org Note: In Australia, Brazil, India, Iraq, Pakistan, Russia, and the United States, minimum wages can be set at both the national and subnational level.
How are minimum wages estimated?
Estimation approaches differ significantly between countries. Some countries have adopted a mathematical formula for the periodic adjustment of their minimum wages. This can increase predictability, avoid having to hold discussions on the adjustment every year, or remove the possibility for sudden or extraordinarily large increases motivated by political rather than technical factors. Other countries set minimum wages by periodically evaluating economic conditions, guided by the absolute or relative estimates of the needs of workers and their families.
Absolute estimates can be constructed by estimating the average cost of a basic but decent lifestyle for a worker and his or her family by adding up the cost of food, housing, and other essential expenses like health, education of children, and participation in the social life of the community. This is the approach usually taken in estimating national poverty lines or "living wage" thresholds [2]. Relative needs and relative poverty lines are defined as some proportion of median household income. Relative poverty lines better capture the “cost of social inclusion and equality of opportunity in a specific time and space” [3] and are usually preferred in more developed economies.
- Source: 2014. ILO: General Survey concerning the Minimum Wage Fixing Convention, 1970 (No. 131) , and the Minimum Wage Fixing Recommendation, 1970 (No. 135) , Committee of Experts on the Application of Conventions and Recommendations, 2014 .
- Note: National poverty thresholds may be determined on the basis of various methods. Some examples are described in Haughton, J.; Khandker, S.R. 2009. Handbook on poverty and inequality (World Bank, Washington DC).
- Source: 2012. Jonathan Bradshaw; Yekaterina Chzhen; Gill Main; Bruno Martorano; Leonardo Menchini; Chris de Neubourg. Relative Income Poverty among Children in Rich Countries. Innocenti Working Paper. Florence, Italy: UNICEF Innocenti Research Centre.
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