Minimum wages : a legal analysis with reference to examples from developing countries

Abstract

Historically, the issue of minimum wages has been, and continues to be, a very controversial matter. As shown in literature, minimum wages hold the potential to particularly be of value to emerging or developing markets such as the BRICS countries. The potential value of minimum wages is based on the fact that minimum wage policies and strategies may assist in addressing challenges regarding inequality, poverty and unemployment. This is even more evident in developing countries because these countries experience such challenges more profoundly. Whether or not this potential value of minimum wages is actualised remains an open question. In this study the different minimum wage policies, in terms of legislative, statutory and other measures used within comparable selected developing countries, were investigated to identify the possible merits or limits thereof. A broad approach was followed by firstly identifying international measures that regulate wages, and more specifically minimum wages. It was then narrowed to the analysis of specific practices, in particular South Africa, by establishing how international measures are given effect through national law, legislation and other measures. The merits and limits in terms of diverging minimum wage policies and practices of developing countries were analysed based on the following criteria: 1. Determination of the minimum wage; 2. Coverage of the minimum wage; 3. The role of supplementary social measures; 4. Adjustments of the minimum wage; 5. Monitoring compliance of the minimum wage; and 6. Enforcement and consequences of non-compliance. Most developing countries have minimum wage policies, but ample opportunity exists for development and improvement of legal provisions with specific reference to the above-mentioned criteria. The International Labour Organisation (ILO) has a central role in terms of establishing a "satisfactory standard of living" through the use of wages, and specifically minimum wages. The idea of a satisfactory standard of living is contained within the living wage and decent work principle. The ILO establishes its principles through the use of conventions and recommendations. The ratification of such measures is crucial in driving and developing countries towards the decent work principle. As such, ratification should be strongly encouraged, particularly in South Africa where ratification of ILO measures regarding wages, and specifically minimum wages, is insufficient. As with numerous other emerging countries South Africa's main challenges include inequality, unemployment and poverty. Minimum wage policies, if effectively utilised through the use of the aforementioned criteria, have an undeniable influence in addressing these challenges. The notion of a South African national minimum wage is supported because of the potential influence it might have on influencing the last mentioned challenges. By addressing these challenges South Africa is promoting our constitutional values. Are these challenges the results of a deeper underlying problem, or do these challenges have a more autonomous origin? These challenges arguably arise to a great extent due to the underlying problem of labour supply exceeding the labour market demand by far. Although minimum wage policies will assist in partially limiting the negative consequences of these challenges it makes sense to address the underlying elements that give rise to these challenges. The oversupply of labour due to insufficient economic growth will therefore need to be addressed. Various methods can be identified as possible solutions to the oversupply of labour. Creating economic growth will stimulate the demand for labour and result in job creation which could address the oversupply of labour. Unfortunately, most developing countries find sufficient economic growth difficult to attain in a sustainable manner. Alternatively, the supply of labour should be decreased. The Chinese one child policy is an example of this method. This Policy holds definite benefits in terms of national economic growth, but due to ethical and discriminatory reasons the one child policy may be difficult to rationalise. A greater investment in education is recommended as an alternative to such a policy. According to literature more educated people have been recorded as having fewer children, which could ultimately serve to address the oversupply of labour in the labour market. Key Words: Minimum wages; Developing countries; South Africa; Brazil; Inequality as well as poverty and unemployment; ILO; Emerging countries.