How to define a 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.

Following this definition, minimum wages exist in more than 90 per cent of the International Labour Organisation's (ILO) member States.

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 to all, and a minimum living wage to 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.

Minimum wage systems should be defined and designed in a way to supplement and reinforce other social and employment policies, including collective bargaining, which is used to set terms of employment and working conditions.   

Historically, the purpose of minimum wages has evolved from a policy tool to be used selectively in a few low-wage sectors to an instrument of much broader coverage.

ILO Conventions reflect this evolution:
  • The Minimum Wage Fixing Machinery Convention, 1928 (No. 26), encouraged countries to implement minimum wages where “no arrangements exist for the effective regulation of wages by collective agreement or otherwise and wages are exceptionally low”.
  • Later, the Minimum Wage Fixing Convention, 1970 (No. 131) called for coverage of “all groups of wage earners whose terms of employment are such that coverage would be appropriate”. The principle of full consultation with social partners lies at the heart of this Convention.
In defining a minimum wage, it is important to be specific about which components of a wage can be counted in the minimum, the extent and conditions under which payment in-kind can be allowed, how the minimum is calculated for workers with piece rate pay, and if the minimum is an hourly and/or a monthly rate.