Chapter 2: How many different minimum wage rates should there be

2.2 Keeping it simple

About half of the countries implement simple national and/or regional minimum wage systems. Simple systems predominate in developed countries, Central Europe and South America.
The other half implement more complex systems with multiple rates based on region, industry and/or occupation.1 More complex systems predominate in Africa, Asia, Central America and the Caribbean.
Whatever the system in place, attention should focus on keeping the level of complexity manageable considering the country’s institutional capacity, the quality of wage statistics, and the enforcement capacity of the labour administration.

When the level of aspired complexity exceeds a country’s capacity, minimum wages are weakened as an effective instrument of social protection and wage policy.

One review of minimum wages in developing countries concludes for example that "it is better to design a simple system that is well understood by all, rather than trying to fully address the heterogeneous needs of the labour force”.2

Differences between complex and simple systems :

Simple systems Complex systems
Setting and adjusting the level:
  • Only one (or few) level(s) to set, ignoring the heterogeneity of different sectors, regions, etc.
  • Nationally representative data can inform social dialogue on the level.

Who sets it?

One tripartite board could consider national data for one national minimum wage.

Who gets it?

A general or national minimum wage in principle provides a floor for all employees.

How is it enforced and monitored?

  • Easier for employers and employees to know the level.
  • Easier to communicate the level.
  • Easy to monitor using household survey data.
  • Easier for labour inspectors to know the level.
How does it interact with collective bargaining?
Minimum wages provide a wage floor for the lowest paid, and collective bargaining determines wages for those above the minimum.


Setting and adjusting the level:
  • Multiple levels to set, tailored to the individual circumstances of each sector, occupation, etc.
  • Requires data of sufficient sample size to be informative at the level of sectors and/or occupations.
Who sets it?
If there is one tripartite board, its members need to understand the characteristics of all the sectors, occupations, regions, etc. Alternatively, multiple boards with this knowledge are required alongside a national coordinating structure.

Who gets it?
In spite of multiple rates, some employees in sectors or occupations that are not in the list may not be entitled to a minimum wage.

How is it enforced and monitored?
  • More difficult to inform the public
  • Employers, employees, and labour inspectors need to know all of the minimum wage rates and understand when and how they apply.

How does it interact with collective bargaining?

Sectoral rates can complement or stimulate collective bargaining, when they are set in parts of the economy where social partners are weak. However, if the system is too complex it may interfere with collective bargaining.

1 ILO Working Conditions Laws Report 2012, p.61
2 Cunningham, W. 2007. Minimum wages and social policy: Lessons from developing countries (Washington, DC, World Bank)