ILO-ACTRAV/ACFTU Asia and the Pacific Regional Seminar on Wage Policy:Address by Dan Cunniah, Director, ILO- ACTRAV

Statement | Bali, Indonesia | 17 April 2013

Participants, invited guests, ILO colleagues

This activity is part of the joint programme between ACFTU and the ILO ACTRAV on the promotion of South-South cooperation in the Asia and the Pacific region.This is a very important seminar particularly under the present economic conditions. It deals with wage which is the only source of income to support the well being of workers and their families. It becomes even more important where there is a lack of other social protection provisions like social security, unemployment benefit, maternity protection etc. Many countries in the Asia and the Pacific region lack such protection and that makes workers depend much more on wages only as the source of income. In many countries they depend on minimum wage only.

In countries like Cambodia the minimum wage is not sufficient. It is not a living wage. A recent study by the Stanford University has found that, “In Cambodia over the past decade wages in the garment sector (which is the main industry) have declined sharply in real terms. Even after the most recent increase in minimum wage in the garment sector in 2011, workers still suffered a 16.6% drop in real wages for regular work from 2000 to 2010. The decrease is projected to grow to 30% by 2014. For many Cambodian garment workers, the result has been that even the basic wellbeing are out of reach. Specifically workers are unable to maintain a decent diet, live in adequate housing, or provide for their families and save for the future.” Cambodia depends on export oriented garment industry and this could have negative effect on national development.

Here I would like to quote a warning by John J. Sweeney from the AFL-CIO, “A core part of the global market is what might be called the 'Nike Economy' - footloose companies that play countries against one another while seeking subcontractors with the lowest wages and cheapest conditions.”

In the Asia and the Pacific region the average real wage growth between 2006 and 2011 as reported in the ILO Global Wage Report shows a positive trend. However if China is excluded from the data then it shows a different picture. The estimates show that for 2011 the growth rate would be 5% but after excluding China the rate falls to minus 0.9%. Similarly at global level we have seen a much modest rate of real wage growth of 1.2% when China is included and 0.2% when China is not included. It shows that real wage growth has fallen far below the pre-crisis period. In developed countries the real wage growth had a double dip of minus 0.3% in 2008 and minus 0.5% in 2011. These are disturbing trends.

We argue and believe that wage is a contributing factor for national development efforts. Fair wage or living wage promotes peace and harmony at the work place and society. It is a vehicle to achieve social justice in a community. It helps create employment. ILO supports a policy on wage –led employment growth. It is simple economics. Higher wages to workers will lead to increase in consumption which creates demand for goods and services and that creates employment. That is why we have difficulties with the policies elaborated by IMF and WB. Their policies of austerity measures are against employment creation and national development.

“When the IMF and the World Bank force a country to cut wages, lay off workers, produce for export instead of their own people, and sell off public property to cronies for less than its value, that's called "economic reform.” This is a quote from the Economist magazine.

The seminar is a great opportunity to share ideas. These are some of the issues the seminar will focus on when discussing Wage setting policy, minimum wage, collective bargaining and wage negotiations, and concerns on wage discrimination particularly in this period of the crisis, youth wage and wage discrimination between men and women.
It is a good opportunity to share experience as we have a very wide cross-section of representatives from the region. There is a wealth of knowledge among the participants that should be tapped. In addition there are a number of reports and studies done by ACTRAV. These have been made available for the seminar. The ILO has always paid special attention to wage issues. The Convention concerning Minimum Wage Fixing Machinery (No 26) was one of the earliest conventions adopted by the ILO in 1928. But the current imposition of reduction of wages in some crisis- ridden European countries goes squarely against the ILO Convention No 131 on Minimum Wage.

The Social Justice Declaration of 2008 has recalled the emphasis placed on wages by the ILO Declaration of Philadelphia,”… recognizes the solemn obligation of the International Labour Organization to further among the nations of the world programmes which will achieve: (amongst others) … the policies in regard to wages and earnings, hours and other conditions of work calculated to ensure a just share of the fruits of progress to all, and a minimum living wage to all employed and in need of such protection”.

What are some of the recent trends in wages? Workers are not getting a fair share. In introducing the ILO Global Wage Report 2012-13, the Director General Guy Ryder has said that, “since the 1980s a majority of countries have experienced a downward trend in the “labour income share”, which means that a lower share of national income has gone into labour compensation and a higher share into capital incomes. On a social and political level this trend risks creating perceptions that workers and their families are not receiving their fair share of the wealth they create. On an economic level, it could endanger the pace and sustainability of future economic growth by constraining wage-based household consumption.”

Secondly the gap between women’s and men’s pay has declined during the crisis years in most countries, but not always for the right reasons, according to the ILO's Global Wage Report. In some cases, this is because men’s situation in the labour market has deteriorated while women’s situation has improved or stayed the same. However the gender pay gap remains still wide. In an ILO report of 2009 it noted that in most countries women’s wages for work of equal value represent on average 70 and 90 per cent of men’s wages.

Wage growth remains far below pre-crisis levels globally and has fallen into the red in developed countries, despite continuing increases in emerging economies, according to the ILO report.

“This report clearly shows that in many countries, the crisis has had a strong impact on wages – and by extension, workers,” said ILO Director-General Guy Ryder. “But the impact was not uniform.” The report points to huge differences between countries and regions, with wages generally growing faster in areas where economic growth is stronger. While wage growth suffered a double-dip in developed economies – where it was forecast at zero per cent in 2012 – it remained positive throughout the crisis period in Latin America and the Caribbean, as well as Africa, and it was even more in the Asia Pacific region. Differences between the regions are particularly stark if one looks at wage growth from 2000 to 2011. Globally, wages grew by just under a quarter. In Asia, they almost doubled. In Eastern Europe and Central Asia, they nearly tripled, although following significant declines in the 1990s. And in the developed world, they increased by just about 5 per cent.

There are also considerable differences in wage levels across countries. A worker in the manufacturing sector in the Philippines took home US$ 1.40 for every hour worked, compared to less than US$ 5.50 in Brazil, US$ 13 in Greece, US$ 23.30 in the United States and almost US$ 35 in Denmark.

Productivity grows faster than wages. The report highlights recent findings that show wages have grown at a slower pace than labour productivity – the value of goods and services produced per person employed – over the past decades in a majority of countries for which data is available. This trend has resulted in a change in the distribution of income, meaning that workers are benefitting less from the fruits of their work while the owners of capital are benefitting more.

The report warns that policy-makers should be careful not to promote “a race to the bottom”. Workers’ share of national income has been shrinking in most countries, causing public dissatisfaction and increasing the risk of social unrest. Simply put, more of the national pie has been going to profits, and less to workers.Let me also reflect on the situation in Indonesia and the recent calls by the unions for an improvement of wages.

We hold this seminar in this country at a time when there is a healthy debate going on here in relation to wages and particularly minimum wage. As I understand, in pursuing wage increases through collective bargaining at plant level, trade unions of different groupings have worked together at district level to get adequate levels of minimum wage increases. This is particularly important in Indonesia where the number of workers in precarious employment such as outsourcing and who mainly depend on minimum wage, have gone up substantially over the last few years. Unions have been fighting for minimum wage increases not only to keep up with inflation but also for the improvement of basic living standard of Indonesian people. Workers spend most of their income on the basic commodities and in this regard I would like to congratulate not only trade unions but also the Government of Indonesia and the Employers’ Organization APINDO for their good tripartite social dialogue which has resulted in the revision of the number of basic commodity items for the calculation of minimum wage.

The working together of all union federations on minimum wage campaign in many cities of Indonesia has inspired confidence among workers. This was supported by most workers. It made them much more positively participate in trade union activities. The success of the campaign has also promoted the cooperation and coordination of different trade union organizations in the country.

At the same time we hear about some companies threatening to move out of Jakarta complaining that minimum wage has increased too much. "They say it is too expensive to operate here after minimum wages in Jakarta rose by 40 per cent and in Bogor by 70 per cent," Indonesian Employers' Association (Apindo) told The Straits Times.

As I understand at the same time President Susilo Bambang Yudhoyono expressing concern over the exodus has urged Apindo and regional leaders to review what was causing the operational costs to go up and he has maintained that, "wages are too low and are not fair". Moreover, businesses are profiting, the economy is growing, yet workers are not benefiting."

We hope that we can learn a lot more in this seminar from the host country’s experience.

I would also like to share with you some thoughts on what we expect from this seminar.

There is need for rebalancing through strengthening institutions for determining wage. There is need for the enhancing of power to workers to do collective bargaining. There is the need for developing appropriate policies on wages. These are some of the strategies I see that should be considered as follow up action from the seminar.Unions should be involved in pushing for tripartite negotiated wage policies that include minimum wage, wage setting through collective bargaining and other social protection measures.

Right to organize and collective bargaining is pre-requisite for wage bargaining. There is the need for the ratification of C.87 and 98 which is the lowest in the region compared to other regions. It has proven that where there is adequate freedom of association and where there is higher percentage of unionization there is much lower level of wage differential between the lowest and highest paid workers.

In this regard I will be making a fuller presentation at a session later in the seminar.

Another issue we need to address is how to convince employers and Government that fair wage is good for industry development and national development. You as leaders in the community need to be able to argue this point.

In this regard let me quote from a famous Industrialist Henry Ford, “There is one rule for industrialists and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible”.

I wish you a successful seminar!