Who should set minimum wages?

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Minimum wages can be fixed in different ways, including by giving the force of law to provisions of collective agreements.1

Collective bargaining can be a means to fix minimum wages. However, there are only a few countries that rely exclusively on collective bargaining for minimum wage fixing. These are countries where collective agreements cover over 90 per cent of employees. In most countries, the coverage of collective bargaining is insufficient to provide protection of minimum standards to a broad majority of workers. In many countries, governments have therefore adopted statutory minimum wages in addition to those set through collective agreements.    

In statutory minimum wages, governments should make every effort to ensure the full consultation and, insofar as possible, direct participation, on a basis of equality, of the social partners in the establishment and operation of minimum wage systems.

To be effective such consultations should be carried out in a context of open social dialogue and held before decisions are taken by the public authorities.

While governments and employers’ and workers’ organizations may hold divergent views on some occasions, social dialogue is the recognition that there is a common interest in the well-being of enterprises and of the workers and their families. It also provides policymakers with important information for effective policy design, improves the chances of buy-in (ownership) and therefore effective implementation, and advances social and industrial peace and stability by minimizing misunderstandings and tensions.

Independent experts, who represent the general interest of the country, and national statistical offices also play a key role. Sufficient resources should be devoted to the collection of wage statistics and other relevant data, as employers and workers' organizations need to have access in advance to relevant information as a basis for formulating their views.