Chapter 4: Who should be getting minimum wages

4.1 Should minimum wages apply to all employees?

The ILO standards

The Minimum Wage Fixing Convention, 1970 (No. 131) aims to “establish a system of minimum wages which covers all groups of wage earners whose terms of employment are such that coverage would be appropriate”.

The Minimum Wage Fixing Recommendation, 1970 (No. 135) provides that “The number and groups of wage earners who are not covered in pursuance of Article 1 of the Minimum Wage Fixing Convention, 1970, should be kept to a minimum.”

However, when an ILO member State ratifies Convention No. 131, the national competent authority may exclude certain groups of wage earners from the coverage of its minimum wage system, in principle in consultation with social partners. Subsequently, a minimum wage system established under Convention No. 131 may not necessarily cover all employees.

Legal coverage in practice

To date, the most frequent groups excluded from minimum wage systems are agricultural workers and domestic workers. Other groups often excluded include: family businesses, small enterprises, apprentices and trainees, and workers with disabilities. The case of public sector workers is discussed in section 4.3.

Figure 1. here below shows the estimated coverage of minimum wage legislation over time for a series of developing economies.

As can be seen, in a majority of these countries 100 per cent of employees are legally protected by minimum wage legislation, including workers in the informal economy. By contrast, in Indonesia, Peru, India and South Africa, minimum wage coverage is less than complete. In Indonesia, minimum wages cover all employees except domestic workers. In South Africa and India, minimum wages are set for specific groups of workers by sector, occupation and/or region.

Figure 1. only considers statutory minimum wages and not minimum wages set through collective bargaining. If minimum wages set through collective bargaining were also included, this would increase the coverage of minimum wage protection.

Figure 1. Percentages of wage earners covered by minimum wage legislation in 11 developing economies

Source: Rani, U.; Belser, P.; Oelz, M.; and S. Ranjbar. 2013. ‘Minimum wage coverage and compliance in developing countries’ in International Labour Review, Vol. 152, No. 3-4.