“Make a minimum wage setting as complex as needed but also as simple as possible,” stated Daniel Kostzer, ILO Senior Regional Specialist on Wages, during his presentation on making a perfect triangle among minimum wages, collective bargaining and economic growth at the National Workshop on Wage System in Jakarta. Held in September, the workshop was part of the ILO support to the efforts on strengthening the minimum wage fixing and mechanism in Indonesia

He stated that the complexity of the minimum wage is important to answer some dilemmas surrounded the minimum wage issues such as one or multi minimum wages, formal versus informal economy or using formula or negotiation mechanism and so forth. However, at the same time, the wage setting should be simple so that the mechanism would be applicable.

He also reminded the participants that there was no single answer to the labour market challenges and to the development of a wage system. He also emphasized the crucial role of empirical data and social dialogue in wage negotiation and analysis.

“The minimum wage has a crucial role in promoting more dynamic collective bargaining. Thus, the minimum wage should be part of the integral tool of the wage system which is negotiation and collective bargaining,” he added.

Related to the wage setting and mechanism, he explained that this could be developed by using a formula or based on negotiation as well as collective bargaining. The advantage of the formula mechanism is that it provides a transparent minimum wage calculation.

“This mechanism could only be applied if there is available data needed with the usage of the credible methodology. Social dialogue also plays an important role in negotiating the formula development and analysis,” he added.

Highlighting the importance of collective bargaining in wage fixing mechanism, he said that the minimum wage is crucial in promoting more dynamic collective bargaining that in turn would help supporting skills development and productivity.

In addition, he also shared experiences of other countries related to the minimum wage fixing. Some countries have used minimum wages setting as ways to improve negotiation and collective bargaining, some other countries have applied minimum wages to improve working conditions and close the wage gap.

In South America, a minimum wage fixing has been used to improve negotiation or collective bargaining. The minimum wage setting has led to more dynamic negotiations and collective bargaining. Meanwhile in some European countries such as France and the Netherlands, the adjustment of minimum wage have been conducted based the average of the minimum wage to improve the working conditions.

“Germany, for example, has introduced its minimum wage in 2015, considering wages of many workers have been left behind. The minimum wage is used to reduce the wage gap and to correct the conditions,” he explained.

A mixed approach according to Daniel is being implemented in countries such as Costa Rica and Malaysia. These countries have imposed a minimum wage to reduce the wage gap by using a minimum wage setting and negotiation.

Daniel concluded his presentation with the notion that minimum wages would not be able to satisfy everybody. “Yet, it is important to remember that minimum wages should make all parties unhappy, but not making them leave the negotiation,” he concluded, emphasizing the crucial role of collective bargaining in above-minimum wage fixing mechanism.