Keeping it simple

Learn more about complex systems

More complex minimum wage systems set multiple wage floors. By doing so, they not only determine an absolute wage floor, but also a relative wage structure between different rates. In the absence of collective bargaining, complex systems may provide an opportunity to set higher wage floors in sectors or industries which have a higher “capacity to pay”.

However, for wage commissions or wage boards, setting and adjusting such minimum wage levels requires not only information at the national level, but also more specific information relevant for the particular sectors, occupations, regions, or other subgroups. The implementation of complex minimum wage systems poses an information and communication challenge. As a result workers, employers, and even labour inspectors may not know the appropriate rate that should apply, leaving room for doubt and conflict.

Complex systems also interact with collective bargaining in different ways. Where minimum wages set a complex grid of wage rates for different industries through tripartite negotiation it may represent something of a hybrid between traditional minimum wage fixing and collective bargaining, and perhaps an intermediary step towards autonomous collective bargaining between social partners. Where collective bargaining is weak, and/or minimum wages is the only avenue for wage negotiations, minimum wages are sometimes “over-burdened” with more ambitious objectives. Taken to the extreme, such a system becomes a substitute for collective bargaining – “crowding out” and delaying its development.

Complex systems also need to be reviewed and modified occasionally. For example, systems that have detailed occupations must eliminate those that have become obsolete and incorporate others that have emerged. In some cases this revision process is too slow and the existing minimum wage systems becomes outdated.