Two years after the government passed a law to set a minimum wage, it still has not come into existence.

The issue has been a source of tension particularly in the garment industry, with a number of strikes so far this year revolving around issues of wages and overtime. Yet experts say it has been a difficult process to put a minimum wage into place, with the topic more complex than it first appears.

“We raise all the issues, but the main challenge is the understanding of the definition of the minimum wage,” said minimum wage-fixing committee member Daw Khine Khine Nwe, also general secretary for the Myanmar Garment Manufacturers Association (MGMA).

The debate has reportedly hit a stumbling block as it approaches what the legislation will provide for, as measures beyond the minimum – such as paid wages that reflect worker productivity – get factored into arguments.

In March 2013, parliament replaced minimum wage laws from the late 1940s with one creating a committee to carry out research and then develop a minimum wage, according to previous analysis from Myanmar legal and tax advisory firm VDB Loi.

MGMA’s website lists this law, along with accompanying rules, as among the country’s labour laws and regulations. It said it had been “widely anticipated” that a tripartite group of business owners, labour unions and government would fix a minimum wage before 2015. Daw Khine Khine Nwe said the last she heard, the committee aimed to roll out legislation around May.

Establishing a minimum wage has been divisive, with the issue of labour market regulations one that regularly splits opinions. Gordon Betcherman, a professor at the University of Ottawa and previously on the core team of World Bank’s 2013 World Development Report on jobs, described two factions that cluster into opposing camps on the matter: those that hold a market-oriented view and advocates of a “pro-institutional” position.

“On the one hand, you have … a view that government regulation and government promotion of institutions in the labour market to protect workers are absolutely essential and result in very good outcomes,” he said at the launch of a labour market research program by the International Development Research Centre and the Myanmar Development Resource Institute – Centre for Economic and Social Development on March 28.

On the other hand, there is the view that “you have to be very careful about how you regulate the labour market”. Supporters of a market-oriented approach believe putting measures like a minimum wage into effect could create distortions and lead to unintended, negative consequences, he said.

“You either set minimum wages too high so that employers are not willing to pay those wages and it results in unemployment, or you create other rules like contracting rules, that limit the efficiency of the labour market, and limit ultimately productivity and employment,” he said.

In the end, though, Mr Betcherman said research determines both ends of the spectrum’s predictions are exaggerated.

“The benefits that the pro-institutional group believes will happen because of stronger labour market rules are not nearly as great as that side of the debate argues, but at the same time, the negative consequences that the market-focused view emphasises are not nearly as large as the market view would assume,” he said.

Raising the floor has “very little” impact on employment, though he did confirm that in the case of a negative effect, female, young and less-educated people lose out with too high of a minimum wage – albeit in a smaller way than the market-oriented faction fears.

A World Bank roundup of international studies concluded that “for most countries, the effect of increasing minimum wages for example is to offer some more protection to the most vulnerable … and being able to do that without really major effects on productivity and employment”, he said.

Establishing the level this wage should be set at is an immense yet delicate challenge.
MGMA project manager Jacob Clere said striking a balance between wages that are too high or too low is crucial, but that players involved in the process generally agree they were “talking about a living wage for one person for the minimum wage”.

“It has to be something that is a realistic living wage,” he said. “If it’s too low, I think it gives [people] an incentive to promote unrest. If it’s too high, it starts to deter from foreign investment and also starts to potentially force factories to close their doors, even creating job losses.”

Recently, a handful of factories went on strike, with workers demanding higher wages. MGMA vice chair U Aung Win said that factories can’t afford a pay increase of K1000 a day for workers.

Last month, Minister of the President’s Office U Soe Thane told The Myanmar Times in an interview that worker productivity in Myanmar lags that of its ASEAN counterparts, and if wages are too, factories will close and head elsewhere. Earlier this year, MGMA came out with a code of conduct that stated “the wage level for regular working hours should not fall below contractual or legal minimum wage rates,” though no number has yet been determined by the wage-fixing committee.

“In the regulations of the minimum wage that the national committee [looks at], the particulars to be considered include everything,” said Ma Myo Myo Myint of the Centre for Economy, Environment and Society, at the March 28 event. “That’s why I think people are mixed up.”

Daw Khine Khine Nwe called the minimum wage “a social protection floor”.

“It has to be seen in three different layers, but they’re all mixed up in one layer,” Daw Khine Khine Nwe said. “This creates a big problem.”

A minimum wage is related to social protection, though there are a number of other related factors besides minimum wage, such as social security and basic requirements like housing and food.

The government has been studying the costs of basic living requirements to factor into an eventual minimum wage.

Mr Clere said according to the minimum wage law, a tripartite committee comprised of business associations, labour unions and the government will fix a minimum wage. Several meetings were held last year to discuss the wage.

“The process has been a little bit delayed. It’s not entirely clear why,” he said. “Officially I’ve been told that it’s because they’re doing a cost of living assessment in industrial zones.”

A representative for the Ministry of Labour at the March 28 event said that thousands of household surveys had been completed.

Mr Clere said this should provide solid information for setting the wage more appropriately.
“There’s been a lot of talk about regional specificity because Yangon’s cost of living presumably is much higher than Pathein, is much higher than Hpa-an.”

If progress is to be made in actually setting a minimum wage, these issues – and others – have to be hammered out.

Source: Myanmar Times

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