IMPLEMENTING MINIMUM WAGE
RATES FOR SOUTHEAST ASIA
WITH THE GOAL TO REDUCE
REGIONAL POVERTY
By Ashley Sun
Social, Cultural, & Humanitarian Committee Chair
Introduction
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The number of workers in Southeast Asia living in poverty is
extremely high. Hundreds of the working poor in many of
these countries earn less than USD $2 per day. In India, 456
million people earn USD $1.25 per day, which is considered
the threshold of poverty around the world. 36% of
Southeast Asia’s population lives in poverty, the second
highest rate in the world, only behind sub-Saharan Africa’s
47.5%.
These people deserve no less than citizens of developed
countries do, but living in poverty hinders their economic and
social development greatly. Therefore, by focusing in
Southeast Asia, implementing minimum wage rates in this
specific region will target ways to begin reducing the issue
of poverty to increase the standard of living.
Definition of Key Terms
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Poverty – Defined by the Oxford Dictionary,
poverty is the state of lacking sufficient money to
live at a standard considered comfortable or
normal in society. The UN defines it is a denial of
choices and opportunities, a violation of human
dignity. It means insecurity, powerlessness, and
exclusion of individuals or communities, susceptibility
to violence, and often implies living on marginal or
fragile environments. Poverty is much more than
simply an economic situation; it is a social problem
and political issue that affects all facets of life.
Definition of Key Terms (cont.)
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Minimum Wage – According to the MerriamWebster dictionary, minimum wage is the minimum
amount of compensation an employee must receive
for performing labor, which is typically established
by contract or law of the government.
Definition of Key Terms (cont.)
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Southeast Asia – For the
purposes of this
conference, Southeast Asia
will be defined as a subregion of Asia that
includes Brunei,
Cambodia, East Timor,
Indonesia, Laos, Malaysia,
Burma, Philippines,
Singapore, Thailand, and
Vietnam.
Overview
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Poverty has always been an issue
afflicting millions of people around
the world, with Southeast Asia
being no exception. The first
Millennium Development Goal
(MDG1), which was to eradicate
extreme poverty and hunger, has
been improving such situations
around the world. Implementation
of a minimum wage rate is an
example of such an improvement.
Overview (cont.)
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Minimum wages were originally implemented
with the idea to help the least able members
of a work force. By doing so, they were also
used as a method to control the proliferation
of sweatshops in large manufacturing
factories. In these sweatshops, factory owners
often mistreated their workers or paid them
substandard wages. Implementing minimum
wages were a way for the owners to pay
their workers “fairly”.
It was first established in Australia and New
Zealand in response to bitter strikes in the
1890s, which then quickly spread to
Massachusetts starting in 1912.
Overview (cont.)
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Today, there are movements to establish or continue minimum
wages in almost 90% of all countries around the world. In the
European Union, 18 out of the 27 member states currently
have national minimum wages. Many of these countries do not
have minimum wage laws established but instead depend on
trade unions to set minimum wage rates through collective
bargaining, the process of negotiations between the employer
and the workers to regulate working conditions.
While some minimum wage rates may seem low (especially in
the United States), they are enough to raise people beyond the
poverty line. For example, the current federal minimum wage
in the United States is $7.25 USD, translating into an annual
income of $15,080 for a single full time worker.
Overview (cont.)
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In order to establish sustainable economic growth in a
country, guarantee of basic human rights and a secure
income are necessary. Both can be achieved with the
implementation of minimum wages. First of all, the
minimum wage gives workers fair compensation for
their labor, which could potentially lead to an
increase consumer spending and therefore stimulate
the economy which is greatly needed in some
countries that have been hit hard by the economic
crises of the past decade.
Furthermore, the establishment of a minimum wage
promotes gender equity and fair treatment, closing
the income gap between men and women. These are
not the only positive aspects of the minimum wage.
Overview (cont.)
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Most agree that minimum wages are implemented with the
correct idea to help the poor, but most of the discussion
regarding the issue is whether its implementation actually
does help workers rise out of poverty. There are four
major faults regarding minimum wages. First, minimum
wages may actually reduce overall earnings if factory
owners become more reluctant to hire more workers. This is
happening in Indonesia today, where some companies
have had to fire staff by more than 80% than it was 8
years prior. Secondly, if the first situation happens, it
creates a scenario where workers have to find jobs in even
more abusive and degrading working situations, which
may even proliferate with the influx of new workers.
Overview (cont.)
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Third, if the minimum wage is implemented, it means
that workers cannot find jobs unless they find
employers willing to pay them the wage, meaning
further unemployment and further poverty until they
find such an employer. Fourth, the minimum wage
could decrease incentive for low-skilled workers to
learn new and better skills to seek better jobs.
Therefore, in order to successfully implement
minimum wages, potential solutions would have to
be drafted first in response to these problems.
Overview (cont.)
Major Parties Involved
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International Labor Organization (ILO) –
international UN organization responsible for
drawing up and overseeing international labor
standards, aiming to promote rights at work, and
decent employment opportunities, and enhance
social protection; has held several conventions on
minimum wages.
Major Parties Involved (cont.)
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Fair Labor Association (FLA) – organization geared
to improve worker’s lives based in Washington,
promotes adherence to international and national
labor laws.
Timeline
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1890 – First minimum wage instituted in Australia and New Zealand
1938 – First federal minimum-wage law established in the United States (Fair
Labor Standards Act)
1949 – ILO Labor Clauses Convention, aiming at ensuring respect for minimum
labor standards in the execution of public contracts
1949 – ILO Protection of Wages Convention, establishing that wages shall be
paid in regular intervals and that workers shall be free to dispose of their
wages as they choose
1970 – ILO Minimum Wage Fixing Convention, requiring ratifying states to
establish a minimum wage fixing machinery capable of determining and
adjusting the minimum wage accordingly
1990 – ILO met for a regional meeting regarding the issue of minimum wage
rates in Southeastern Asia
1992 – ILO Protection of Worker’s Claims Convention, providing for the
protection of wage claims
2000 – MDGs are established, the objective of “full and productive
employment and decent work” being among the first MDG goal which was to
eradicate extreme poverty and hunger
Timeline (cont.)
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2012 – ILO publishes a research analysis paper called the
“Global Wage Report 2012/13: Wages and Equitable Growth”,
documenting the differences in wages around the planet, the
impact of the economic crisis on them, and policy recommendations
on how to establish minimum wages
2012 – After years of cheap labor in Southeastern Asia that
translated into vigorous economic growth, governments have
responded positively laborer protests for increases in minimum
wages to these protests (Indonesia, Thailand, Malaysia, and
Vietnam have made increases in their minimum wage rates by as
much as 44%)
UN Involvement
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The UN has taken some action in the past to eradicate
poverty, seeing that it is currently the first MDG. While
eradicating poverty may seem like an impossible goal
to reach in just 15 years, several regions have made
huge progress and are expected to meet some targets
by 2015. The UN has also acted indirectly through the
ILO, establishing multiple conventions and agreements
to improve the minimum wage in all its member nations.
However, the UN has not asked for any direct change
or written resolutions on what actions governments
should take to enforce the minimum wage.
Possible Solutions
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In response to the four problems stated above in the
overview, delegates must keep in mind that there are
economic issues that are inherently associated with
implementing a minimum wage. Therefore, in order to have
a minimum wage that benefits society and does not sink the
country’s economy, measures to deal with issues like inflation
need to be included in a potential resolution. There needs to
be a close connection between the growth of amount of
labor and the growth of the worker’s compensation. In
addition, reforms will need to be implemented outside of
the work force itself.
Financial markets need to be reformed to channel resources
into productive and sustainable investments to ensure that
there is enough profit so companies are capable of
establishing minimum wage in the first place.
Possible Solutions (cont.)
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Also, monitoring the progress of
poverty reduction has been a
difficult task, due to the lack of
good quality data taken at steady
intervals. This is especially
problematic in sub-Saharan Africa
where the tools needed to collect a
full set of data on MDGs are
available in less than half of
the countries in that area. Creating
a means to monitor the data
efficiently would be a very useful
tool in tracking the reduction of
poverty.
Possible Solutions (cont.)
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Institutions also need to be strengthened. Because it is
always hard to organize workers, especially low-wage
laborers, more supporting and stronger institutions need
to be created for collective bargaining in order to
ensure that their rights are protected at all costs. In
addition, there is the very clear risk that the number of
jobs available will decrease once there is a minimum
wage rate.
In order to avoid this and actually alleviate poverty,
systems like employment guarantee schemes should be
put into place to give private firms incentive to comply
with the minimum wage and retain the same number of
workers.
Possible Solutions (cont.)
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However, in developing/emerging
countries, only about half of all workers
are actual wage earners while the rest
are self-employed or simply unemployed.
In order to raise the level of poverty,
other measures need to be put in place
to create more wage jobs or to raise
productivity and earnings of those in
self-employment. However, raising
efficiency and earnings of the selfemployed means there has to be a raise
in the level of nationwide education as
well as improved social protection
systems by governments or NGOs so that
these workers and their families can
spend less on the very basic necessities
of life and more on things like education.
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