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29 November

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Working together for Minimum Wage Setting: Evidence from Myanmar

In May 2018, Myanmar’s union government increased the daily minimum wage for an eight-hour work day from Kyat 3,600 to 4,800 (US $3.56). The revised wage applies to all businesses with 10 or more employees, regardless of the type of work or the company’s location. This effort represented a collaboration among worker representatives, businesses, government, and researchers. Effective minimum wage policies are not possible without accurate information about costs, and researchers can provide this support.

Coming to an agreement on wages in a maze of conflicting interests is not easy. Company managers who fear a rise in operations costs and a loss of competitiveness usually object to an increase. On the other hand, minimum wages address the need of workers to make ends meet, especially in low-wage manufacturing positions. Minimum wages can also lead to worker retention in companies, as workers are less pressured to look for higher paying jobs. The wage increase in Myanmar was implemented after a series of stakeholder negotiations involving workers, company managers, politicians and researchers. However, it is still not enough to guarantee a basic and decent standard of living.

The challenge is not only to balance these diverse interests, but also to have enough reliable information to support decision-making. Data collected from worker communities is a vital ingredient in determining household needs, costs of living and minimum-wage rates. Data helps governments and worker representatives understand income disparities and identify areas of intervention. However, it is hard to judge how minimum wage rates pose a threat to businesses if their cost structures are not well understood. Firms have a natural objection to disclosing data on their cost structures. Further, overlapping research initiatives have led to survey fatigue among companies in trending manufacturing sectors associated with global supply chains.

The consistent, long-term involvement of research institutions in stakeholder negotiations is vital in shedding light on the capacity of different stakeholders to manage minimum wage rates. Researchers can assume a mediating role between parties by providing information and counter-evidence. A case in point in Myanmar is the Centre for Economic and Social Development (CESD), a think tank based out of Yangon. Its team contributed insights to the National Committee on Setting the National Minimum Wage and engaged in tripartite workshops on the issue. In order to inform policies on minimum-wage rates, CESD collaborates with worker groups and the private sector to collect data. This kind of involvement ensures that policy-making is fact-based and reflects real circumstances.

Reaching consensus on minimum wage rates is an important step toward a more inclusive industry because all stakeholders sit at the table. How to buffer the effects of a wage increase to raise productivity should remain part of the conversation, too. More often than not, wages increase in response to modernization of machinery and more productivity through worker training, not the other way round.

Long-term strategies around wage-setting that serve the interests of the many as opposed to the few, can only be sustained through consistent engagement of all parties: worker representatives, businesses, and the government. Beyond that, researchers can perform an essential role as facilitators of change.

CESD and JJN currently implement a project on Inclusive Industrialization for ASEAN, in particular on the quality and quantity of jobs in Myanmar’s export-oriented garment sector.

Adithya B. Kumar is a Senior Management Coordinator at CESD.
Tanja Matheis is a project manager at JustJobs Network.

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