Minimum Wage Case Study

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I. Introduction 1) Background Study Since the Cambodian Labor Law was passed in 1997, which gave authority to the Ministry of Labor to set minimum wage levels for all working sectors, the only sector with a minimum wage is the textile, garment and footwear industry (henceforth referred to as the garment industry), currently set at $50 per month. The Labor Advisory Committee (LAC) will review the minimum wage in 2010. As of date, there is no Prakas on minimum wage and no standard for determining the appropriate level. The Community Legal Education Center (CLEC) commissioned the Cambodia Institute of Development Study (CIDS) to conduct this study in order to develop a transparent and practical framework for determining the minimum wage for…show more content…
Based on the objectives of the minimum wage, a set of criteria for setting the minimum wage is identified. Common criteria include: basic needs of workers (and sometimes their dependents); general level of wages; social security system; and economic factors, such as level of employment, unemployment and underemployment; productivity; competitiveness. In order for a policy to effectively reach its intended target group without creating adverse effects on other groups in society, the design process must be grounded with facts. When designing a policy, there are three fundamental steps, which we will use in this study: 1. Define the policy objectives. What do we want the minimum wage to achieve? Or, why is a minimum wage necessary? 2. Identify the criteria. Once we have clarified the objectives of the minimum wage, we need to identify the criteria or standard for judging if the minimum wage achieves its objectives. What factors must be accounted for in the level of minimum wage to ensure that its aims are met? 3. Develop a formula for calculating the minimum wage. Our analysis in step 1 and step 2 gives us a basis for developing a simple and practical equation for calculating the ideal minimum wage. a. Objectives of Minimum…show more content…
There are a number of criteria; the relevance of the criteria depends on the objectives of the minimum wage. Some commonly used criteria are basic needs of workers, general level of wages, social security system, and economic factors. Basic Needs of Workers The fundamental criterion for setting the minimum wage is the basic needs of workers. As an underlying principle, the minimum wage should not be fixed at a level below subsistence. The minimum wage should at least enable workers to satisfy their basic needs, such as food, clothing, shelter, and health. Basic needs should be based on existing consumption patterns of the target group and not on an abstract notion of what is desirable, in order to ensure that the request is relevant and does not create or widen inequalities in society.10 General Level of Wages When the main objective of the minimum wage is to reduce wage inequalities, the general level of wages is given considerable weight. The general wage level is represented by the average wage and/or GDP per capita. The minimum wage to average wage (or GDP per capita) ratio is a useful indicator for measuring the relative status of the target group with the average person. Similarly, the wage rates fixed by collective bargaining agreements for identical or similar work may be taken into account during the wage determination

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