Minimum Wage Policies and Their Effects in Developing Countries: A Comparative Perspective

Abstract

India was one of the first developing countries to introduce the Minimum Wages Act in 1948 and it is still considered to be an important piece of labour legislation. However, the Act is only applicable to a small proportion of workers. This has resulted in intense academic and policy debate over the past decades about having a meaningful wage policy and a binding national minimum wage, which is applicable to all workers. This is especially important as the growth rates have been quite high over the past decade in India but income inequality has remained quite high. A number of developing economies like Brazil, China have been able to seize the opportunity of high growth rates and implemented a meaningful and enforceable minimum wage system. This paper makes an attempt to look at minimum wage policies and institutions in developing economies and the role they have played in providing a decent wage floor and securing a minimum living standard for low paid workers and their families. The paper also explores the policy lessons that can be learnt for improving the minimum setting mechanism and enforcement within the Indian context.