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August 24-26, 2011  Chiang Mai, Thailand 

Organizers

Faculty of Economics, Chiang Mai University

Asia Monitor Resource Center (AMRC)

Centre for Social Policy Studies, Department of Applied Social Sciences,

The Hong Kong Polytechnic University

Hong Kong Social Security Society (HKSSS)

CONTENT

Foreword  

Programme Activities

SECTION I           ASIAN MINIMA IN PRACTICE

AROSS 2011 Position Paper on Asian Minima in Practice. (P. 9)

Reference information for the Position Paper .(P.11)

Asian Minima in Practice: Minimum Wage. .(P.13)

Asian Minima in Practice: Social Assistance . (P.21)

SECTION II          KEYNOTE SPEECHES

Towards a Regional Social Security Minima. . Surendra Pratap (P.27))

SECTION III        MINIMUM WAGES

Fixing and Enforcement of Minimum Wage in China: Situation and Problems. .Kun-gang LI(P.67)

A Snapshot of Social Protection and Minimum Wage System in Pakistan: Impact and Challenges for Workers’ Rights. .Khalid Mahmood(P.82)

Minimum Wage Policies in Vietnam – Ways to a Minimum Living Standard. .Thu Ha Van Thi(P.94)

Minimum Wage Study in Huhan –the Special Collective Contract of Wage for Catering Industry workers (Chinese only with English Asbtract) . Gui-jun Han(P.111)

SECTION IV        SOCIAL ASSISTANCE

An Economic and Labor TOR for an Integrating Asia. .Rene E. OFRENEO(P.121)

Korea’s Workfare and Making Work Pay Policies: the Way to Strengthen Income Security in a Less-developed Welfare State. .Deok Soon HWANG(P.132)

China’s Pro-poor Land Policy and Social Security for Rural Land-expropriated Peasants: a Case of Minima in Practice.. Yi-fang YANG(P.148)

SECTION V          GENERAL SOCIAL SECURITY ISSUE

The Minimum Insurance for the Work-related Injury in Asia: a Study Based on the Prior Payment of Compensation for Work-related Injury. .Xin-hua YU ; Qing-feng ZHENG(P.170)

Workplace Injury and Social Security Aspects: Bangladesh Experience. .S.M. MORSHED(P.175)

Comparative Research on the Synchronization Level between Health Security and Economic Development – Shenzhen and Hong Kong as Sample. .Diana Xiao-dan QIU ; Mike Guang-yi XU(P.180)

List of Participants                                                 

FORWARD

We are honoured to bring you this collection of papers from the Third Asian Regional Roundtable on Social Security (AROSS 2011). The Roundtable aims to arouse interests in the issue of social security inAsia, to facilitate exchange and debates between all stakeholders including academics, NGOs and trade unions, and to chart out a concrete roadmap towards social security for all inAsia.

With the past two Asian Roundtables on Social Security (AROSS), we have come to the recognition that almost one third of our Asian population are living below poverty, that is below US$1.25 (ppp) per day, and requires urgent living protection. Social security is a basic right for all people as recognized by the Universal Declaration on Human Rights, International Covenant on Economic, Social and Cultural Rights, the ILO and other UN conventions. Building a social security system that provides universal and basic living protection to all people should be foremost goal of economic and social development a state should pursue. And the governments are urged to commit at least 6% of their GDP to providing social security for all by 2015. However, for the sake of Asian solidarity and fair share of economic progress, there is obligation and responsibility for the Asian governments to adopt a unified standard of social security minima, priority of which should include social assistance, minimum wage, health service, work injury insurance and pension. We have formulated the principles of the unified Asian social security minima. It is important for us now to look into the details of different minima in practice. As preferred by the past participants, the third AROSS is chosen for social assistance and minimum wage.

Below is our initial understanding of what Asian minima of minimum wage and social assistance should be. They are just proposed for your perusal and are subject for debate in your roundtable papers:

 

A.     Minimum Wage

1.      All Asian countries, except Singapore and Malaysia, ratified the Economics, Social and Cultural Rights Convention. Hence, all Asian governments should be responsible for implementing a full employment policy.

2.      All employees should be entitled to a minimum wage policy, which replacement rate of 40% to 60% of the country average wage. This is an international practice.

3.      The Euro Statistics indicated that 15 OECD countries on average have a minimum wage policy over 40%. Hence, the minimum level of minimum wage for Asian countries should not be less than 40%.

4.      Asian governments should provide public work for the working age people who are eligible for social assistance and should provide public them with the minimum wage. The public work should include hospitals, schools, roads, electricity, irrigation and other social infrastructure facilities. This is related to the importance of workfare.

5.      It is important that we should not pay attention only to the workers in the city but also the livelihood of the peasants. If we provide same level of minimum wage to the peasants as well as the workers, the rural population will be encouraged to stay in the villages and build up the community. Thus the income disparity between the people in the cities and the people in the villages will also be narrowed.

6.      For details of minimum wage policy in the Southeast Asian countries, please refer to Samydorai’s paper on Social Security for Migrant Workers in ASEAN.

 

B.     Social Assistance

1.      Social assistance is the last resort to those living in poverty, or what we call the safety net.

2.      What minimum level of social assistance should Asian governments provide to the poor?

3.      If we adopt the international poverty line of US$1.25 per day as our social assistance benefits, it may be quite difficult for countries which have over 20% population in poverty.

4.      But if we set up minimum wage and provide public work to those employable eligible for social assistance, the pressure on government budget will be much reduced.

5.      In order to provide good working incentive for minimum wage employments, we recommend the minimum individual social assistance benefit be set at 15% of the country average wage. The reason is that on average, an employed person needs to support at least two family members. In other words, the most a two person family can get from the social assistance is 30% of the average wage. Hence, there is working incentive for poor employee to take up a job with 40% level minimum wage, and will not cause welfare dependency.

6.      For some countries, a poor employee may need to support 3 family members. Hence the minimum wage level should be set up 50% or more.

7.      The individual benefit of social assistance in the European Union is over 30%, and the family level of benefit is around 50%. Hence the recommended level of individual social assistance benefit is only half of that in the European Union.

8.      In 2007, the cost of social assistance in 87 developing countries is around 1% to 2%. The median figure is 1.4%.

9.      When 20 some developing countries set up their social assistance system, their GDP per capita is around US$447 to US$9300; the average is US$3518.

In all submissions of paper, participants of AROSS 2011 are requested to look into the actual data and situations in their own country together with the ongoing demands of the NGOs, and see whether the above proposed minima is useful to be adopted as the guideline of the minima in practice.

      The 3^rd Asian Roundtable on Social Security: 亚洲社会保障圆桌会议

      Asian Minima in Practice 如何实践亚洲社会保障最低统一标准

  Chiang Mai University, 24-26 August 2011

  泰国清迈大学, 2011年8月24-26日

 

Run-Down 日程表

Time 时间	Theme 主题
August 24th, 2011 (Wednesday)
8:30—9:00	Registration 登记
9:00—9:30	Opening Remarks of Asian Roundtable on Social Security (AROSS) 亚洲社会保障圆桌会议开幕致辞
9:30—10:00	Report Back from Skill Share among the legal Practitioners on OSH compensation in Asia Workshop亚洲工伤赔偿司法及法律实务工作交流会议成果汇报
10:00—10:40	Position Paper of AROSS 2009-2011 回顾三届亚洲社会保障圆桌会议的立场书演练及讨论 Social Security in Thailand 泰国社会保障制度的介绍
10:40—11:00	Break 茶休
11:00—1130	Sharing from ILO social security initiatives 国际劳工组织代表发言—社会保障
11:30—12:00	Keynote speech: Towards Asian Minima 主题发言: 迈向亚洲社会保障最低统一标准
12:00—13:30	Lunch & End of Legal Skill Share workshop 午餐及工伤赔偿司法及法律会议结束
13:30—15:00	Roundtable Session on Minimum Wage I 最低工资讨论 I
15:00—15:30	Break 茶休
15:30—18:00	Roundtable Session on Minimum Wage II最低工资讨论 II
August 25th, 2011 (Thursday)
9:00—9:30	Registration 登记
9:30—10:30	Roundtable Session on Social Assistance I低收入保障讨论 II
10:30—10:40	Break 茶休
10:40—12:00	Roundtable Session on Social Assistance II低收入保障讨论 II
12:00—13:30	Lunch 午餐
13:30—17:00	Planning for the future 讨论未来计划
17:00—18:00	Concluding Remarks 总结发言
August 26th 2011 (Friday)
10:00—20:00	NGOs visits in Chiang Mai 探访清迈的民间组织

SECTION I           ASIAN MINIMA IN PRACTICE

AROSS 2011 Position Paper on Asian Minima in Practice

A. Minimum Wage

1. Minimum Wage legislation is the foundation of Asian Minima in social security. All Asian countries, exceptSingaporeandMalaysia, ratified the International Covenant for Economic, Social and Cultural Rights. Hence, all Asian governments should be responsible for implementing a full employment policy and provide minimum wage to every employable, including the rural unemployed and those in the informal sector.

1. All adult employable persons should be entitled to a minimum wage policy, with a replacement rate of 55% of the country or provincial average wage. This is because the employable usually has to support 3 family members in the urban and rural low income households inAsia. But they may start with 40% to cover the lowest 10% of the wage earners, and upgrade to 55% through progressive realization, with reference to international practice.

1. The Euro Statistics indicated that 15 OECD countries on average have a minimum wage policy of over 45% in 2011. Hence, to set at a range of 50% to 55% as the target minimum wage level is still within the range of the minimum wage of 40% to 60% in international practice, and would not undermine the Asian competitiveness nor the Asian economy, due to exchange rate.

1. Asian governments should provide public work with minimum wage for all working age people who are eligible for social assistance. The public work should include hospitals, schools, roads, electricity, railways, irrigation and other physical infrastructure facilities, as well as jobs in social services. These are badly needed for social development and economic growth in many Asian developing countries. And this is the real meaning of workfare.

1. It is important that we should not pay attention only to the workers in the city but also the livelihood of the peasants. If we provide same level of minimum wage to the peasants as well as the workers, the rural population will be encouraged to stay in the villages and build up the community. Thus the income disparity between the people in the cities and the people in the villages will also be narrowed.

B. Social Assistance

1. Social assistance is the last resort to those living in poverty, or what we call the safety net. Hence social assistance is also the foundation of Asian minima in social security, in parallel with minimum wage.

1. Since an employable in low income households has to support 3 family members, the individual social assistance benefit level should not be less than 16% of the country or provincial average wage. This is because 3 family members would add up to 48%, leaving only 5% to 10% as the economic incentive for the employable to stay in minimum wage jobs.

1. If we adopt the international poverty line of US$ 1.25 per day as our social assistance benefits, financially it may be quite difficult for countries which have over 20% population in poverty. But if we set up minimum wage and provide public work to those employable eligible for social assistance, the pressure on government budget will be much reduced. It is recommended that social assistance scheme should cover at least the lowest 10% of the population in order to make a substantive impact on poverty reduction.

1. The individual benefit of social assistance in the European Union is over 30%, and the family level of social assistance benefit is around 50%. Hence the recommended level of individual social assistance benefit for Asian minima is appropriate as it is only half of that in the European Union.

1. In 2007, the cost of social assistance in 87 developing countries is around 1% to 2% GDP. The median figure is 1.4%. But in 2009, the cost of social assistance with full coverage inBrazilandChinais 0.4% and 0.2% GDP respectively. Hence the Asian minima for social assistance expenditure should not be less than 0.5% GDP and would be within the reach of many Asian countries.

Reference information for the Position Paper

Principles recommended for setting the Asian Social Security Minima:

1. Principle of Full Coverage: As a matter of justice and citizenship, everyone is the same in the society and should be entitled to social security protection. Almost all Asian countries ratified the International Covenant on Economic, Social and Cultural Rights (ICESC)(See Table 1). Article 9 Of the ICESC clearly states: the States Parties to the present Covenant recognize the right of everyone to social security, including social insurance. Hence all kinds of social security provision must be of full coverage, so that everyone share the same right. Due to the large population, it may not be easy for Asian countries to achieve full coverage in one shot. Thus, in terms of design, it is acceptable that the social security provision be made full coverage by stages.

1. Principle of Full Employment: The foundation of social security should be full employment. The Article 6 of the ICESC clearly states: the States Parties to the present Covenant recognize the right to work, which includes the right of everyone to the opportunity to gain his living by work which he freely chooses or accepts….to achieve the full realization of this right shall include technical and vocational guidance and training programmes, policies and techniques to achieve steady economic, social and cultural development and full and productive employment. In other words, government should set up minimum wage to protect all working age employable so that everyone has a job to earn his living, without depending on welfare. And so is the disabled. Appropriate arrangement should be made for the disabled to work with suitable working condition. They should enjoy same right to work.

1. Principle of Basic Protection: as the main objective of social security is to protect living in case of risks, the social security benefits should not exceed the basic living requirement. Any excess of the basic protection will lead to great financial burden, if we are to aim at full coverage. Since Asian countries are largely developing economies, social security must be basic, particularly when we are setting the minimum standard. In general, standard setting should draw reference to the level of living expenses of the low quintile of the country population.

1. Principle of Redistribution: employment income is the first level of distribution. Social security belongs to the second level of distribution. Since social security aims to protect people from risks, it should focus on the low income people and the vulnerable who face the highest level of risks. Hence, social security should provide higher level of benefits to the poor and vulnerable. Even when the people are incapable of making contribution, they should also be entitled to the social security benefits for basic protection. In the same manner, employers should contribute more than employees, and so be the government. And in this way, social security narrows the income disparity, brings justice and promotes social stability.

1. Principle of Simplicity: social security system must be simple, easy to understand and easy to administer. In this way, it reduces administrative expenses, saves a lot of human resources, and leads to transparency. For instance, the beneficiaries will know to how to calculate the amount of benefits they enjoy, the way the social security system operates and are capable of monitoring the whole system. For countries with large population, simplicity of the system means easy to promote and educate the public to use the system.

1. Principle of Sustainability: to set up social security minima is to ensure the financial feasibility and sustainability. The international practice is to conduct actuarial assessment every 3 to 5 years. The assessment period will cover 50 years for mid-term assessment, and 75 years for long term assessment. This is to ensure the system is workable for several generations. This is particularly true for pay-as-you-go system. And it will promote confidence in the public and bring stability to the rate of contribution.

ASIAN MINIMA IN PRACTICE: MINIMUM WAGE

 

H.T. Chow, H.L. Fung, A. Leung and H. Mok

Minimum wage has long been a topic that easily arouses heated debate. Designed to protect workers from unduly low wages, many nevertheless argued that it is detrimental to the lowest skilled workers through increasing unemployment. However, the simple derivation that increasing wage must decrease demand for labour ignores the fact that the economy is an interlinked whole. The increase in wealth and consumption among workers will boost the economy and might even reduce unemployment. A more equitable division of wealth would reduce social conflicts and encourage development. Complimented with the provision of employment guarantee, there should be no reason why even developing nations should not implement the minimum wage.

Yet the above argument hinge on the assumption that there should be no exemption from the minimum wage requirements, or else investment would simply move to places or sectors where there is no minimum wage, and adverse effect on the economy could result. In the context of a globalised world today, this implies the necessity of a regional, if not a global minimum.

The idea is not new. The Asian Floor Wage Campaign, launched in 2007, pushes for an Asian level minimum wage for the garment workers. A recent article on the Financial Times written by Thomas Palley argued for a global minimum wage system. Our goal is somewhere in between: an Asian minimum wage for all, fairer in principle and not at all unfeasible. The vast majority of Asian countries, includingChina,India,CambodiaandIndonesia, already have some form of minimum wage legislation; the question now is how to unify them.

In this article we shall review the principles guiding the formation of Asian Minima, explore the idea of workfare, and propose a method of calculating the Asian minimum wage.

Legality of Asian Minima

It is common for many Asian scholars to draw upon the ILO conventions as the legal basis for Asian practice in social security. We hold a different view. For instance,the ILO Convention No. 102 is no longer useful as a legal instrument for Asian minima in social security. The latest internal document of ILO stated clearly in their concluding remarks: “the Committee recognizes that for the many industrial societies which the drafters of these (ILO) standards had primarily in mind, ILO standards have achieved their initial objective to relieve want and prevent destitution….This however has not been the case in developing world…. In the 21st century, it has become clear that the minimum standard of Convention No. 102 exceeds the reach of the majority of low-income countries. The classic system of social security does not extend to the informal, rural and subsistence sectors that comprise the bulk of these countries’ economies. According to a recent ILO estimate, close to 80% of the global population have no social security protection.” (ILO, 2011)

Anyhow,Japanis the only Asian country that did ratify the ILO Convention No. 102. In other words, there is not much relevance for all the Asian countries exceptJapan, to follow strictly the ILO Convention No. 102, even with the use of progressive realisation concept. In the near future, it is very unlikely that the situation will change tremendously.

Hence, the legality of Asian minima lies in the International Covenant on Economic, Social and Cultural Rights (ICESCR). Except two countries, all Asian countries have ratified the ICESCR. That means all Asian countries must follow the Articles in the ICESCR in legal manner. Articles 6, 7, 9, 11, 12 and 13 are particularly relevant to Asian minima in social security:

Article 6: The right to work, which includes the right of everyone to the opportunity to gain his living by work…. to achieve the full realization of this right shall include technical and vocational guidance and training programs.

Article 7: The right of everyone to the enjoyment of just and favourable conditions of work which ensure (1) remuneration to all workers, as a minimum with fair wages and equal pay for equal work; and with a decent living for themselves and their families; and (2) safe and healthy working conditions.

Article 9: the right of everyone to social security, including social insurance.

Article 11: the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions.

Article 12: the right of everyone to the enjoyment of the highest attainable standard of physical and mental health.

Article 13: the right of everyone to education, with (!) free and compulsory primary education; (2) progressive introduction of free secondary education including technical and vocational education and (3) progressive introduction of free higher education accessible to all on the basis of capacity.

It is clear now that the Asian minima in social security must be formulated on the basis of the above 6 articles.

Asian Minima in Minimum Wage

Based on Articles 6, 7,and 9,  it is quite obvious that Asian governments must do their best to ensure full employment with the introduction of minimum wage for all including those working in the informal sector and those in the rural areas. The main emphasis is on full employment and not unemployment protection by means of unemployment benefits, as proclaimed by the ILO. It is not difficult to achieve full employment. As over 95% of Asian population are living in developing countries, there are ample space for physical infrastructure such as hospitals, schools, public housing, roads, electricity and irrigation system. They are clearly specified by Articles 11, 12 and 13. When the above structures are ready for use, there will be great demand for social service workers. Hence, the government is capable of creating public work projects and provide minimum wage to all those unemployed, including the rural unemployed and those partially disabled to do the work. Moreover, it is universally recognised that employment is much better than unemployment benefit, as employment will provide self-confidence, self-actualization, social network and dignity. This is close to what we call workfare, and they are mutually beneficial to the employed and the government which needs to build up the society. And above all, full employment and minimum wage will help reducing poverty tremendously, and improve the wage dispersion.

1. have doubts about employment/ growth driven by public work – would growth dependent on public work be sustainable? Would such dependency lead to massive waste as the country enter into cycle of building and demolishing? Would it land the country in massive debts? Yet I have to say I haven’t read enough on it yet…)

The best example isIndia. In 2005, the Indian government enacted the Mahatma Gandhi National Rural Employment Guarantee and has provided a legal guarantee for 100 days of employment in every year to adult members of any rural household willing to do public work at the statutory minimum wage of 60 rupees per day. Currently the trade unions inIndiaare demanding for 200 days employment guarantee. It is likely that they are on the way to year round full employment for both rural and urban working age population through the method of progressive realization..

Similarly,Bangladeshalso provides a program of employment guarantee for rural poor under the Employment Generation Program. It guarantees every rural poor 100 days of employment, with the aim to alleviate seasonal hard core poverty and offset the cost of food through the non-productive agricultural periods. This is targeted to the rural poor, but they may have the opportunity to improve the scheme to every rural household that needs employment.

Even when the policy makers focus on economic growth, full employment and minimum wage will have a positive impact on productive output and economy. In particular, evidences inEuropeandUSAshow that introduction of minimum wage will not affect the unemployment rate, and in some cases tend to increase employment rate. Even substantial minimum wage increase did not show negative employment effects (Herr and Kazandziska, 2011). Moreover, households which receive minimum wage tend to have a higher propensity to consume compared to rich households, the level of consumption is expected to be enhanced and drives up the retail economy. The overall result will be great improvement in the country economic growth with equity.

How to Determine the Asian Minima in Minimum Wage

ILO Convention 131 has not defined a specific rate of minimum wage, but writes: “ The elements to be taken into consideration in determining the level of minimum wages shall include (a) the needs of workers and their families, taking into account the general level of wages in the country, the cost of living, social security benefits and the relative living standards of other social groups; (b) economic factors, including the requirements of economic development, levels of productivity and the desirability of attaining and maintaining a high level of employment.” (ILO, 1970)

The practical experiences of introducing minimum wage in China (1995), in United Kingdom (1998) and in Hong Kong (2011) were studied and analysed ( Mok, 2009; Leung et al, 2010). To simplify the practice, it can be concluded that there are 3 major determinants for minimum wage level (MWL):

1. MWL must be more than the social assistance benefit level (SAL). Only when the MWL exceeds SAL, would the unemployed be willing to take up the MW jobs and refuse to remain dependable on SA. It is quite obvious if SAL is higher than the MWL, the unemployed will be reluctant to take up MW job because SA provides better living condition than MW employment.

1. Supporting ratio for family members by the employed. If the employed has to support two members, the MWL must be more than the SAL for two persons. If the employed has to support three members, the MWL must be more than the SAL for three persons. This is to provide economic incentives for the unemployed to leave welfare dependency and work for their living.

1. The international practice of MWL. It is well known that the international practice of MWL is between 40% and 60% of the local average wage (AW). It is obvious then that the MWL should be at least 40% of AW or more, but usually be less than 60% of AW.

According to the latest available data ofChina(see Table 1 and 2), it is quite obvious that the low income families have much higher supporting ratio than those of the middle income group. In the cities, the supporting ratio for low income group is 2.7 persons, while in the rural area, the supporting ratio for low income rural families is close to 3. Moreover, one has to note thatChinais under population control of one child policy. Hence, one would imagine the supporting ratio for the low income groups in Asian countries will be on average much higher. It is likely that the supporting ratio will go beyond 3 persons in both the urban and rural regions. In fact, the minimum wage inIranis fixed at a level which fulfils the needs of a family of four.

Table 1  Distribution of Urban Household Supporting Ratio inChinain 2006

Income Groups

Average Family SizeAverage Working MembersSupporting RatioLowest

(10%)

3.31

1.30

2.65

Lowest Quintile

(20%)

3.20

1.52

2.11

Lower Quintile

(20%)

3.09

1.56

1.98

Middle Quintile

(20%)

2.92

1.56

1.87

Higher Quintile

(20%)

2.79

1.56

1.80

Highest Quintile

(20%)

2.69

1.56

1.72

Highest

(10%)

2.62

1.62

1.62

Country Average

2.95

1.53

1.93

Table2  Distribution of Rural Household Size inChinain 2008

Lowest Quintile	4.57persons
Lower Quintile	4.31persons
Middle Quintile	4.05persons
Higher Quintile	3.81persons
Highest Quintile	3.40persons

Source: Chinese Statistical Annal 2008. P.342.

As the currant assumption of supporting ratio is around two persons and many governments fail to consider the difference of supporting ratio between the middle and the low income group who are more likely end up in MW employment, the average MWL for the OECD countries in 2011 is around 45% of the local AW. Thus the appropriate Asian minima for MWL should go beyond 50%. It is recommended here that the Asian minima for MWL should be between 50 % and 55%. To begin with, the first target should be at least 40% of the AW.

To set the replacement rate of country minimum wage at 50% to 55% is higher than those in the developed countries. But this will not affect the degree of competitiveness inAsia. It is because the level of average wage is much lower inAsia, and the exchange rate renders the level of minimum wage at the end compares favourably with those in the west. Hence, with the practice of progressive realization, it is possible to target at 50% to 55%, and they are still within the range of international practice.

One may query that the current replacement rate of minimum wage is around 15% inRussia, around 20% inIndia, and around 30% inChina. But they adopt the line of progressive realisation. For instance, inChina, it has been scheduled in the coming Five Year Plan that the rate is to be increased at least 13% or more annually in the next 5 years. Moreover, it is important to note that minimum wages should be high enough to affect the lowest wages. If minimum wages are close to the lowest wages actually paid to a relevant group of workers, they are just meaningless and will not improve the wage dispersion.

Minimum Wage in Practice

In many countries, the governments set up tripartite wage commission with equal number of representatives from unions, employers’ associations and government officials. They recommend the amount of the minimum wage, but it is the government who make the final decision at the end. This system has the advantage of making the government accountable to the official recommendation of the tripartite body and the government has to present arguments in case it objects to the recommendations.  In some countries, the government consults with the unions and employers’ associations about the amount and other aspects relating to the minimum wage. But when it comes to the final decision, it is the government that makes it autonomously. Examples areRussia,China,NigeriaorIran. The best practice is to have tripartite body composed of representatives from the unions, employers’ associations and academia, with government officials to serve as secretariat. The academics are usually required to write annual wage reports and will provide f important information for public comments, thus making the whole process transparent and encouraging public participation. The best example is the practice inBritain.

Many Asian countries developed minimum wage but they are not strictly enforced and followed by every private companies. They are not effective and the workers do not benefit from the minimum wage. When the workers do not have strong bargaining power, the introduction of a statutory minimum wage is meaningless. Thus, the important practice is to have effective penalties and to have a group of well-trained labour inspectors to monitor the implementation. Moreover, citizens must be encouraged to complain their cases to the government departments and officials must be proactive to put unjust cases to the court for jurisdiction. To avoid the harmful effects of corruption and reduce the legal burden of the complaints, NGOs and trade unions must be active to employ lawyers to bring cases of violation to the court.

(Rather, the more important practice is to ensure freedom of association and change the power balance in the workplace? Remedies through litigation is 沒辦法中的辦法，and should not be put before the importance of affirming the three labour rights – FoA, strike and bargaining)

Countries with large population and large discrepancies in economic developments in different parts within the country, tend to have a series of different minimum wages. For instance, more than 1200 minimum wages exist inIndia. The same happens inChina. But it is not fair to the citizens and may cause different direction of flow of workers from one part to another parts within the country. The law of equal pay for equal work requires that a national statutory minimum wage must be enacted, while provincial governments and even cities can fix minimum wages above the national level. But it is still a function of trade unions to negotiate higher wages in collective bargaining.

There should be no exceptions from the minimum wage as inMalaysiaandTurkey. Even the disabled persons can enjoy the same level of minimum wage, because the same minimum wage applies to unskilled persons, which does not take working performance into account. At most, a secondary minimum wage such as 90% of the national statutory minimum wage may be introduced for the disabled, with government paying the disability allowance to cover the deficit. But it is common to find big exemptions of minimum wage to exclude public sector, agricultural sector and the domestic workers, such as inChina. It is against the concept of social security for all and violates the principle of equal work for equal pay. Thus it is hoped that these exemptions may be corrected in the future through progressive realisation.

Conclusion

A regional minima wages is essential in preventing a disastrous race to the bottom, and to provide all working men and women the basic necessity to live with dignity. Regardless of its possible economic effects, minimum wage remains a matter of justice. It provides protection from the relentless force of the market, and calls a halt to the endless commodification of work. In short it calls to the heart of humanity; would our society allow our fellow men to be so exploited that all their hard work could not earn them enough food to eat? Do we want a society that only regards workers as money-making machines, ignoring all their human needs?

This points to the concept of living wage; the minimum wage, responding to the needs of human, should at least allow one to meet all basic needs. This is the fundamentally consideration for setting a minimum wage; all method of calculation are secondary and must not violated this requirement. Although we have not directly employ this concept in our proposal here, we considered our suggestion sufficient to meet such requirements based on empirical experience of how a normal economy works. Using average wage as the benchmark has the advantages that it is transparent in calculation, easy to generalise across countries, and can adjust automatically with inflation. The traditional approach of pegging the minimum wage to a basket of goods, periodically adjusted and bargained, while principally more direct, can be difficult to generalise across different regions, and lag behind changes in economic situation.

We realise that the level we proposed here – 50-55% of local average, cannot be achieved overnight. Yet to prevent it from becoming just another empty promise pushes to the indefinite future, unions, NGOs, academia and governments would have to come together to work out a concrete timetable. Employment guarantee program should be implemented as complementary measure. Workers inAsiahave been played against each other for too long in the globalised drive to seek the cheapest men; now is the time to call it to an end.

References

Herr, H and M Kazandziska (2011) Principles of Minimum Wage Policy: Economics , Institutions and Recommendations. GlobalLabourUniversityWorking Paper No. 11. March 2011.

ILO (1970) Convention 131, Minimum wage fixing convention ,Geneva.

ILO (2011) General Survey concerning Social Security Insruments in light of the 2008 Declaration on Social Justice for a Fair Globalization. Report of the Committee of Experts on the Application of Conventions and Recommendations. Report III for ILC 100th session 2011.

Mok H (2008) “The determinants of the minimum wage inHong Kong” in Hong Kong Social Security Society (2009) From Risk to Security (in Chinese). Pp.137-150.

Leung A et al. (2010) “ The setting of minimum wage inHong Kongin 2011”  in

Guandong Social Insurance Journal. (in Chinese) Pp. 14-27.

Thomas I. Palley (2011) “A global minimum wage system” in the Financial Times,18 July 2011

ASIAN MINIMA IN PRACTICE: SOCIAL ASSISTANCE

K.W. Chung, H.L. Fung, S. Choi and H. Mok

Social assistance has historically been used in many countries to meet the needs of the very poor families. Very often the benefits were very meager and designed to cater only for the most desperate cases. They were also concentrated in urban areas and required very complicated asset and income investigation. They are usually funded from the government taxation and paid to those living below poverty. During the 1970s and 1980s, many developing countries were indebted and sought financial aid from the IMF and the World Bank. These social assistance programs were often retrenched or even abolished as a result of the imposition of structural adjustment programs. However, in recent times, there are renewed interest in social assistance, particularly when conditional transfer have been commonly used in the Latin American countries. This paper aims to discuss the Asian minima in social assistance and hopes to establish standards in social assistance design forAsia.

Legality of Social Assistance

ILO has been the leading organization in setting international standards in social security. But it is clear that ILO did not touch in details how social assistance should be defined and their rates of payments be specified. Hence, the right-based element of social assistance has to come from the International Covenant on Economic, Social and Cultural Rights (ICESCR), as it was ratified by all Asian countries except two.. The following 6 articles are particularly relevant to the Asian minima in social assistance:

Article 6: The right to work, which includes the right of everyone to the opportunity to gain his living by work…. To achieve the full realization of this right shall include technical and vocational guidance and training ptograms.

Article 7: The right of everyone to the enjoyment of just and favourable conditions of work which ensure (1) remuneration to all workers, as a minimum with fair wages and equl pay for equal work; and with a decent living for themselves and their families; and (2) safe and healthy working conditions.

Article 9: the right of everyone to social security, including social insurance.

Article 11: the right of everyone to adequate standards of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvements of living conditions.

Article 12: the right of everyone to the enjoyment of the highest attainable standard of physical and mental health.

Article 13:the right of everyone to education, with (1) free and compulsory primary education; (2) progressive introduction of free secondary education including technical and vocational education and (3) progressive introduction of free higher education accessible to all on the basis of capacity.

Asian Minima in Social Assistance

As Article 6 points to the responsibility of the government to provide jobs for every adult citizen, there is no requirement for the state to provide social assistance for the unemployed. As long as the government succeed to provide jobs to the working age population, or public work with minimum wage payment, social assistance should not be given to the adult members. If jobs are not available, vocational training with certain amount of training allowance should be provided to those who are able body and living below the poverty line. These social security measures should also cover the mildly disabled who should also be entitled to jobs and vocational training.

Indiahas been a very good example of providing employment guarantee. In 2005, the Mahatma Gandhi National Rural Employment Guarantee was enacted and provided a legal guarantee for 100 days of employment in every financial year to adult members of any rural household willing to do public work-related unskilled manual work at the statutory minimum wage of 60 rupees per day. Around one third of the stipulated workforce is women. The job guarantee scheme started in 2006 in 200 districts and expanded to cover 619 rural districts in 2009 (ILO, 2011). Currently, the trade unions inIndiaare demanding for 200 days employment guarantee. They are on the way to progressive realization to year round full employment for both rural and urban population.

Article 11 stipulates that everyone is entitled to an adequate standard of living for himself and his family including adequate food, clothing and housing. That means a universal scheme of means-tested social assistance be set up to help those who are living below poverty and without employability. Caution must be made not to establish a multi system like those inPakistan, which is likely leading to corruption and political manipulation, against the original objectives of social assistance.

How to Determine the Adequate Standard of Social Assistance

The basic principle is to provide a basic basket of food to the poor so that everyone should have at least 2000 kcalories per day, and the social assistance scheme should cover at least 10% of the population. The rationale behind is simple. The nutritional intake is the international minimum standard, and all the western countries provide social assistance to more than 10% of their population. As in many Asian countries, the population living below poverty is much greater than 10% of their populations (on average, should be around 30%), the social assistance scheme must cover 10% of the population in order to make a substantive impact on the needy.

The benefit level of social assistance should go beyond the lowest quintile of the country income per capita, that is, the lowest 20% of the income group. In other words, the average income level of the individual in the lowest 20% of the country income groups should be treated as the minimum level of benefit of the social assistance scheme. The average income level of the lowest quintile means that it is at the lowest 10% level of the country population.. Thus, using the lowest quintile of the country income per capita as the social assistance benefit level, is likely to cover the lowest 10% income group in the country.

However, it must be noted that in many Asian countries, there is great discrepancy between the economic development in the rural and urban population.. It is more appropriate to establish different criterion for benefit standard of social assistance in rural and urban districts. It is recommended that in every provincial area, social assistance benefit standard should be limited to two level, one is the city level, the other the county level.

For city level, it should be linked to 15% of the city average wage. It is because the minimum wage is to support 3 family members, as argued in the Asian Minima in Minimum Wage paper (Chow et al, 2011). If the minimum wage is set at 50% to 55% of the city average wage level, 3 members should get social assistance at a total of 45% of the average wage, leaving 5% to 10% for economic incentive to take up the minimum wage job instead of relying on welfare benefits. This helps the employability and reduce the government financial burden.

Similarly, it is recommended that for the rural level, the benefit standard of social assistance should be set at least 30% of the average rural income level. In some cases, it should be at 40% as in some Asian countries, the average rural income is so low that a much higher level of benefit standard of social assistance is required.

In regard to the asset level, we can simply add on 15 fold of the benefit standard of social assistance. This is to provide individuals and families to handle their living problems adequate for one year.

In this way, for every province, there will be only two standard of social assistance, one at the city level, the other at the county level. The design is simple and the fairness will be improved when the two standard merges together and form into one unified system of social assistance with every citizen entitled to same benefit when they are qualified for the means-tested social security system.

The Need for Categorical Benefits

There is a need to legalize the categorical benefits for able body, the elderly and the severe disabled.

It has already been argued that the government should provide pubic work-related jobs for the unemployed with minimum wage, and those without job be given training programs with half of the minimum wage as training allowance. Hence, it must be specified in the social assistance law that minimum wage job or allowance for training sessions be given to those who are able body under the social assistance scheme. This will help reducing the financial burden of social assistance in the government.

The second categorical assistance should be given to the elderly. As it is the right of everyone to entitle to social security including social insurance, the elderly should get minimum pension instead of social assistance. Those who are 60+ or 65+ should be entitled to minimum pension around 20% of the average wage, as the elderly is likely to end up in sickness and incur more medical expenses.

The third categorical assistance should be given to the severe disabled. It has been well documented that the poor households are likely to have family members who are disabled in some ways (Mok 2002). It is important to relieve the poor households from harshness in supporting and caring the disabled. And in many Asian countries, there is no social security system to cover the disabled. Hence it is imperative to provide at least social assistance benefit for the severe disabled. The benefit standard of categorical assistance to the severe disabled should be equivalent to the city level of social assistance benefit, that is, 15% of the city average wage.

Distribution of disabled & Chronically Sick by Housing Types in 2001

Housing Types

Disabled and Chronically Sick (’000)

No. of Households

(’000)Disabled and Chronically Sick Per HouseholdPublic Housing

530

620

0.9

Private Housing

410

1050

0.4

Subsidized Housing

170

300

0.6

Others

40

40

1.0

With the above 3 categorical assistances and their relevant benefit standard, it is clear that the benefit standards are uniform for both rural and urban recipients. There are many advantages to employ uniform categorical assistance benefit. First of all, it is simple and easy to administer. Secondly, they can avoid many poor practices such as biased treatment to the closed friends in the rural villages. Thirdly, they can be very good bridge to unify the urban and rural social assistance scheme in the future through progressive realization to giving out same benefit level.

The Need for Special Benefits

Articles 11, 12 and 13 of the ICESCR have regulated that everyone has the right to adequate housing, health and education. Thus the destitute families must be qualified for public housing, health services and free education.

Public housing schemes have been well developed as inSingaporeandHong Kong.Chinahas also implemented a public scheme for public rental housing of very low rate. This is achievable as the cost of constructing public housing schemes can be divided into 40 to 50 years. In other words, the cost can be divided into as much as 600 months. Through the employment guarantee schemes with minimum wage, the monthly rent could as low as 5 to 10 US$ a month. With partial government subsidy, the welfare recipients are only responsible for one third or one fifth of the cost only, thus to be covered by the monthly benefit.

Health service could be easily covered by the National Health Service system. The clinics will only charge 10% to 20% of the cost. As the medical doctor attends about 10 minutes for every outpatient case, he or she can treat 6 patients an hour, 40 patients a day. For 26 working days a month, he or she can treat over 1000 patients. (InHong Kong, 10 cases per hour are required). If every patient is charged for 1US$ per visit, the doctor can earn almost 800 US$ a month. This is a substantial income for a professional in Asian developing countries. At the same time, the cost per visit can also be built into the social assistance benefit by half subsidy from the government.

Education is human capital investment. Hence in many Asian countries, they have already introduced free primary education for all. But it is important to note that there are still high levels of illiteracy rate. Hence it is important to implement compulsory education and compensation education for the illiterates. This is also important for disrupting the poverty cycle so that the young generation of the poor with good education are capable of taking up high income jobs in the future. This is particularly true for rural households.

Preference for Conditional Assistance

Latin American countries lead the world in using social assistance conditional cash transfer. These reformulated social assistance programs pay benefits to poor families on condition that children attend schools , that they are immunized, that children are not malnutrition, that they receive regular health checks, and etc.  In 1997, the Mexican government introduced Opportunidades scheme. The welfare recipients are required to send their children to school. It pays a cash benefits as well as books and educational materials free of charge.. The social assistance also cover nutritional benefits to children and to pregnant and lactating mothers (Levy, 2006).Brazil’s Bolsa Familis scheme was established in 2003. It requires children to attend school regularly, children be immunized and pregnant mothers to attend prenatal clinics regularly. Various studies shown improvement in school enrollment and women’s health (Rawling , 2005). Hence, for Asian countries, there are good reasons for the policy makers and NGOs to learn to develop social assistance schemes into conditional transfer.

Costing for Social Assistance

It is very difficult to estimate the costing of social assistance in one country. But reference can be drawn from two examples. The Bolsa Familia program ofBrazilprovides since 2003 a minimum level of income for extremely poor families, and covered 46 million people in 2009 at a cost of about 0.4 percent of GDP. (ILO, 2011)

The social assistance inChina, covers about 70 millions citizens in both urban and rural areas, cost about 0.2% GDP in 2009 (Tang, 2010). Hence, one would imagine the maximum cost of social assistance in many Asian countries would not be more than 0.5% GDP and this may be set as the Asian minima in social assistance. They should be within the reach of many Asian countries.

Conclusion

Social Assistance, like Minimum wage, is the foundation of social security. It is a universal scheme for means=tested families living in poverty. If well administered, it can be turned into a system of categorical benefits, which build into a uniform social allowance benefits for both urban and rural residents. It could also be a conditional cash transfer to improve the rates of enrolment and the use of health services. But the cost is minimal, seldom exceed 0.5% GDP. Hence, it is within the reach of many Asian countries and they should be introduced to bring all those living below poverty to the level of ICESCR. Linking social assistance to minimum wage level, individual social assistance benefit should be around one third of the statutory minimum wage, as the low income family bread winner has to support three family members. These lessons are well drawn and should be formulated as the basis of Asian minima in social assistance.

Reference

Chow et al (2011) Asian Minima in Practice: Minimum Wage. Paper presented to the AROSS III,Ching Mai,Thailand, 23-24 August, 2011.

ILO (2011) General Survey concerning Social Security Instruments in light of the 2008 Declaration on Social Justice for a Fair Globalization. Report of the Committee of Experts on the Application of Conventions and Recommendations. June 2011.

Levy, S. (2006) Progress against Poverty: Sustaining Mexico’s Progresa-Opportunidades Program.WashingtonD C. Brookings Insitution Press.

Mok H (2002) Health Promotion and Medical Costing.Hong KongBaptistUniversity. Table 5.5

Rawlings (2005) “A New Approach to Social Assistance : Latin American Experience with Conditional Cash Transfer Programs” International Social Security Review 58(2/3): 133-162.

Tang J (2010) “Urban and ural Social Assistance Systems: Problems and Solutions” in Society of China: Analysis and Forecast, 2011. (in Chinese).  Social Sciences Academic Press, Dec. 2010. Pp. 208-217.

SECTION II          KEYNOTE SPEECHES

                             

Towards a Regional Social Security Minima

 

Surendra Pratap*

 

Introduction

With the disastrous impact of globalization and liberalization becoming more and more visible, the issue of Social Security is emerging as an important agenda both for the states and the labour/people particularly in developing countries ofAsia,AfricaandLatin America. The motives are certainly different but for both capital and labour, the compulsions for emphasis on social security are generated by the same ground realities. For labour and the people at large this is an issue of survival. And for the states this is an issue of watering down on the discounts of the people/labour to minimize the chances of anti-capital volcanic movements, and to project a better image of corporate led globalization by putting a glossy cover on the barbaric reality.

Therefore, for the people’s social security movements it is crucial to critically look at the social security initiatives of the state and transnational capitalist class (TCC) and put forward the alternative agenda of social security with labour perspective (and transnational working class-TWC perspective) by clearly articulating the commonalities and differences with state and TCC initiatives.

This paper is an attempt to provide a brief analysis of the impacts of globalization and liberalization on labour and situate the issue of social security in the political economy of capital and political economy of labour in the current phase of globalization. In the light of this analysis the paper will also briefly attempt to put forward a general critique of current social security initiatives. The ultimate objective of the paper is to contribute in building an alternative social security agenda for labour and people at large, particularly inAsia.

Struggle for Social Security is Struggle for Survival

The meaning of civilized society is a society where at least survival (different levels of survival at different levels of socio-economic development) is fully ensured for all; and the workers and the people at large can effectively exercise their powers of collective bargaining to ensure redistributive justice for further improvements in their living standards and working conditions. If the survival is not ensured, then, on the one hand, the workers are actually thrown in the conditions of slavery and it drastically reduces their collective bargaining power; and on the other hand, if survival is not ensured, it means that there is no set base-level for collective bargaining, and in such situations, collective bargaining can not effectively ensure the redistributive justice and improvements in working and living standards (accompanying economic growth). The importance of labour laws on wages and job security, social security, OSH and other working conditions for the larger enterprises of organized sector (as was the case in most Asian countries) was primarily in respect of ensuring survival and setting the base level for collective bargaining. The greater collective bargaining strength and improvements in the working and living conditions of organized sector workers (in comparison to unorganized sector workers) could be achieved primarily due to this factor.

There were consistent struggles in most of the Asian countries for gradually transforming the unorganized sector in to organized sector. The trade union movement in India was successful in achieving two great victories in this direction: one, in 1976 the Industrial Disputes Act 1948 was amended to extend applicability of Chapter V-B, and thereby extending the job security to workers in enterprises with 100 or more workers, rather than the earlier threshold limit of 300 or more workers; two, enactment of Contract Labour (Regulation &Abolition) Act 1970, which ensured regularization and job security to contract and casual workers engaged in core activities and in jobs of perennial nature. Similar trends were also observed in other developing countries.

The peasant movements (in 1960s and 70s) in most of the developing countries were also successful in varying degrees in compelling the governments to implement land reforms and develop and provide inputs and infrastructural facilities (particularly irrigation) at subsidized rates. Providing some essential commodities like grains, cloths, kerosene oil and sugar etc at subsidized rates through public distribution system was also with the objective to ensure the survival.

It is not the case that everything was moving in right direction before globalization, but at least the issue of people’s survival was also somewhere included in the agenda of economic development, and the presence of a strong labour movements and peasant movements were putting a sustained pressure on the governments to ensure some pro-people orientation of development. Even if there was no big qualitative change in the conditions, it helped a lot in transforming the life of the people and setting the direction of struggles for further improvements.

But the current phase of globalization and liberalization completely reversed these trends. The people’s survival is no more and no where in the agenda the economic development. Globalization and liberalization came as an overall attack on the working class and people at large. Change in the balance of powers at global level and economic and industrial restructuring drastically reduced the collective bargaining power of the working classes and the people at large in various ways; and on the other hand, all round attack on the rights of the people (privatization of public sector industries, education, health, transport etc, cutting or slashing subsidies, rampant informalisation of labour and in overall terms transformation of the state in a corporate agent) compelled the labour and people’s movements to go on defensive. Moreover, the new development strategies increased the vulnerabilities of the people and working classes in overall terms. It will not be an exaggeration to say that the profit maximization in the new development strategies is based on exploiting the vulnerabilities of the people and as an outcome it further increases these vulnerabilities.

Following are the worth noting aspects of globalization and liberalization that are actually creating the crisis of survival for the people.

The current phase of globalization is most aggressive phase of capitalist expansion in terms of a drive to commoditize virtually everything from nature to emotions, privatize everything whatever is still left in the public space, and transfer the ownership and control of everything in corporate hands. With a decisive change in the balance of power at global level in favour of capital, the states are transformed in the corporate agents and thereby legislating as much as possible in favour of the corporate and against the labour and people at large (deregulations).

1. The production structures are completely changed and a new international division of labour has taken shape. The factories have taken the shape of global factories and now the assembly lines are not only global assembly lines, but in developing countries it extends up to the home based workers. Moreover, all other sectors of workers for example peasants and most of the other categories of self employed workers are also transformed in wage labour in their own fields and their own workplaces and strongly linked to the global value chain and completely dependent on it. Therefore, the most dramatic change that happened with the globalization is that the fate of almost all workers and producers is now controlled by the transnational capital or the transnational corporations.

1. Reorganization of production operations on post-fordist models and shifting the labour intensive and environmentally costly manufacturing operations in developing countries is the transnational capital’s aggressive move in hunt for super profits. This is accompanied with imposition of new global economic order compelling the developing countries to shift from import substitution growth models to export oriented development strategies based on foreign investments. Therefore, to accelerate the economic growth in this framework, the developing countries are compelled to compete with each other for more and more export orders and for more and more share of foreign investments. Metropolitan capital, having attained unrestricted mobility, is reaping super-profits by throwing them in this cut throat competition. Developing countries are competing with each other to provide huge incentives to corporate in various forms including tax exemptions and unrestricted access to natural resources and unrestricted supply of cheaper labour (mainly by informalisation of labour and curtailing labour rights) etc. Therefore, repression of the labour and people at large is actually inbuilt in the development strategy

1. Deregulations at national level and reregulation at international level became the rule of the game and supranational economic planning agencies captured the stage for virtually acting as international governments. Now the regulations for the global economy were to be decided by these supranational economic institutions fully controlled by metropolitan capital, like the International Monetary Fund, the World Trade Organization, the World Bank, and the OEGD, and business planning forums like the World Economic Forum (WEF), the Trilateral Commission (TLC), and the International Chamber of Commerce (ICC) etc. and the developing countries were compelled to implement these regulations by harmonizing their regulations with these international regulations. In this international regime, even to fight against deregulations and for re-regulations on labour rights, human rights, social rights and environmental rights at national level becomes difficult unless it is accompanied by a strong movement for the same at international level. After becoming part of WTO, the nation states have lost their capabilities to regulate on the issues that in any way affect the issues involved in WTO agreements they have signed. In this international regime social rights and regulations (labor rights, subsidized health, education and housing etc) are regarded as imposing excessive and unjustified costs on capital and trade. Through structural adjustment programs, governments are discouraged from seeking to regulate in such issue areas or to fund social welfare costs. Inability of the state to legislate on these issues reduces the power of the labour and people’s movements to affect the policies of the government; and it is also one of the important factors behind the state becoming more and more repressive particularly in developing countries.

1. Wellbeing of the people is left to the demand-supply magic of ‘market god’, and CSR of its ‘corporate priests’. Therefore, actually the new international economic regime is a type of conscious barbarism in which the people are consciously and systematically thrown in extreme vulnerable situations.

Drastic impacts of the above aspects of globalization and liberalization inIndiaare felt in both rural and urban sectors and society as a whole.

Impact on rural life:

1. Tyrannical inequalities continued in the Indian society because radical land   reforms were not implemented, and then globalisation and liberalisation further aggravated these problems. In Indiamedium and large farmers who constitute only 3.5 per cent of rural population still own as large as 37.72 per cent of the total land; and the rest 96.5% of the population survives on only 62.28% of the land. Majority of dalit population remained landless or virtually land less, and in all caste categories percentage of landless+near landless is increasing. According to National Sample Survey data (1999-2000), percentage of landless+near landless increased from 69.73% for SCs, 41.58% for STs and 47.21% for others in 1992 to 79.20% for Scheduled Castes (SCs), 52.90% for Scheduled Tribes (STs) and 59.20% for others in 1999-2000.[1]

1. Drastically declining share of agriculture in GDP and its share in employment remaining almost stagnant very clearly expose the conditions of poverty and chronic hunger in rural areas. From 1983 to 2004-05, share of agriculture in GDP and employment changed from 37 and 68.5 percent to 21.1 and 56.5 percent respectively. The jobless growth (share of manufacturing in GDP and employment changed in the same period from 14.3 and 10.7 percent to 15.1 and 12.2 percent respectively; and share of services in the GDP and employment changed in the same period from 38.6 and 17.6 percent to 53 and 24.8 percent respectively)[2] explains very clearly why about 42 percent of Indian population lives below poverty line[3] and why about 75% of the Indian poor are in rural areas. The development is creating no avenues for alternative employment and therefore the poor rural folks have no space to escape from hunger. The annual growth rate of employment declined from 2.03 percent in 1983-1993/94 to 1.85 percent between 1993-94 and 2004-05 as per UPSS (Usual Principal and Subsidiary Status) estimates with the corresponding decline being from 2.72 percent to 1.88 percent as per MCWS (Modified Current Weekly Status) measurement.[4]

1. Globalization and Liberalization is leading to accumulation by dispossession–not only in relation to land, but also in relation to dispossession from all resources and rights-by way of handing over the control of all natural resources and energy resources in corporate hands, privatizing all public sector industries and selling it to the corporate at throwaway prices, privatizing the education, health and transport-services etc.; and also in terms of stopping/minimizing expenditures on welfare schemes, stopping/minimizing subsidies to farmers and  people at large; and on the other hand granting huge subsidies to the corporate.

1. Large scale destruction of livelihoods and mass displacements is aggravating problems of poverty, unemployment and also leading to a severe food crisis. According to Agriculture Ministry data, the net sown area has actually fallen, from 143 million hectares in 1990-91 to 140.9 million hectares in 2003-04; and net irrigated area decreased from 57.1 million hectares in 1999-2000 to 55.1 million hectares in 2003-04. Around 50 million people lost their land since 1950 on account of development projects and almost 75 percent of them are still waiting for proper rehabilitation. Already approved Special Economic Zones are going to displace more than 114,000 farming households (each household on an average comprising five members) and an additional 82,000 farm worker families (Average five members) who are dependent upon these farms for their livelihoods will be displaced. It means roughly 10 lakh (one million) persons are loosing their livelihood and facing eviction. The land going to SEZs may look meagre as percentage of total agricultural area, but it will amount to a loss of about 298 thousand tons of grain output per year. Massive distress migration is bound to take place due to these factors[5]

1. As an initial step of Structural adjustment programs, the Indian Rupee was devalued in 1991 by 25% (an explicit condition of the IMF loan), which had an overall disastrous impact on Indian agriculture. Actually this can be considered as the first step that forcefully changed the direction of Indian agriculture towards export orientation in a big way. With devaluation of Rupee the Indian crops becoming cheaper in the global market, the farmers were systematically convinced to shift from mixed agricultural practices based on traditional crops to export oriented cash crops. The logic was further forced with introduction of contract farming for producing raw materials for various multinational companies.

1. This new structure of agriculture increased farmers’ overall dependence on market and on multinational companies. Following the dictates of IMF, liberalisation policies reduced the fertilizer and pesticide subsidy by two thirds by 2000; electricity subsidy was also drastically reduced; and on the other hand the cash crops needed more fertilizers, more pesticides and more water. Cost of inputs per acre reached at alarmingly high levels. The biggest impact of globalization and liberalization on agriculture is imposing almost complete dependence of farmers on multinational corporations for most crucial input-Seed. Before liberalisation, farmers were largely using the seeds produced in their own fields or supplied by the government at subsidized rates-through a well developed network of Seed development corporations. With liberalization, on the dictates of IMF most of the Seed development corporations were closed or paralysed, seed market was opened up and the farmers’ fate was transferred in the hands of giant global corporations like Monsanto, Cargill etc. Resultant effect was generally increasing the cost of seed inputs per acre from Rs. 70 in 1991 to about Rs. 1000 in 2005 (a hike of 1428%) and in case of genetically modified pest resistant seeds like Monsanto’s BT Cotton to about Rs. 3200 or more per acre.[6] Indigenous food and medicinal systems is being pirated and patented. The knowledge of the poor is converted into property of TNCs and now the poor are forced to pay for these seeds and medicines.

1. It is interesting to note that only 39% ofIndia’s cultivable land is irrigated and it was one of the important concerns of development in pre-liberalisation era to expand the irrigation infrastructure and facilities in order to increase agricultural production by increasing the proportion of irrigated land. But after liberalisation this focus was lost from the development strategies. Excessive use of water by more water demanding crops and excessive use and pollution of water resources by industries resulted in depletion of both ground and surface water resources leading to multidimensional water crisis. If we look at the huge amount of water that is allocated to special economic zones at the cost of agriculture, it gives a horrible picture for the future. Water table in almost all agriculturally important states is already gone tens of feet down, drastically increasing the cost of irrigation and creating a water crisis. Every year farmers inNorth Indiaare on the roads for demand of irrigation water.

1. Restrictions on imports were removed from 1,500 items including food by 2001. The result was flooding of market by cheap imports goods pushing prices of crops drastically down. Excess supply of cotton in the market led cotton prices to crash more than 60% since 1995. Pepper prices recorded a decline of almost 81% from 1998 to 2004.[7] Similar were the trend for other crops.

1. The cash crops increased the dependency of farmers on loan, and on the other hand, the government’s policy relating to this issue was reversed with the liberalisation. Major Indian banks were nationalized in 1969 and agrarian credit was given priority to make available cheaper credits to farmers. But with liberalisation, it no more remained priority, and credit extended to farmers was drastically reduced (10.3% in 2001 against a recommended target of 18%). This situation forcefully threw the farmers in the trap of private moneylenders who many times charge as high interest rates as 24% a month.[8]

1. Large majority of Indian farmers were in a position of minimum security and therefore government subsidy, state regulations and greater expenditure in development infrastructure were crucial in increasing the agricultural production and also reducing the overall rural poverty. Even if there was no big qualitative change, its impact was visible, and rural poverty declined from 55% in the 1970s to 34% in the 1980s. But globalization and liberalization reversed this trend and the incidence of poverty again increased from about 34% in 1980s to about 42% in 2000s. This is closely linked with the above factors and reduced rural spending of the government (from about 14.5% of GDP during 1985 – 1990 to about 8% by 1998, and about 6% thereafter). [9]

1. The resultant effect of all these factors came as falling down of agricultural production by 12.6% in 2003. In overall terms, agricultural growth slowed down from 4.69% in 1991 to 2.6% in 1997-1998 and to 1.1% in 2002-2003.[10]

1. All the above factors (soaring input costs, decreasing rate of production, dangerously fluctuating prices, lack of proper credit facilities etc) pushed large number of farmers in to a painful debt trap, which was the main factor behind recent heart breaking phenomenon of farmers’ suicides. NSSO (National Sample Survey Organization) survey in 2005 exposed that 66% of all farm households owned less than one hectare of land and 48.6% of all farmer households were in debt. According to P. Sainath’s estimates 182,936 farmers committed suicide in Indiabetween 1997 and 2007 and close to two-thirds of these suicides have occurred only in five states (Maharashtra, Karnataka, Andhra Pradesh, Madhya Pradesh and Chattisgarh).[11]

 

Impact on Labour

 

1. Downsizing, closures and privatization of public sector units is throwing out large number of workers out of jobs. Thousands of dalits not only lost their jobs, but also a big space that was ensured for them in public sector, because reservation policy was not extended in private sector. In absolute terms, the public sector shed 1.46 million workforce between 1993 and 2006[12]

1. There is an unparallel informalisation of Jobs in the industries, both by transferring the jobs from formal to informal sector and by casualisation of jobs in the formal sector. The net growth of employment from 1999-00 to 2004-05 has been largely of an informal kind.[13] This is true of both formal and informal sectors. What this means is that even the increase in employment in the formal sector is entirely that of informal employment suggesting informalisation of the formal sector as far as employment is concerned.[14] This duality in the labour force is increasingly institutionalized and there are almost no chances for upward mobility for the workers at the lower levels. This duality also reflects on the caste divisions in the society, since majority of contract/casual workers both in informal sector and formal sector are drawn from dalits and other backward communities.

1. Pauperisation of peasantry and mass destruction of livelihoods (land acquisitions for urbanisation and industry and destruction of traditional occupations by way of replacing their products and services by industrial products and modern services) created a huge reserve army of labour flooding in the industrial centres and creating downward pressure on wages.

1. In a situation with unrestricted mobility of capital, export oriented development based on foreign investments is increasing vulnerabilities of workers to alarming levels. It was reflected in the current global financial crisis when about one million workers lost their jobs. Moreover, the sword of mass unemployment remains always hanging (out of fear that capital may fly away to another destinations). It drastically reduces the collective bargaining power of workers.

1. With the liberalisation there is consistent attempt to amend the labour laws in favour of the employers, and even if no major amendments in labour laws could be done due to strong protest from trade unions, the laws are virtually made irrelevant by allowing violations and paralysing the inspection machinery. Even if the laws are largely the same, the courts interpret them differently and the workers are denied any relief. The courts have already made precedents in favour of employers, saying that casual/contract workers have no right to claim regularisation. There are also judicial precedents saying strike is not a right and putting a ban on the general strikes. Proposals of National Commission on Labour for amendments in labour laws include: Reduction of labour cost for building competitiveness so that Indian industry, employing more and more workers as casual and contract workers to resolve the problem of unemployment, and withdrawal of the protection provided in Industrial Dispute Act for nearly seventy five percent of the industrial units, leaving the workers at the mercy of the management (by allowing the employers to hire and fire at will, retrench or close the industries at will, in establishments with less than 300 workers; also proposing to exclude workers getting more than Rs 25000 per month from the definition of ‘worker’ under Industrial disputes act). There is also an attempt to make the protective provisions meaningless by allowing employers retrench and close any factory at will, and it is proposed that in industries employing more than 300 workers employers can retrench or close the industry if the Governments does not reply within sixty days. It is also proposed to make it compulsory to hold secret ballot for strike and only if 51 percent workers vote in favour of strike then only strike will be considered as legal strike. In the case of illegal strike 3 days wages can be deducted from workers for each day of strike (Maruti Suzuki and some other industries are already imposing it on workers).

1. Hundreds of the Special Economic Zones (SEZs) that are coming in the country are declared public utility services under Industrial Disputes Act. Even when there are no major amendments in labour laws for SEZs, the whole labour relations machinery is put out of the interventions of state labour departments and the powers of labour department are transferred to the SEZ development authorities (which includes the representatives of private developers of the zones). Now, New Manufacturing Investment Zones are being planned on the same lines for manufacturing industries and it is proposed that they will be exempt from applicability of all important labour laws. It is a clear intention to completely informalise the workforce of the zones-i.e. to make the labour laws meaningless without amending it (after NMIZs come in to existence nothing will be left outside the zones and if NMIZs get exemption from labour laws, SEZs will also automatically get these benefits).

1. The whole politico-economic environment is anti-labour, and any attempt by workers for asserting their rights is crushed brutally by use of police force and goons.

1. The states are allowing self certification on various aspects of Factories Act including Occupational health and Safety and for the environmental issues and discouraging inspections for ensuring compliance. As a result OSHproblems are increasing alarmingly which is reflected in increasing incidences of factory fires and accidents. According to ILO estimates, around 403,000 people in India die every year due to work-related problems, i.e. more than 1,000 workers every day or 46 every hour die due to occupational health and safety problems[15].

1. The growth rate of wages of almost all categories of workers including casual work which concerns the bottom layer of workers has declined during 1993-94 to 2004-05 characterized by economic reform compared to the previous decade of 1983 to 1993-94. This is clearly a case of generalized slowdown in the growth of wages when the overall economy registered a higher growth in income during the second period compared to the first. [16]  Declining collective bargaining power of labour is also reflected in sharply increasing share of profit and drastically declining the wage share (since 2001-02), resulting in depressing purchasing power. Approximately 73 million out of 173 million wage earners throughout India do not receive minimum wages[17]. About 30–40 per cent of these low-paid wage earners belong to poor families.[18] It is also accompanied with soaring prices of essential commodities amounting to double attack on workers. The workers are actually surviving and supporting their families by consuming at minimum possible level. They are generally thrown out of job at the age of about 45 years (only young workers are hired by the industries) without any social security benefits. Most of them survive by doing odd casual jobs, illegal street vendors, rickshaw pullers etc and when they are unable to work generally end as beggars or return to their village to die in chronic poverty situations.

1. The helplessness created by these situations is compelling a large number of workers to end their life. There are several cases of suicides by workers and their families facing longer periods of unemployment, retrenchments and closure of factories. Recently large number of suicide cases by garment workers in Tirpur (Tamilnadu) was reported. Only in two years 2009-10, about 1000 garment workers and their families took their life. 495 garment workers and family members killed themselves in 2009, and in the first six months of 2010 there were 350 suicides; and just in the three months of June- August 2010, 250 workers took their own lives. The causal factor of these suicide cases was cutting 25000 jobs and wage cuts by employers.[19]

The Impact on Environment[20]

 

1. Globalisation has converted less developed countries into pollution havens for dirty industries. The share of dirty industries in total FDI inIndiawas 51 percent in 1991-2000. Of these 27.4 percent was in energy, 4.5 percent chemicals, 7.5 percent transport, 5.5 percent metallurgy and 3.5 percent in food processing, all classified as Red or most polluting industries, while hotels and tourism having 1.7 percent and textiles 1.2 percent came under orange industries. The largest inflow to approvals of foreign investment was in the dirty industries chiefly chemicals.

1. Many goods produced by the public sector were de-licensed and private and foreign firms were allowed in these sectors including polluting industries such as mining, power generation, Chemicals etc. The impact of this on environment is already visible. The impact of Hindustan Lever’s mercury thermometer factory on Kodaikanal environment can be seen as example. Mercury poisoning went almost 250 times the permissible limits and adversely affected the environment of the region. It is also to be noted that theHindustanliver opened this factory here after closing down its unit inUSA, and therefore the environmental cost of the Mercury thermometer production is transferred fromUSAtoIndia.

1. India’s 75000 km of long coastline has already been converted in to a destination for waste disposal of the entire world. Lead Ash,Batteryscarp, Zinc ash, waste oil and old ships laden with asbestos are increasingly reaching here.Indiais importing over 70,000 MT Zink waste and 50,000 MT lead waste through its 7 major and 100 minor ports. Huge amount of plastics and metal waste are coming intoIndiafromAustralia,Canada,UKandUSAapparently for recycling. Indian company Futura industries of Tamilnadu imported 10,000 metric tones of plastic wastes since 1992. Indian coasts are now emerging as world’s largest ship breaking yards. This is only the tip of the iceberg and shows only the trend. The complete picture is really scary. The pollution content ratio ofIndia’s trade increased from 0.480 in 1985 to 1.38 in 2000.

1. MNCs inIndiaare not following the environmental standards. The case of Coke and Pepsi can be seen as example. In 2003, Center for Science and Environment,New Delhiexposed that Coca-Cola and Pepsi Company production inIndiacontained extreme high levels of pesticides, DDT, Malathian, Lindane etc.

1. Excessive use of ground water and pollution of water bodies by the MNCs both Indian and Foreign are putting heavy pressure on already depleting water resources and severe water crisis is emerging in different regions of the country. The Cocacola case inVaranasican be cited as an example. Coca-cola plant located in Mehdiganj, 20 kilometer from Varansi draws thousands of liters of underground water by its two tube wells every day. Its impact is felt on water level going down from 15 to 40 feet. Moreover, it discharges its waste into surrounding fields and pollutes the ground water making it unfit for human consumption. Land is also poisoned. Peasants are protesting against these practices of the Cocacola and the people’s movements specially Gandhians raised this issue at national level. But the story does not end here. The Cocacola as its CSR initiative distributed its solid waste of bottling pants to farmers in Kerala to use it as manures. BBC exposed that this waste contained extremely high levels of heavy metals such as lead and cadmium.

1. Now in the name of accelerating industrial growth not only huge amount of land including agricultural land, water bodies, forests, wet lands, coral reefs and environmentally sensitive areas are transferred to special economic zones and other industries. In many regions, industries have been allotted the land adjacent to the marine National part and wild life reserves.

 

The Impact on the Poor in general

 

1. Gift of globalization and liberalization to poor is high inflation and drastic increase in food and fuel prices, and thereby all essentials for life. Privatization has led to a sharp rise in cost of education, health, housing, power, water, transport, communication etc. They eat a major portion of poor people’s income and throw them in poverty.

1. In every budget of the liberalization period the subsidies are gradually reduced to the minimum. In recent budget of 2011-12, massive Rs. 20000 crore cut in major subsidies on fuel, fertilizer and food are announced. Coverage of benefits of subsidized provisions especially for food and fuel is also reduced by making it only for BPL (below poverty line). It is well exposed that BPL lists inIndiaexclude large sections of the country’s poor.

1. The change in economic policy in terms of providing relief in direct taxes and putting more pressure in indirect taxes amounts to extracting more from people and benefitting elites and the corporate. 2011-12 budget provided relief of Rs. 11500 crore in direct taxes, while targeted to mobilize an additional Rs. 11300 crore through indirect taxes. As per the Statement of Revenue Foregone, total tax concessions reached over Rs. 5 lakh crore[21] in 2010-11, with corporate tax exemptions totaling over Rs. 88000 crore. This is resulting in severe budget constraints for expenditure on public welfare and overall social development. Therefore many well publicized flagship schemes of the social sector, in reality emerge as a smoke screen. The allocation for well celebrated National Rural Employment Guarantee Scheme (NREGS) has fallen by Rs. 100 crore in 2011-12 budgets despite a claimed increase in the wages. Actually here lies the reason why large scale failures and corruptions are tolerated in NREGS. These failures and corruptions put a curtain over the paralysis of the scheme created by the state by not allocating enough funds. The same is the fate of ICDS (Integrated Child Development Services Scheme). The allocations for the welfare of women, minorities, dalits and tribals also always remain inadequate.[22]

1. It is also the poor who are the worst affected by the mass destruction of livelihoods and displacements and also by the environmental pollution and eco-disasters.

1. The current phase of Globalization as a most aggressing phase of capitalist expansion has also destroyed the traditional communal modes of social protection. Collectivity and cooperativeness inbuilt in traditional Indian social structure provided some sort of social protection-for example combined family system supported nonearning family members also, and community provided some sort of support to its members at the time of contingencies etc. It was never enough and many times it was not respectful, but even then it was a crucial support. Moreover, at the time of harvests, poor people going home to home received significant amount of grains from peasants. It was like a begging, but the peasants were obliged to pay them as part of their culture. Even if it was also disrespectful, it was a crucial support for poor men’s survival. The capitalist expansion forcefully broke this culture by implanting a market culture-a culture of give and take-a culture of brutal self interest and individuality. Old disrespectful system of social protection (in whatever extent existed) was broken but no respectful system was put in place.

The above impacts very clearly explain that globalization and liberalization is actually creating a crisis for survival. The crisis is not created by any sudden and temporary failures of the economy, but it is systematically imposed by new international economic regime on long term basis.

It is these concerns which make the social security as prime agenda of today. It is in this respect that the struggle for social security becomes a struggle for survival of the people. It is crucial for setting a baseline for collective bargaining and for empowering the working class and people at large to enforce redistributive justice in the society.

With the impacts increasingly becoming visible and exposed, for fear of emergence of volcanic people’s movements, the states and international agencies of the Trans National capitalist class are also taking initiatives for social security measures. But these social security measures must be critically analyzed to see their effectiveness in dealing with above impacts.

 

General Critique of Current Social Security Initiatives

 

  Here very briefly we will critically examine various aspects the social security initiatives particularly the ILO’s Current Social Security initiative and UN social protection floor, and side by side also discuss the case of India (state initiatives) to situate our discussion and critique in ground realities.

 

  Let us first start from the point, how actually these initiatives articulate the need for social security. ILO (and also the UN) articulates it as follows: “The rapidly growing interconnectedness of global financial, product and labour markets poses new challenges for the maintenance or enhancement of social justice. In a world in which financial and economic crises in any region are highly contagious and their effects on labour markets and social welfare spread rapidly, the capacity of individuals to cope alone with economic risks is less effective than before. The global social risks associated with pandemics and the expected effects of climate change have a similar impact on the levels of individual social security. National social security systems need to be stronger than ever to neutralize additional systemic global risks. The risks and opportunities inherent in globalization require effective social security.” And that “While the importance of social security for the well-being of workers, families and communities has always been an integral part of the ILO’s mandate, the essential role of social security in addressing people’s needs worldwide has been increasingly recognized by other international organizations. This renewed understanding of the interconnectedness of economic and social development, and the need for balanced economic growth, has also gained momentum in response to the financial and economic crisis.”[23]

It is clear that these initiatives largely articulate the need for the social security because of rapidly growing interconnectedness of global financial, product and labour markets that make the financial and economic crises in any region highly contagious. It is to be noted that this is only one disastrous aspect of globalization. These initiatives do not refer to those impacts of globalization and liberalization on farmers, labour, environment and people at large, that we discussed in chapter one. The do not refer to those impacts of globalization that expose its character as corporate led globalization-leading to privatization and centralization of all wealth and resources in corporate hands, transforming the states in corporate agent, reducing the legal power and economic capacity of the states to spend desired amount of funds on social security and public welfare, cutting all the subsidies and spending on public welfare, corporate controlling the fate of farmers, corporate destroying the environment and ecosystems, drastically increasing the cost of education, health, housing, transport etc by privatizing these services, drastically increasing the prices of essential commodities, declining wages, drastic move for informalisation of labour and destroying or shrinking the coverage of the social security systems available to formal labour, mass destruction of livelihoods and increasing the reserve army of unemployed labour etc.

Therefore these social security initiatives are focusing only on part of the problem and are completely silent on most crucial insecurities created by globalization that are creating a crisis of survival for the people. And most importantly they are talking about the contingencies (that also only part of the contingencies) and are completely silent on the factors creating these contingencies. It actually means that they have accepted and also forcing us to accept that there is no alternative; and that these factors cannot be removed, they will keep on creating these contingencies; and what we can best do is to provide some help to those who are worst affected by these contingencies, so that they do not die, remain in the labour force and reproduce the labour force to insure unrestricted supply of vulnerable and cheap labour.

Now let us examine the important aspects of the UN social protection floor and current ILO social security initiative.

The social protection floor has two components:

(a) Essential services: i.e. geographical and financial access to essential services (such as water and sanitation, adequate nutrition, health and education, housing, and other services including life and asset saving information); and

(b) Essential social transfers: i.e. social transfers, in cash and in kind, paid to the poor and vulnerable to provide a minimum income and health security.[24]

It proposes to ensure four guarantees[25]:

 

1. All residents have access to a nationally defined set of affordable essential health care services;

1. All children enjoy income security through transfers in cash or kind, at least at the level of the nationally defined poverty line, ensuring access to nutrition, education, and care;

1. All those in active age groups who cannot (due to unemployment, underemployment, or sickness) or should not (in case of maternity) earn sufficient income in the labor market should enjoy minimum income security through social transfers in cash or in kind schemes or employment guarantee schemes;

1. All residents in old age and with disabilities have income security at least at the level of the nationally defined poverty line through pensions for old age and disability or transfers in kind.

ILO social security initiative has following components:

1. Enabling access to health services: Social health protection
2. Guaranteeing income security in old age, disability and survivorship
3. Income security for the unemployed
4. Income security in the event of employment injury
5. Family benefits, minimum income support and social assistance
6. Maternity protection

The two initiatives are said to be complementary and it is claimed that both together will be able to achieve the millennium development goals (Eradicate extreme poverty and hunger, Achieve universal primary education, Promote gender equality and empower women, Reduce child mortality, Improve maternal health, Combat HIV/AIDS, malaria and other diseases, Ensure environmental sustainability, Develop a Global Partnership for Development). However with all these big claims what they are actually offering is virtually nothing. The UN social floor initiative clearly says that the level of benefits and scope of population covered for each guarantees proposed will depend on the national conditions. Thus the social protection floor does not propose universal coverage of these guarantees. It leaves the level of coverage and level of benefits to be decided by the nation states. Means, if the states have covered some portion of population (and that is actually the case in many countries) then they will enter in the good books of these initiatives. The initiative says clearly only one thing-the total cash/kind transfers must ensure basic basket of food (and other essential services that it never defines). So the actual concern of Social Protection Floor is only to ensure basic basket of food so that they do not die; and that also not for all, because universal coverage is not necessary. Is it not shameful to talk like this about human beings? The Social Protection Floor never tries to enter in the issue of how to remove those factors from the national and international economy that create such inhuman conditions when people are poised to die of hunger. It says that only if people can move from the informal to the formal economy and thus migrate from low productivity subsistence level activities to become tax and contribution payers can an economy grow. But it only says this and does not dare to propose any measures, any policies or legislations to convert the informal economy to formal economy. Is it not a shameful duality that the UN agencies and other international institutions on other platforms always advocate for liberalization friendly labour laws to make hire and fire smooth and easiest (flexible use of labour)? Is not the rampant informalization of labour forcefully imposed (even by violating the labour legislations) to achieve these objectives?

ILO initiative is comparatively wider and concrete but the difference is only in quantity and not in quality. Like the UN social protection floor the ILO initiative also is silent about various crucial insecurities created by globalization and liberalization for example drastically rising prices of essential commodities and also of the crucial services like health, education, housing, transport etc, environmental pollution and eco-disasters, natural calamities, mass destruction of livelihoods and displacements, large scale migrations, emerging new epidemics, injuries and deaths caused by accidents not covered in  employment injuries etc. Regarding the factors that are creating contingencies, as we have already discussed, all the initiatives say by their silence-there is no alternative.

Apart from these, the ILO initiative (and also the UN social protection floor) has following problems:

1. For all practical purposes, the unemployment is defined (by these social security initiatives) only in terms of short term contingency and not a systemic problem. However, in the phase of globalization unemployment is a systemic problem and it is consciously created (by job less growth on the one hand and mass destruction of livelihoods on the other) to always maintain a huge reserve army of labour creating downward pressure on wages and putting the labour always in a vulnerable state. Moreover, rampant informalisation makes the unemployment contingency a regular contingency and not that occurring only occasionally and during any crisis. Therefore it is also a systemic problem and treating it as short term contingency actually means hiding the real problem and denying the right of workers to get unemployment benefits for actual days of unemployment and on long term basis.

1. It comes out as a very shrewd move to transfer all burden ultimately to the people only. It apparently sounds very nice when these initiatives advocate that the social security is the responsibility of the state, but in reality what they are saying by not saying is-there is no responsibility of the employers and the corporate in general. It is very much clear if we read this with the IMF and World Bank directives to the states for putting more emphasis on indirect taxes rather than direct taxes (which is already the case inIndiaand many other developing countries). It is clearer when we read it with unimaginable tax benefits by way of exemptions is granted to the corporate in almost all developing countries. So it will be ultimately the people who will pay to face contingencies created by the corporate. Not only this, it seems to be paving the way for the corporate to loot the people further. It is to be noted that the dictates of WTO, World Bank and IMF do not allow for subsidizing the public services, and therefore even if people are taxed (by way of indirect taxation), it may not be spent for the benefit of the people. Take the case of health services, there is a great pressure to privatize whatever public health services are available and move towards the privatized health insurance schemes. So where the government expenses on health will ultimately go? Naturally it will go in the pockets of the corporate (National health policy of the India 2002 clearly stresses on the privatization of health care. It will also amount to dismantling or privatization of Employees state Insurance Corporation providing health insurance and other benefits to the formal workers). The contributory schemes put double burden on the people-paying tax for state contribution and paying their own contribution also, the employers and corporate are free from all these obligations.

1. Putting employment injury and the unemployment contingency created by closures, lockouts and retrenchments under the social security (that is the responsibility of the state) emerges as clear case of releasing the burden of economic responsibility from the employers (even when they are still required to pay some contribution) and putting all the burden on the workers and the people. Employment Injury Scheme in India is under Workers’ Compensation Act and is the employers’ liability, but now there are efforts (recommendations of II National Labour Commission) to amend the labour laws to put it under social security scheme and make it the liability of the government. Paying compensation for layoff and retrenchment inIndiais the liability of the employers under the Industrial Disputes Act, but now there are efforts to make it part of Employees Provident Fund Scheme or any other Social Insurance scheme (recommendations of II National Labour Commission). So the Indian government is moving very faithfully in the direction suggested by ILO and UN social floor.

1. ILO accepts that in developing countries only a tiny minority of formal sector workers are getting the employment linked major social security benefits. This is also a fact that now the formal sector workers are increasingly being informalised and it means that they are also moving out of the coverage of social security benefits. It is also to be noted that only formal workers in these countries get minimum wages or more, the large majority of informal workers do not get minimum wages. Approximately 73 million out of 173 million wage earners throughout Indiado not receive minimum wages[26]. Moreover, globalization and liberalization have reduced nation state’s legislative powers and financial capabilities to effectively address the task of universal coverage of social security. All this means that in all respects the conditions are more unfavourable than the pre-globalisation era. In such situations, without path breaking drastic measures in terms of legislating pro-people and pro-labour policies, and such economic policies that increase the financial capability of the nation states, it is impossible to address these tasks. But ILO or UN initiatives are not coming out with any such proposals. On the one hand they claim that they are pushing the world for universal social security coverage, and on the other hand they remain the champions of the same international economic regime that is responsible for generating and increasing the spread and intensity of contingencies. These initiatives do not propose any new policy initiative which may insure the realization of universal coverage of social security.

1. These international initiatives and also the state initiatives focus more on fixed amount of cash transfers. These cash transfers have no linkage with the inflation and therefore the value of transfers is actually reduced with the inflation.

In such situations, the question arise that why then suddenly the social security became the prime agenda of the international agencies like ILO and UN, Transnational capitalist class and the nation states? What they actually want to achieve by this?

Actually they have very clearly expressed their concerns and their motives also come out very clearly in these concerns:

“Investments in basic social protection are necessary conditions for workers to be sufficiently healthy, well nourished and educated to be employable in the formal economy.”[27]

“National Social Protection Floors are a social and political necessity, a minimum of income security is the material basis for the functioning of families and households which, in turn, provide the basis for social cohesion that is pivotal for the functioning of societies and states. Without a minimum of social protection and material security, the commitment of a major part of society to a democratic state will be at risk and with it the security of all. This was also acknowledged by, among others, the World Bank which, in its 2005 World Development Report, made the case that poverty is a risk to security and lack of security can sully the investment climate.”[28]

So these are the only real concerns of these initiatives, and they are actually the concerns of the transnational capitalist class. The first concern is to ensure unrestricted supply of employable and cheap labour. The second concern is more important. The globalization and liberalization are worsening the conditions to the extent that it is crossing all the limits, and it is very much clear to all sensitive people that this will very soon force the emergence of anti-globalization volcanic movements and revolts. This is the real danger for the transnational capitalist class and it is the real concern behind the social security initiatives. But as in the case of CSR, the emphasis is more on ‘appear to be doing’ rather than ‘actually doing’, because effectively ‘appear to be doing’ saves the costs and also effectively manipulates the consent of the workers and the people in favour of the states and the capital in general. Therefore, in the social security initiatives also, the major focus is on effectively ‘appear to be doing’ and not on ‘actually doing’.

This strategy is very much visible in ILO and UN praising the efforts of some developing countries likeIndiatowards achieving universal coverage of social security. Take the example of well praised achievements in case of old age pensions inIndia. Firstly, the old age pension is only for the below poverty line old age people and not for all. It is also very well established that the poverty line inIndialeaves large number of poor actually living below poverty line, mainly due to erroneous formula for deciding the eligibility. And what is actually offered under old age pension? Recently the amount is increased from Rs 200 to Rs 500 per month. Nowadays in any part ofIndiain worst dhabas (street hotels) also one cannot get a meal in less than Rs 25; at home also it may not cost less than Rs 20. So if they take three meals a day, this pension can guarantee them for a maximum of 9 days meal and nothing else. Not only this, they do not receive payments regularly (due to lack of funds) and one can see hundreds of old age people demonstrating every year before local and district authorities in almost every state of India for coverage under the scheme and for payment of pensions. Is it not shameful that ILO and UN praise such pension scheme?

Another example is the Unorganized Workers Social Security Act. InIndiaeveryone working on the labour issues knows very well that practically it is nothing but a paper act. The Act actually incorporates 10 already existing social security schemes applicable in various unorganized sectors (1. Indira Gandhi National Old Age Pension Scheme. 2. National Family Benefit Scheme. 3. Janani Suraksha Yojana. (protection during maternity period) 4. Handloom Weavers’ Comprehensive Welfare Scheme. 5. Handicraft Artisans’ Comprehensive Welfare Scheme. 6. Pension to Master craft persons. 7. National Scheme for Welfare of Fishermen and Training and Extension. 8. Janshree Bima Yojana. (Insurance scheme) 9. Aam Admi Bima Yojana. (Insurance scheme) 10. Rashtriya Swasthya Bima Yojana. (Health Insurance scheme). The act also says that the Central Government may, by notification, amend the following Acts to extend their applicability for unorganized sector workers: The Workmen’s Compensation Act, 1923 (8 of 1923), Industrial Disputes Act, 1947 (14 of 1947), Employees’ State Insurance Act, 1948 (34 of 1948), Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), Maternity Benefit Act, 1961 (53 of 1961) and Payment of Gratuity Act, 1972 (39 of 1972). It is also said that the State Governments may formulate and notify, from time to time, suitable welfare schemes for unorganised workers, including schemes relating to: (a) provident fund; (b) employment injury benefit; (c) housing; (d) educational schemes for children; (e) skill upgradation of workers; (f) funeral assistance; and (g) old age homes.

Apparently it looks promising, but actually it is also the strategy of ‘appear to be doing’ rather than ‘actually doing’. The following aspects of the act are worth noting in this regard:

1. The Act is essentially for workers below the Poverty Line and not all workers in unorganized sector. The definition of the term “self employed worker” and “wage worker” provide for limits to be prescribed by the government for monthly earnings or of extent of land holdings or of monthly wage. This is actually an attempt to create a divide among the unorganized sector workers as being above or below the Poverty Line.

1. No time limit is prescribed when the government is going to extend the application of various schemes and welfare legislations to unorganized sector workers. The promise for extension of labour laws like industrial disputes act to informal sector is actually only to fool the working class. On the other hand, there are attempts to exclude more and more formal workers out of the coverage of protective sections of Industrial disputes act. Moreover, the labour laws require proof of employment and majority of informal workers do not posses any proof of employment.

3. It is not made clear, what is the eligibility criteria, what will be the scale of benefits and under what conditions.

1. Trade Unions are consciously kept out of the boards constituted to look after the implementation.

1. Most importantly, the act is completely silent on what will be the funding arrangements to meet the cost of social security

The most important aspect of this act is that it finally turns the wheals moving towards formalization to towards informalisation by institutionalizing the duality of the labour force. Therefore the initiative of establishing a separate system of social security for unorganized workers is actually meant to provide a justification for informalisation of labour. Is it not shameful that ILO and UN are praising such legislations and schemes?

In the same way if one enters in the reality, he will find that well publicized and well praised progress in universalisation of primary education inIndiais a complete fraud. It is also more strategized to ‘appear to be doing’ and rather than ‘actually doing’ and this can be seen in its focus on informal education.

The most important and praiseworthy scheme implemented in Indiais National Rural Employment Guaranty Act. This landmark legislation enacted in 2005 is a major step towards realizing the employment as a legally enforceable right. Most important aspect of the act is its strategy of employment generation throw development works in rural areas. Therefore, the Act actually clubs together the development rights and employment rights. But the realities on the ground expose that here also focus is more on ‘appear to be doing’ rather than ‘actually doing’. In various studies it is well established that nowhere in Indiathe workers are getting 100 days of employment. According to a study conducted in three stats of India, the workers reported on an average 20-25 days of wage work in a year in Madhya Pradesh, 30-40 days in Uttarakhand and less than 40 days in Orissa. Moreover, the workers are not getting the unemployment allowance for not getting 100 days of employment.[29] All over the country, only few cases are reported where workers were actually able to compel the authorities to pay unemployment allowance. The payment of wages is also delayed and the workers keep on waiting for months. And, all this is not happening only because of corruption as it is widely publicized; the actual reason is non-allocation of enough funds by the government. As we have already discussed that the allocation for National Rural Employment Guarantee Scheme has fallen by Rs. 100 crore in 2011-12 budgets despite a claimed increase in the wages.

Social Security is a Right and not a Charity

 

The issue of social security brings back again our attention on the very basic concepts of socio-economic development. What is the development? How to understand the development of a country? The nation is not a map; it is the people who make the nation. The development means the overall development of the people, development in their living standards and cultural standards, development in their knowledge, development of most democratic forms institutions and the collective concerns of the people for sustainability of the globe and human race. Development cannot be measured by the growth of the concrete buildings, emergence of huge shining cities full of wealth and growth of transnational corporations. If with the growth of economic wealth there is no comparable development in living standards, educational and cultural standards of the people and democratic institutions in the society, then this cannot be said as positive development, it is rather a negative and distorted development.

Therefore, raising the issue of social security is actually questioning the development strategy itself. Now all the developing countries are engaged in a cut throat competition for achieving faster economic growth relying on export oriented model based on foreign investments. But why we need a fast economic development? Is it benefitting the people, is it resolving the problems of the people in the same pace? Who needs the fast economic growth and why?

It is here that the whole problem starts. From the perspective of labour and the people, we may not advocate or put greater emphasis on fast economic growth. It is but natural that when the wellbeing of the people and overall development of society as a whole is a prime concern of the development then allocation of more and more resources will be directed towards this goal and not for accumulation of wealth and profits. In such situations, for some time (and it depends on particular conditions) the economic growth may be slower. For example, the ILO and UN also accept that former communist countries, even the smaller ones (whatever their other problems were) have more social security coverage than other countries with comparable GDP. Overall socio-cultural and educational development of the people in these countries was also at higher level than other countries with comparable GDP.

But from the perspective of capital, fast economic growth is of prime concern. From this perspective fast economic growth is the only way that can resolve the problem of poverty and unemployment, illiteracy etc. by way of its trickle-down effect. It is inbuilt in this development strategy that more and more resources are directed to accelerate the economic growth, in other words for generating profits and accumulation of wealth, and people’s wellbeing gets its place only in trickledown effect. Whatever space for the people was left in the development strategies is also finally lost in the current phase of globalization and liberalization, when it advocated that the state must go out of the economic sphere and the market god will take care of wellbeing of the people by its magic of supply and demand, and whenever it fails CSR of corporate priests will take care.

Therefore the issue of distributive justice and people’s wellbeing is thrown in background when we accept the logic of fast economic growth. The people are thrown in the conditions of chronic poverty, unemployment and hunger, in the name of their own welfare that are to be brought by the faster economic growth. And after that they are themselves blamed for their conditions and offered some welfare as if showing mercy on them. By propagating and establishing this logic by all means in the society, the capital psychologically weakens the people and makes it appear that the welfare and social security is not the right of the people but it’s a charity provided to them by the state and the capital. Therefore it is necessary to understand that social security is a right and to oppose all efforts to make it a charity.

Rather than arguing that actually the wealth of the society is created by no other than the workers and peasants, let us base ourselves on some more acceptable, more visible and more concrete arguments.

If we look historically, it was the rise in productivity (by hundreds times) of the workers in 19^th century that made it possible to realize the eight hours working day. Obviously it was not granted automatically, large number of workers laid their lives in the eight hours working day struggle all over the world and then only the capital was compelled to accept it. But behind the emergence of the struggle and acceptance by the capital, the great and overall increase in labour productivity was one of the important factors. Now if we look at the developments from the 20^th century to 21^st century, the labour productivity has gone up by more than 1000 times (In 1920 steel production needed more than 3 worker-hours per tonne and in 2000 it needed only 0.003 worker hours per tonne).[30] Productivity raised by computers only is about 500percent.

This extremely high jump in productivity naturally builds a strong argument in favour of reducing the working hours further and providing more space to workers for recreation and their overall social, economic, cultural, educational and political development.

But actually what is happening? Particularly in developing countries ofAsia, that are emerging one of the most important manufacturing hubs of the global factory, the working hours are in general increased. In most of the industries the workers are compelled to work about 10 hours a day-with compulsory overtime of two hours. In some cases, for example in export garment manufacturing industries, workers are compelled to work 12 hours or even two shifts continuously in peak order seasons. No residential facilities are provided to the workers in nearby areas and in most cases up and down add one to two more hours. From the view point of workers, these two hours also cannot be excluded from the working hours and these are actually unpaid working hours. Therefore in general the working hours have gone up to about 11 to 12 hours and out of which about one to two hours are in general unpaid.

On the other hand, if we see the recent trends, with the increase in productivity, the wages rather than increasing are actually declining. This can be seen in shrinking the workforce in formal sector, and side by side replacement of formal workers with informal workers (who are getting as low as half (and sometimes one third) of the salary that the formal workers received for the same work). This is made possible by the introduction of highly automated machines requiring almost no skills in workers (any one can acquire the skills to work on these machines in one or two days-sometimes only in few hours). This is very clear that the informalisation of the workforce amounts to the heavy loot of the wages (by reducing the wage cost by replacing formal workers with informal workers). But this is not the end. The most barbaric loot of wages starts from here by exploiting the vulnerability of informal workers and not paying the legal wages (minimum wages) and other legal benefits provided to the workers. Only to avoid the payment of compensation and medical expenses the employers, after accidents, send the workers to the hospitals and then clearly deny that any such workers were employed in their factory. There are also some exposed and unexposed cases inIndia when only to avoid the costs the employers actually murdered the workers after they faced major accidents by throwing them alive in furnaces etc.

What I want to argue here is that not providing employment injury compensation and medical aid to workers facing accident is the loot of wages and precisely to loot the wages the employers are going to the extent of murdering the workers facing major accidents. All the liabilities provided in labour laws towards the workers were the wage costs for the employers and it were part of the wages for the workers. Wages include all the costs necessary for production and reproduction of labour. It not only includes food and cloth, but it also includes the cost of housing, health, education, recreation, child bearing, safety etc. With the development of economy and with the rising social standards number of items in the necessary costs for production and reproduction of labour also increases and this cost does not come from nothing, it comes from rising productivity of labour. Maternity benefits are also the part of wages. The unemployment benefits are too the part of wages. The unemployment compensation is a necessary cost for production and reproduction of labour. The labour laws that came in to force were based largely on the acceptance of this logic. But then also in many cases to subsidize the employers tripartite contributory schemes were formulated and only part of the costs were imposed on employers, and the rest of the costs were to be shared by the workers and the people (contribution of labour and contribution of the state).

With the globalization and liberalization, the state transforming itself in to a corporate agent reversed this whole logic and opened the immense space for wage loot by the employers. The informalisation is one of the best strategies for this wage loot in terms of not paying those wage parts meant for maternity benefits, employment injury and unemployment allowance etc. What was actually the wage part and the employers’ liability, is now defined by the states and the international agencies as social security and the responsibility of the state or the workers themselves. This is an attempt to further reduce the wage cost (or increase the wage loot) to the corporate.

On the other hand, it is the globalization and liberalization that is leading to mass destruction of livelihoods and aggravating the problems of unemployment. It is the privatization of public sectors, health, housing, education etc that is aggravating the problems of the poor by increasing the cost of living. It is the corporate led globalization that is aggravating the farmers’ plight. All this amounts to the direct or indirect loot of the workers, farmers, and the people at large by the corporate. But the corporate have nothing to pay to the society. Rather, they are being granted huge amounts of benefits in terms of tax exemptions etc.

Therefore it is the obligation of the corporate to pay back and the right of the people to get back.

The state has the responsibility to ensure this ‘get back’ for the people by way of redistributive justice. It is in this light we argue that the Social development and social security to the people can never be a charity or business; it is the right of the people and the responsibility of the state. Only by fulfilling this responsibility, the state gets a legitimacy and authority to ask the people to comply with the laws and policies. If it is denying fulfilling this responsibility, it will also loose this authority.

In the light of the above discussions, it is very much clear that accepting the concept of social security of ILO and UN actually means accepting that: a) there is no alternative, corporate led globalization and current international economic regime is eternal and the contingencies are unavoidable and what we can best do is to provide some help in the form of welfare-charity to those who are worst affected; and b) the cost of these contingency-welfare/charity is to be shared by people themselves (indirect taxes) and no obligation can be put on the corporate towards this.

Therefore the social security from the labour and people’s perspective must include the measures that help in removing/reducing the scope of contingencies, and ensure the ‘get back’ from the corporate. With this perspective we can propose the following structure of social security:

1. Basic Social Security

A basic social security fund must be created by the government by collecting 75% of the funds from the corporate by way of progressive taxation and 25% from the people by way of progressive taxation. It is to be run by tripartite body of workers’ organisations, state and employers’ organisations. This is the only justified way to ensure the basic security because the privatisation and Globalisation-liberalisation has forcefully economically weakened the state[31] and the people and enriched the corporate and therefore the major portion of financial responsibilities of basic social security must also be shared by the corporate. The basic social security must include the following aspects:

a)       Employment as legally enforceable right to all and Unemployment compensation equal to that part of minimum wages, including basic wages (defined in later chapter on minimum wages), dearness allowance, housing rent and maternity benefits. It is to apply to all long term and periodic unemployment (unemployed youth, long term unemployment of workers, seasonal unemployment in various sectors like agriculture etc).

b)       Subsidized education, health &sanitation, drinking water and housing facilities to all.

c)       Food Security to all (subsidized food items throw Public Distribution system).

d)      Ecological Security to all (maintaining the ecosystems and prohibiting any activity disturbing it—to protect the people from eco-disasters).

e)       Land reforms to increase the average size of land holdings.

f)        Subsidized inputs to small and marginal farmers; and also to other self employed producers.

g)       Old age pension (equal to that part of minimum wages, including basic wages, dearness allowance, housing rent) + free travel and free health care to all who do not retire with a pension benefit.

h)       Disability pension (equal to the part of minimum wages, including basic wages, dearness allowance, housing rent and maternity benefits) + free travel with one assistant + free health care to all disabled persons who are unable to work.

i)         Maternity benefits to all women. Those who are employed in industries, the cost must be paid by the employers (as it is part of wages) and for the rest it is to be covered by the social security fund.

1. Contingent Social Security

 

In view of high level of informalisation, it is necessary to establish an Industrial contingency fund (may be categorized industry wise also) at district (regional) level by instituting a system of collecting proportionate contributions from all employers (including formal and informal industries, private and government industries) by way of progressive taxation. All the workers in the districts (regions) must be registered under the Industrial Contingency Fund (may be registered industry wise also) and they may be allowed to directly claim the benefits from this office. This will also be useful as a first step towards formalization of the workforce.

1.  Unemployment created by way of dismissal/retrenchment/layoff or closure of industries: Compensation equal to six months’ salary to be paid by the employers and if not getting employment in six months then to be considered unemployed under basic social security

1.  Employment injury compensation: Total wage for whole period of out of work, and treatment cost +compensation for any minor or major disabilities created by injury must be paid by the employers

1.  Death or major disability making the worker unable to work: Disability pension or alternative livelihood to survivor + compensation and free education and health cover to the family. In case of workers employed in the industries, total responsibility goes to the employers and in case of others the responsibility goes to the state

1.  Livelihood destruction and displacement (due to natural or manmade disasters): Decent alternative livelihood ensuring comparable income + rehabilitation along with compensation. The total responsibility goes to the state

1.  Crop failure/ destruction or death of cattles etc: Enough support to compensate for the losses and to regenerate their livelihood security. The total responsibility goes to the state

Towards a Regional Social Security System

 

  Asia, with its population of 4 billion people is home to almost 60% of the global population; and it is also the home of largest number of working poor (71% of the global working poor) and largest number of workers in vulnerable sector. In 2009 Asia accounted for about 57% of the global employment and in contrast accounted for nearly 71% of the total workers in the vulnerable sector (as high as 78.5% in South Asia, 62% in South east and 51% in East Asia).  There is rampant informalization of workforce all over Asia and only a tiny minority is protected by labour laws and gets social security benefits. The conditions are becoming so worse that every year about 1.1 million workers die in Asia due to work related reasons. [32]

 

  There is a drive for large scale land acquisition all over Asia leading to mass destruction of livelihoods and large scale displacement of population. Therefore on the one hand Asia is emerging as a shining economic regions and most important manufacturing hub of the global factory, and on the other hand, workers and people at large in almost all developing countries of Asia are facing one of the worst conditions of life and work and thrown in the crisis of survival.

 

  There are specialties of socio-economic formations of each country, but there are broader similarities and commonalities in Asia (except few developed Asian countries like Korea, Japan, Singapore etc). Moreover, in the current phase of globalization and liberalization the people and the working class in developing countries of this region are facing the similar problems and have the common concerns.

 

  We may see in the tables below that in almost all developing countries in Asia, the proportion of wage and salaried employment is very low and self employed workforce (largely the small and marginal farmers and poor people engaged in other traditional occupations) is very high, in contrast to the developed countries where wage and salaried employment is as high as 80-90%. Latin American developing countries are also in far better position than Asian countries in this regard. On this pointAsia (particularlySouth Asia) is more similar to Sub Saharan Africa. Actually this employment structure generally acts as the indicator for underdevelopment and intensity of the poverty and unemployment in the countries. In current situations, larger proportion of self employment generally reflects on the higher level of unemployment or underemployment and therefore also the poverty. We may also see that similar is the trend in case of social security expenditures.Asia is not much better than sub-SaharanAfrica.

 

Table1. Structure of Employment and Crucial development indicators in selected countries

Country	Status in employment							GDP per capita	Human dev. index	Population living below 2USD
	Wage/salaried workers	Total self employed	employers	Own account workers	Cooperative workers	Contributing family workers	Not classified
Bangladesh	13.9	63.6	0.3	63.3	—	21.7	0.9	494	0.543	81.3
Combodia	12.9	41.2	0.2	41.0	—	45.7	0.2	651	0.593	68.2
China								3263	0.772	36.3
Indonesia	32.6	50.4	2.9	47.5	—	16.9	—	2253	0.734	53.8
India								1068	0.612	75.6
Nepal	24.6	66.5	3.8	62.7	—	8.8	—	441	0.553	77.6
Pakistan	37.4	35.3	0.8	34.5	—	27.2	—	1013	0.572	60.3
Philippines	52.9	38.1	5.3	32.8	—	9.0	—	1847	0.751	45.0
Thailand	43.7	41.6	3.7	37.8	0.1	14.7	—	3868	0.783	11.5
Kyrgyzstan	50.6	36.0	1.1	34.1	1.0	13.2	—	837	0.710	51.9
Georgia	36.6	43.7	1.4	42.3	—	19.6	0.1	2931	0.778	30.4
Japan	86.1	12.3	3.6	8.7	—	1.1	0.5	38442	0.960	2.0
KoreaR								19114	0.937	2.0
Tanjania	10.5	78.1	1.8	76.3	—	11.4	—	482	0.530	96.6
Mali	13.6	71.4	—	—	—	15.0	—	688	0.371	77.1
Brazil	63.9	29.5	4.8	24.8	—	4.5	3.0.	8399	0.813	12.7
Bolivia	43.1	41.7	7.2	34.1	0.4	15.9	0.3	1721	0.729	30.3
France	89.5	9.9	4.6	5.3	–	0.6	—	45981	0.961	—
Germany	88.4	10.7	4.7	5.9	—	0.9	—	44470	0.947	—
Constructed on the basis of data provided in World Social Security Report 2010/11, ILO,Geneva

 

 

Table2: Employees (wage and salary workers) in the Labour Market Worldwide, 2008(%)

 

Source: World Social Security Report 2010/11, ILO,Geneva

 

Table3: Social Security Expenditure by Region and Globally, Latest Available Year (%GDP)

Source: World Social Security Report 2010/11, ILO,Geneva

 

 

 

 

 

 

 

 

Table4: Social Security Statutory Provisions: Regional

Estimates

Source: World Social Security Report 2010/11, ILO,Geneva

It is in this background that the integration of world markets, unrestricted mobility of capital, free market logic and export oriented development is bringing high risks to the people of developing countries. There is a saying-if you throw un-equals in an equal competition, the weak is compelled to suffer. Here the ‘weak’ are the people and working class of the developing countries.

Export oriented development based on the foreign investments and free trade being the mantra of the new development strategies, a high level of interdependence and integration of economies is creating a system with sustained presence of dangerous level of vulnerabilities for the people. With the strategy of export oriented development based on foreign investment, developing countries are competing with each other for more and more share of exports to developed countries and for more and more foreign investments from the same developed countries. Metropolitan capital is reaping super-profits by throwing the developed countries in such a cut throat competition. This competition is unique in the sense that the victory in this competition depends on another actual war with its own people, its own working class. Victor is one who is more barbaric in suppressing its own people, its own working class and thereby able to offer better and unrestricted opportunities for corporate capital to suck the blood of working class and the people at large. In this cut-throat competition the capital of one country flourishes at the cost of the other, but the working class of all countries face inhuman hardships irrespective of who is the winner. Given the unrestricted mobility of the capital, there is always a threat that investments may at any time fly away to other countries and thereby may lead to mass unemployment. Therefore, this competition between national capitals is of permanent nature. This is one of the reasons why, there is a general and overall offensive against labour in many countries and interestingly they are competing to offer the same to the corporate: flexibility to hire and fire; ensured and unrestricted supply of cheap labour; suppression of trade unions etc; and also ensuring cheap land and natural resources by forcefully acquiring from the people, granting huge subsidies and exemptions from compliances on labour and environmental laws etc.  In such situations, only a common social security system in all developing countries can put this barbaric competition and corporate hunt for cheap labour to an end and save the people from the vulnerabilities. The common social security system will also help in curving the distress migration from different countries.

Regional integration of Asian economies on free market logic is going to be disastrous for the people if it is not accompanied with a common social security system for whole of the region. It is very much visible in the concerns of the peoples of poorer countries in ASEAN, APEC and SARC region. The trade unions and the people’s organization in ASEAN, APEC and SARC are raising these issues and demanding for inclusion of a social dimension in the regional economic integration. The economic integrations must also have an element to integrate the people and to ensure a comparable social security system for the people of the whole region.

There can be many specificities of the comprehensive social security system of each country with specific socio-economic formations, but the general structure of social security system as discussed in the earlier chapter can form the basis of a common regional social security system. It is well justified given similarities in the socio-economic problems and similar impacts of globalization and liberalization that the common structure of the regional social security must address the two tasks: the Basic social security and contingent social security. Conceptual framework and items included in the basic and contingent social security system as discussed in the earlier chapter applies to all developing countries inAsia, and therefore it may form a common structure of regional social security system.

To conclude, it is again to be emphasized that the struggle for social security system at national and regional level is the struggle for survival of the people, and to set a base level for collective bargaining. Current globalization has weakened the labour and increased the power of capital by increasing the vulnerabilities of workers and the people in various ways. The social security for the workers and the people at large can be the only effective way to turn the balance of powers at equal level and empower the working class and people at large to effectively exercise their rights of collective bargaining to ensure distributive justice. It is in this regard that the social security is emerging as the most important issue in the agenda of labour.

How to Achieve Regional Minima

Discussing about regional minima for social security at conceptual level has no problems and it is well justified looking at more or less similar socio-economic formations in Asian developing countries, more or less similar problems that they are facing with globalization and liberalization, with industrial restructuring and unrestricted mobility of capital, and with almost same development strategies based of exports and foreign investment. And therefore there is also commonality in problems that the working class and the people at large are facing in these countries. But when we start discussing about the practical aspects, i.e. how to move towards achieving this goal, then we have to face and address various other dimensions of these issues, some of which can be listed as follows:

1. To practically achieve any policy changes, we have to collectively bargain with an authority capable of enacting and implementing these policies. There is no such authority at Asialevel and therefore, to talk about Asian minima can be only effective in terms of raising awareness and consciousness on these issues, sharing of experiences to help each other and developing a broader solidarity, but we cannot build a dynamic movement for the Asian minima. (We can see the fate of Asian Floor wage campaign. There are many conceptual-practical problems[33] with this campaign, but the main problem is that it can only cry but will never be able to build a movement and achieve what it is advocating for. The big question is-who will legislate Asian floor wage? But the crying also has a positive impact in terms of popularising the issue and raising awareness on the issue-that can be the only achievement). The dynamic movement can be built at the country level and at the level of ASEAN, SARC or APEC, which are emerging as effective regional forums of countries inAsia and Asia-pacific, leading to integration of economies by formulating common economic policies, and therefore they are emerging as the regional authorities. It is becoming urgent to raise the issues of social security in these regional forums and compel the authorities to include the issue of a common social security policy in the process of regional integration. Therefore the campaign for social security inAsia means building dynamic movements for comprehensive social security system in ASEAN, SARC and APEC.

1. It is to be made clear that advocating for Regional Common Minimum Social Security does not mean advocating for a common basket of social security with same amount of items or same in monitory terms. It can never be achieved and it is illogical given different levels of social economic development and different socio-cultural needs of the people in different countries. What we mean by Regional Common Minimum Social Security is a common structure of social security system with two aspects: basic social security and contingent social security; and also the common structure of basic and contingent social security compulsorily covering the areas as discussed in earlier chapter. The amount of benefits may vary in different countries, and also number of items may also vary in countries. This much difference may persist. It may also have an impact in terms of creating comparative advantage for lesser developed countries in terms of attracting the FDI. But it will be positive and not negative. If the Basic Minimum wages has a linkage with GDP growth and social assistance has a linkage with basic minimum wages (discussed in detail in later chapter on minimum wage), then this comparative advantage may help in accelerating the overall development of lesser developed countries.

1. It is not possible to make everyone equal by simple mathematical calculations. Sometimes it is disastrous also particularly in the current phase of globalisation and liberalisation. For example, fixing a common wage (money amount equal to same purchasing power) may be very difficult (because of currently very low wage) and disastrous (in terms of loosing business) for some countries (generally less developed) but may bring no impact to other countries (generally with higher level of development) and therefore prove beneficial in terms of improving comparative advantage (over the lesser developed ones). Moreover, the common minimum regional wage, Asian wage or international wage is only a utopia. It can never be achieved given different socio-economic formations of different countries and different levels of socio-economic development. But what can be actually achieved is-a common structure of minimum wages with comparable basic minimum wage at regional levels (this is only one part of minimum wage; discussed in detail in later chapter on minimum wage). Similar logic applies to many other social security benefits also, i.e. we can argue for a common social security structure, but the number of items and amount of benefits may not be the same.

1. To raise such an important issue like regional social security system requires a regional coalition of the working class and people’s movements, coalitions of labour organisations and people’s organisations with significant mass base. If the capital is integrating itself at regional level, then working class and people’s movement must also integrate themselves at regional level. It is not only important for regional level bargaining, if they are not integrating at regional level their collective bargaining power at national level is also reduced in such situations. Therefore, to build a social security movement inAsiawe have to rearticulate the issues of social security at regional levels and actively engage in debates of regional integrations and centralise our collective efforts to force the agenda of social security to be included in the process regional integrations like ASEAN, and SARC. Therefore I propose to form two working groups in AROSS(Asian Round Table on Social Security)-one for SARC and the other for ASEAN (may be third also for APEC)

Social Assistance

 

  The issue of employment rights, minimum wages, poverty and social assistance are linked with each other. Employment as legally enforceable right to all and decent wages are the two crucial factors which can resolve the problem of poverty and reduce the need for social assistance to a great extent. Therefore major focus of social security must be on these two aspects.

 

  Legally enforceable employment right (or livelihood right) and a decent wage is a right of all human beings and it is the very basic and primary responsibility of the state. The state has no legitimacy if it does not accept this responsibility. On this ground the social assistance to poor is not a charity. It is actually the unemployment benefit that the state is obliged to provide to the people if it fails to provide them decent employment/livelihood. However, the state accepted this logic only when it was forced by the situations or compelled by the people’s movements. In the pre-globalization period till 1980s when people’s movement and also the trade union movements were stronger, this logic was partly accepted and translated in two major social security programs: a) recognizing the low earnings of majority of self employed and wage workers in various occupations all over the country, universal public distribution system was established to provide cereals, sugar, kerosene oil and cloths etc at subsidized rates. This was also accompanied with provisions of subsidized inputs to self employed producers/workers in various occupations including agriculture and also the low interest loans. b) Financial assistance to recover losses caused by contingencies like droughts, floods or any other factors, and ensuring some income security in such periods by providing short term casual employment in public works.

 

  However, the contingencies that were occasional in nature in pre-globalization period took shape of systemic contingencies in the globalization era. For example, in agriculture, with the introduction of modern techniques-tractors, threshers, pumping sets etc., and heavy dependence on market for seeds, fertilizers etc, productivity was increased many fold drastically decreasing the need of man power and therefore creating a problem of mass unemployment (not only for wage workers, but also for sons and daughters of farmers who were now no more needed in agriculture), and on the other hand, with rising input costs it became almost impossible for small farmers to cultivate their fields without any income from outside. Therefore large number of small and marginal farmers were proletarianised and thrown in the reserve army of labour. This problem was further aggravated with the withdrawal of input subsidies by the government following the dictates of IMF and World Bank. This happened not only in agriculture but also in various other occupations like handlooms and power-looms etc. Many traditional occupations were completely erased. If we see the picture in totality, it actually looks like a large scale invasion by some invisible army. One can realize the intensity of this problem keeping in mind that in the same period, the privatization, downsizing and closures of the factories threw millions of workers out of job. Moreover, large scale land acquisitions for industries, dams and cities also led to mass destruction of livelihoods and mass unemployment. The growth in the globalization-liberalization era largely remaining a jobless growth was unable to provide this huge unemployed army any alternative avenues for employment.

 

  It is in this background, that the government ofIndia was compelled to accept the contingencies as systemic contingencies particularly in rural areas. The demand for employment as a right was emerging as a common issue all overIndia. The enactment of National Rural Employment Guaranty Act (NREGA) is based on the state’s recognition of the rural unemployment as a systemic contingency; and it also reflects the state’s realization that situations are becoming explosive. Therefore NREGA is basically an attempt to water down on the discontents, rather than resolving the problems; and this is why the main focus of the state is on ‘appear to be doing’ rather than on ‘actually doing’. But with all these limitations, NREGA is a path breaking legislation in terms of: a) recognizing that the unemployment is a systemic contingency and not the occasional one, b) guaranteeing employment as legally enforceable right (even if in a very limited sense and with very limited scope), c) strategy of employment creation by way of rural development i.e. development of crucial infrastructure in rural areas like roads, reclamation of water bodies etc.

We have already discussed that on the ground NREGA is not coming out with the desired results, mainly because of not allocating required amounts of funds, not providing 100 days of employment, not providing unemployment benefits and systematically ignoring (and therefore actually promoting) corruption at all levels. The ruling classes in rural areas also have an interest in failing NREGA. It is not only monetary interest but also their class interest. They are looting significant amount of NREGA money in collusion with government officials, this is well exposed; but what is not exposed is that they want to systematically fail the NREGA because it is increasing the aspirations of the wage workers and increasing the wages in rural areas. It is also creating one very tricky problem. Rising input costs (due to withdrawal of input subsidies and monopoly of TNCs on seeds, pesticides etc) have already made it almost impossible for small and marginal farmers to cultivate their fields and in many areas a tendency of reverse leasing (small peasants leasing out their land to richer and big farmers) has already emerged on the seen. Middle peasants (mainly producing for subsistence) are any how sustaining in the cultivation but are actually walking on a tight rope. They employed wage labour only in some intensive operations like harvests that cannot be timely done only by family labour. Wage costs accounted very small part of input costs for them, but then also rising rural wages (NREGA impact) are like a final kick compelling them to move out of cultivation (lease out their land). There is no reason to argue against the wage increase, because it is not the impact of wage increase, the real factor for their ruination is rising input costs due to withdrawal of subsidies and monopolistic price of seeds, fertilizers, pesticides etc. However, this situation is spreading a false consciousness among small producers and destroying the bases for alliance of small producers with wage workers to build a united struggle for rural transformation. Therefore if the demand for increase in rural wages is not accompanied with the demand for subsidized inputs to rural producers it may prove disastrous for the unity of the people’s movement in rural areas.

 

  Again coming back to the NREGA, if we overlook the above aspects for the time being and critically look at it as a social assistance program, it is no doubt the most effective way to address the problems of poverty in rural areas. However, the scope of NREGA is still limited. To be a really effective program in order to guarantee the employment as legally enforceable right to all the NREGA needs to be restructured to extend:

 

a)      The guarantee of employment on demand to every adult individual rather than one member of the family.

b)      NREGA is to be made applicable in urban areas also. It is well established that the unemployment has taken shape of systemic contingency in urban areas also and therefore there is no reason why it is not to be extended to urban workers.

c)      The days of guaranteed employment through the scheme in various sectors must be decided on the basis of thorough studies estimating the average annual days of unemployment in particular sectors.

d)     Creation of employment through development works must not be limited to construction of roads and water bodies, it must also include to build in rural areas: a) hospitals, schools, libraries, sports facilities and recreation centres etc, and b) community owned economic projects like fruit gardens, beekeeping, fisheries etc.; and in urban areas: housing, education and recreation facilities for workers, along with various forms of cooperatives.

Such social assistance programs are also relevant for all developing countries inAsiaand particularly inSouth Asia, because of similarity in socio-economic formations, particularly in terms of larger proportion of population is still dependent on agriculture, and small and marginal farmers plus landless wage workers forming the substantial majority.

But the problem of poverty cannot be resolved only by this type of assistance programs guaranteeing only few days of employment at minimum wages. Therefore the effective social assistance program needs to include five other aspects:

a)      A public distribution system to provide at least cereals, pulses, edible oils, sugar, salt, fuel, cloths, soaps etc at subsidized rates.

b)      Subsidised inputs to self employed producers in agriculture and other traditional occupations.

c)      Subsidised and easily accessible/approachable health services.

d)     Free education up to 12^th standard and subsidised higher education.

e)      Maternity benefits

These benefits must be extended to all wage workers and self employed. There must be no poverty line constraint for eligibility under these assistance programs, since the poverty lines everywhere excludes majority of these sections who are actually poor.

Minimum Wages

To fully explore the issue of minimum wage it is to be realized that there is and there must be some linkage of minimum wage with poverty line and also with the amount of social assistance to be extended to those who are unemployed or unable to work. Which part of minimum wages is to be extended as social assistance to those who are unemployed or unable to work? Let us see, how the poverty and minimum wages are defined inIndia.

Poverty: “Fundamentally, the concept of poverty is associated with socially perceived deprivation with respect to basic human needs…These basic human needs are usually listed in the material dimension as the need to be adequately nourished, the need to be decently clothed, the need to be reasonably sheltered, the need to escape avoidable diseases, the need to be (at least) minimally educated and the need to be mobile for purposes of social interaction and participation in economic activity. … Deprivation may indeed exist in non-material dimensions as well, for instance, gender based or caste-based discrimination. Even in the material dimension, the composition of the minimal basket of basic human needs that the society would expect every citizen to satisfy may be expected to keep expanding with economic and social progress of the society.”[34]

Minimum wages: The Minimum Wages Act of 1948 does not provide any concrete definition of minimum wages. However, various committees, commissions and apex court judgements gradually evolved a clear cut definition of the minimum wages inIndia. Committee on fair wages 1949 suggested that in addition to sustenance of life minimum wages must also provide for some basic level of education, medical requirements and amenities. The 15th Indian Labour Conference suggest to fix minimum wages keeping in view: three consumption units per earner, minimum food requirements as 2700 calories per unit, clothing requirement 18 yards per unit per annum, housing rent at the rate of government subsidised industrial housing scheme, fuel, lighting and other ‘miscellaneous’ items of expenditure as 20 per cent of the total Minimum Wages. The Supreme          Court judgment in case of Workmen of Reptakos Bretl and Co. Vs Management 1992 further expanded the definition of minimum wages to include additional component of Children’s education, medical      requirement, minimum recreation including festivals/ceremonies and provision for old age and marriage. The minimum wages Advisory Board in 1991 recommended suggested to link the minimum wages with productivity and also to fix piece rate wages. The definition of minimum wage that evolved as above is largely accepted by the Indian state. However, in practice the state never followed these criteria and never separately quantified the various components of minimum wages like food, clothing, housing, health, education and other miscellaneous items. The minimum wages are fixed largely arbitrarily and it is actually the poverty wage rather than a minimum wage.

It is very much clear that poverty and minimum wage is defined almost in similar manner including almost same number of items: Food, housing, health, education and other amenities. What is additionally included in minimum wage like recreation, festivals, marriage, old age also can not be argued in any way to be exclude from the definition of poverty. So we find that the state defines the minimum wages and poverty in the same way; and it is true that the items that are included in the minimum wages are actually the basic human needs and cannot be denied to any person. But when the state computes it in monetary terms, then social assistance goes far below the minimum wages. Why this inconsistency? Actually neither the minimum wages nor the poverty line is computed on the basis of the above concepts and definitions; they are fixed arbitrarily and never arrived at by computing expenses needed in different items as given in the definitions. Moreover, there is no reflection of the fact that “the composition of the minimal basket of basic human needs that the society would expect every citizen to satisfy may be expected to keep expanding with economic and social progress of the society.” There are many other games that are played to reduce the poverty and the minimum wages also. For example, for fixing minimum wages minimum food requirement is generally agreed to be at 2700 calories per unit[35], but different authorities include different food items (generally excluding animal proteins) to arrive at 2700 calories to reduce the money amount as much as possible. This game for defining poverty is even more interesting. The most authentic body to recommend the required calorie intake can be the Indian Council for Medical Research (ICMR), and it recommended: 2,425 calories (sedentary work) to 3,800 calories (heavy work) for men and 1,875 calories (sedentary work) to 2,925 calories (heavy work) for women for maintaining health and consistent body weight. But in their exercise to reduce the number of people below poverty line, not only the Indian state but also international agencies ignored ICMR recommendations, and recommended/recognized a far lower calorie requirement for Indian people. FAO recommends 1,770 calorie intake for India and 1,900 calorie for China. Planning Commission of India considers calorie intake of 1,776 for urban and 1,999 for rural per person[36].  Therefore the Indian government is able to project a low poverty figures and also able to manipulate that poverty is on decline in the country. World Bank, IMF, FAO and all transnational agencies are also happy and they become furious if any one argues against this achievement of theirs. However, one cannot fully hide the reality and it suddenly appears and brings embarrassment to them. Professor Utsa Patnaik, exposed in her study that 76% of families or 840 million people in India do not get the requisite daily intake of calories — ie 2,100 calories for urban and 2,400 calories for rural residents. A government report itself (Arjun Sengupta Committee Report on Unorganised Sector Workers) exposed that about 77% of people in the country subsist on under Rs 20 per day. Another government report- National Family Health Survey-3 exposed that 46% of children under the age of five are undernourished. The Right to Food campaign exposed the cases of more than 5,000 starvation deaths in different parts of the country between 2001 and 2005.[37]

Coming back again to the minimum wages, the big question is, can the minimum wage be equated to poverty line? Can the minimum wage be accepted as poverty wage? If not, then how the minimum wage is different from the poverty line, and which part of the minimum wage corresponds to the poverty line or which part of minimum wage represents the social assistance benefits to be provided to the unemployed or those not able to work?

To answer these questions, we have to deconstruct the minimum wages and compute its different parts separately, taking in the account that “the composition of the minimal basket of basic human needs that the society would expect every citizen to satisfy may be expected to keep expanding with economic and social progress of the society.” In the age of liberalization and globalization, some new needs have been created without which it has become impossible to live and work, for example communication. Moreover, globalization and liberalization has created new risks that need to be addressed in wages like intermittent periods of unemployment due to informalisation. Globalization and liberalization has resulted in privatization and monopolization of resources in the corporate hands that have a highly negative impact on redistributive justice. Taking in to account all theses aspects we can attempt to construct the minimum wages by including following items:

1. Basic Wages (not less than 50% of country average wage), to meet basic minimum expenses of family in:

a)      Food and fuel, drinking water, sanitation, clothing, lighting

b)      Education

c)      Health

d)     Recreation, festivals, Marriage etc

e)      Social travel and communication etc

1. Dearness allowance
2. Housing rent
3. Maternity benefits
4. Additional travel allowance for daily travel to workplace
5. Lunch and Tea allowance for working days
6. Additional Clothing allowance for workers
7. Compensation for frequent intermittent periods of unemployment due to informalisation (on the basis of average days of unemployment for casual workers in different sectors and different regions)
8. Productivity bonus: increment in Basic wages with the same percentage points as increase in GDP
9. Provisions for old age-Provident Fund and Pension
10. Employment injury compensation (in addition to leave with pay and treatment)
11. Retrenchment compensation equal to six months’ salary

The deconstruction of minimum wage in above terms and computations of each part separately empowers workers to understand and critically evaluate whether the fixation of minimum wages is on actual basis or not, and for which part they are actually underpaid. This will not only raise their consciousness but also empower them to clearly articulate demands for improvements/increments in wages.

This deconstruction also helps us in understanding which part of minimum wages should be considered for social assistance to the unemployed and to those who are unable to work. Social assistance must be that part of minimum wages including Basic wages, Housing, Dearness allowance and Maternity benefits; because this part of minimum wage represents the basic needs of the human beings. Other parts apply only to those who are working. For social assistance the basket under basic wages may differ in different regions with different situations, for example-if drinking water, education and health are provided by the government free of charge in some regions or to some section of the people, then these items may be excluded from the basket.  Dearness allowance also may be different with differential impacts of inflation in different regions. House rent may also be different in different regions of the country.

As for as minimum wages to workers are concerned, it is possible to have a National Floor Minimum Wage, but its importance will be more in terms of common structure of minimum wage rather than deciding a minimum amount of wage. Deciding minimum amount of National minimum wage will be of very limited value; mainly to set a basic standard below which no one is allowed to hire any worker, and it must be considered as offence to nation. (It is worth mentioning that inIndia, there is a National Floor wage, but it is actually binding only in the works and industries under control of central government and not binding for works and industries under control of state governments. State governments fix their own minimum wage. National Floor wage is now fixed at Rs 115, and minimum wages fixed by the state governments for different sectors are largely equal or slightly above the national floor wage).

But more effective and of more practical value will be National Floor Basic wages, which will set a more or less common minimum living standard for the workers. It may be argued that this National Floor Basic wage must not be less than 50% of average wage of the country, and it must compulsorily increase with increase in GDP and with the same percentage points as the increase in GDP. This will to some extent ensure the redistributive justice. Other aspects of the Minimum wages may vary in different regions and also in different sectors, but they will have a linkage with the National Floor Basic wage. Housing, maternity benefits, travel allowance, lunch and tea allowance, clothing allowance and Compensation for frequent intermittent periods of unemployment must be computed on the basis of actual average in the regions and sectors.

The compliance of minimum wages is another challenge. With a huge informal sector, rampant informalisation of jobs and huge reserve army of labour, taking advantage of abundant supply of labour and competition among workers, the employers easily violate the labour laws and generally do not pay the minimum wages. In such situations, without a structured system of hiring labour, the compliance cannot be insured. In present situations in India (and probable in other developing countries also) the most effective way to build such a system can be establishing labour centers in all industrial regions and all cities and rural centers (in villages it can be linked with NREGA registration system) and making it compulsory that all workers in that regions must be registered with these centers, and hiring labour for any work must be done through these centers. These centers should be established by the government with active involvement of trade unions and other labour organizations. The registration in these centers can be skill wise and sector wise also. There may also be a section at the center for self employed workers. This system can also be linked with the Basic Social Security Fund and Industrial Contingency Fund (as suggested in earlier chapter) to ensure a smooth process for providing social security benefits to workers. In present situations, this system will also be effective as a step towards the formalization of informal labour. Therefore it will help in building the unity of informal labour and formal labour on the one hand and increase the collective bargaining power of the workers on the other.

 

 

 

 

Concluding Remarks

 

At regional level, i.e. at the level of ASEAN or SARC or APEC or Asia, it may not be possible to have a floor wage because of different stages of socio-economic development of different countries and different socio-cultural needs of the people, but it is advisable and necessary to integrate the issue of minimum wages and social assistance with the regional integration process. The structure of minimum wage as discussed above can be proposed as common minimum structure for the Regional Minimum Wage including Basic Wages (not be less than 50% of the country average wage), Dearness allowance to compensate for inflation, House rent at the actual average rate, Travel allowance, Lunch and Tea allowance, and Clothing allowance etc to workers, Maternity benefits, Compensation for frequent intermittent periods of unemployment due to informalisation (according to actual average days of unemployment per month for casual workers in different sectors), Productivity bonus in terms of increment in Basic wages with the same percentage points as increase in GDP to ensure the redistributive justice, Provisions for old age (Provident Fund and Pension), Employment injury compensation in addition to leave with pay and treatment, and Retrenchment compensation equal to six months salary.

In the same way, a common regional structure of social assistance to unemployed and those who are unable to work can also be proposed to include that part of minimum wages including basic wages, dearness allowance, housing rent and maternity benefits. Strategy to generate employment by way of development projects can be the best way to address the problem of seasonal and short term unemployment in all the developing countries. However, the social assistance programs must also include: state run public distribution system to daily necessities at subsidized rates, subsidized inputs to self employed producers in agriculture and other traditional occupations, subsidized health services, free education up to 12^th standard, subsidized higher education, and Maternity benefits.

To ensure the compliance also, similar structure can be suggested at regional level i.e. Governments should establish labour centers (or anything like that) in all industrial centers, cities and rural areas with active involvement of trade unions and other labour organizations to regulate hiring of all workers; and establishing a basic social security fund (75% by taxing corporate and 25% by taxing people) and an industrial contingency fund (proportionate contribution from different industries by way of progressive taxation) with tripartite control (workers’ organizations, government and employers’ organizations). These funds may also be categorized industry wise and all the workers may be enrolled with these funds. It will ensure easy access to social security benefits to all workers. It will also minimize the chances of hiring any worker without proof of employment. Therefore, in overall terms it will reduce the vulnerability of workers and increase their collective bargaining power. In the situations when global assembly line has scattered the workforce, these arrangements may also be helpful in rebuilding new collectivity among workers and accelerate the organizing process.

SECTION III        MINIMUM WAGES

 

Fixing and Enforcement of Minimum Wage in China: Situation and Problems

Kungang Li *

Abstract

This essay will introduce how the minimum wage standards in China are established, the scope of employees that are covered by minimum wage standards and the current situation of the minimum wage system. Then, this essay will discuss the problems of minimum wage system in China, such as: the percentage of employees who live on the minimum wage is too large; the increasing speed is slower than the economy development and unbalanced standards among different districts and also makes some comparative studies. Lastly, this essay also makes some suggestions on the improvement of the minimum wage system in China.

Key words: Chinese minimum wage; economy development; income balance;

 

Introduction

The minimum wage system refers to the “bottom line” in wages set up for employee by the governments so as to insure the employees get enough income to satisfy his/her family needs and the needs of himself/herself. New Zealandwas the first country in the world to adopt the minimum wage system, when the industrial relations were at crisis under the background of the rapid development of capitalism and lots of sweat workshops existed. Industrial Conciliation and Arbitration Act 1894 was passed by the Parliament of New Zealand in 1894. The 1966 Encyclopaedia of New Zealand stated that: “After some 70 years of operation, the industrial conciliation and arbitration system has become a firmly accepted – perhaps even a traditional – way of determining minimum wage rates and handling industrial disputes.” After that, the minimum wage systems were established in many other countries.[38]

In 1984,Chinaapproved the Minimum Wage-Fixing Machinery Convention, 1928 of ILO. In 1992, Shenzhen of Guangdong Province became the first city to adopt the minimum wage system. In 1993, Ministry of Labor ofChinaenacted Regulations on the Minimum Wages in Enterprises. In July 1994, Labor Law of China was passed by the Congress, in which the minimum wage system was contained. OnMarch 1, 2004, Ministry of Labor and Human Resources Department issued Rules of Minimum Wage. InChinathe minimum wage systems have included the regulations issued by central departments and local governments.

The enforcement of minimum wage system in Chinahas great significance. Compared with the developed countries, the market economy is still in the initial stage, which especially requires the minimum wage systems to provide protections for the employees whose incomes are low for two reasons: first there is no effective collective negotiation system in China, and it is impossible for the employees to have their wages increased by the means of collective bargaining; second the labor resources are abundant in China. Under such a circumstance, most of the employees would be oppressed to the lowest possible line by the employers if there were no requirements in the wage standards. The present situation in the labor market has made it necessary for the government to adopt minimum wage legislation to adjust the income distribution so as to protect the interests of the employees.[39] The employees will lose their rights to bargaining in the game between the rare capitals and abundant labor force if the government does not set up the minimum wage standard for the weak group.[40]

It is necessary to clarify the wage statistics inChinabefore making analysis of the minimum wage system ofChina. In accordance with the current statistic systems, only the state-owned units, collective-owned units and joint ventures and foreign invested enterprises and enterprises invested by people fromHong Kong,MacaoandTaiwanare included. The wages of private enterprises in the city and rural areas and individual industrial and commercial owners are not included in the statistics. And the wage refers to the total incomes which include hour income, piece-work income, bonus, subsidies, overtime income, etc.

Because of the deficiencies mentioned above, some researchers hold the viewpoints that the present statistics cannot reflect the real social average income; therefore, the conclusion drawn from the statistics may be wrong.[41] However, the author of this essay believes that although the wages of employees of the private enterprises and the individual business establishment have not been included in the statistics, the base of statistics has not been changed. On this premise, from the comparison between the minimum wage standards and the average wages of each year, the development trend can still be revealed from it. The conclusions based on that are thus objective and convincing.

It has been about 17 years since the minimum wage system was enforced inChina. Generally speaking, in the initial period when the minimum wage system was enforced, it practically raised the income of the wage earners in the low level and actively improved the life quality of the employees in the low level. In many cities the minimum wage standards were over 50% of the average wage, even 70% in some cities at the time when the minimum wage system was put into force. However, with the quick economy development and slow increase of the minimum wage, the minimum wages are only 20%-30% of the average wages according to the statistics, far lower than the requirement of 40%-60% percent, which have resulted in the weak protection of the minimum wage system.

The experience in the last more than 10 years has a lot for us to study, such as the problems like, what is the problem existing in the standard establishment of the minimum wage? What kind of force has slowed down the increase of the minimum wage standards? This essay will introduce the current situation of the minimum wage system inChinaand put forwards some ideas of the author.

I. The Formulation of Minimum Wage

i. The orientation of minimum wage system in China

A. The establishment of labor system under the environment of marker economy

During the planned economy period ofChina, the wage standards of the workers were set and paid by the government. The enterprises in the planned economy period were not independent entity. There were no market and competition in the planned economy period, and the employees were employed by the state instead of the enterprises, the workers were recruited and sent to work in the state-run enterprises by the government. Though wages of workers were very low during the planned economy period, one thing that could not be denied was that the society was very stable when the income was even when all people were poor.

After practicing reform and opening to the outside world policies, Chinabegan to gradually swift from planned economy to market economy. After practicing planned economy for more than 20 years, to probing a new suitable economic development road was rough without precedent examples to learn from. The process was really like as Deng Xiaoping described “crossing the river by feeling the stones”. In the first period, the economic policy was changing the “planned commodity economy” to “the planned economy mainly as a supplement to the market economy”, and then the policy was “the market economy mainly as a supplement to the planned economy”, and at last, after 1992, the economy was set as “socialist market economy”.

After the purpose of constructing a system suitable to the socialist market economy was set, the legislations were accelerated. As far as labor law and employment law systems are concerned, there was no labor law inChinaafter 1949 when People’s Republic ofChinawas established. After 1992 when the purpose of constructing the suitable socialist market economy was set, the labor law legislation speed began to speed up, and the matching systems with labor law, such as the minimum wage system, also caused the attentions of the legislators.

B. The establishment of minimum wage system in China

Under the market economy, labor supply and labor demand are the important factors in determining the price of labor. However, due to the special characteristics of labor, the price of labor should not be decided by the market, the government needs to adjust the price by law apart from market competition. With the practice of reform and opening to the outside world policy, the competition in the human resource market was becoming more and more intense with lot of dwellers in the rural area surging up to cities. Under such a circumstance, there was an objective need to legislate on minimum wages, especially in the special economic zones, such as Shenzhen.

Shenzhen was the earliest experimental zone inChinafor the reform and opening to the outside world. After Shenzhen Special Economic Zone was established, into which the foreign capitals began to flow; meanwhile more and more migrant workers were also attracted to go there. Because of the richness in labor and the rapid economic development, the gaps of wage income among the employees were soon enlarged. Shenzhen municipal government, therefore, enacted minimum wage standards in 1992, which was the first legislation concerning minimum wages inChina. With the increasing of the economy in Shenzhen, the minimum wages also get increased, from 1996 to 2005 the minimum wages increased 73% within the ten years.

In 1993 Ministry of Labor of China enacted Regulations on Minimum Wages for Enterprises（1993） following the precedent of Shenzhen. In 1995 Labor Law of China was enforced, in which the minimum wage system was included. The enforcement of minimum wages embodies the ethics of the enterprises, which could make it possible to have a basic protection in the wage incomes for the employees so as to ensure them to satisfy the basic needs for life. In the initial period during the construction of market economy, especially when the social insurance system has not been well established, the minimum wage system plays an important role in promoting the stable and continuous development of economy.

ii. The main contents of the current minimum wage system

A. The scope of application of minimum wage in China

According to Regulations on Minimum Wages for Enterprises（1993）, the system of minimum wage mainly applied to employees in various enterprises within Mainland China. As for the workers who worked in the enterprises in the rural area, there were no unifying regulations, which were decided by the local governments in the provincial level. That showed the legislators’ cautious attitudes towards the minimum system.

The local governments in the provincial level enacted their own enforcement regulations in order to enforce Regulations on Minimum Wages for Enterprises（1993）. The local government was active from the regulations enacted by them, for instance, Minimum Wage Regulations of Fujian Province stipulated that the minimum wage system was applied to “all enterprises and individual business establishment and employees in Fujian Province.” In the municipal city of Shenzhen, Minimum Wage Regulations of Shenzhen Special Economic Zone stipulated that the minimum wage standards were applied to the employees in the official organs, institutions and social organizations as legal persons when their relationships were established through labor contracts in Shenzhen.

The present regulation—Regulations on Minimum Wage promulgated by Ministry of Labor and Social Security in 2004 is applied to “the employees whose labor relations with enterprises, non-enterprise units run by private persons, individual industrial and commercial establishment which hire workers, and also official organs, institutions and social organizations are in accordance with these provisions.”^[42]

Because of the vast land and unevenness in economic development, there are great differences between developed areas and underdeveloped areas. Therefore, it is impossible for Chinato have a unifying minimum wage standard. According to the provisions of Regulations on Minimum Wage, even within the scope of a province, different districts could have different minimum wage standards. So at present, the minimum wage standard is fixed on the county level. For example,Hefei, the capital city ofAnhuiProvince has three counties Feigong, Feixi and Changfeng apart from the city area, the four areas all have their different minimum wage standards.

B. The definition of minimum wage

There are now two kinds of minimum wages in China, minimum month wage and minimum hour wage. Minimum month wage is applied to the workers in regular employment and minimum hour wage is applied to the workers in atypical employment. In accordance with Regulations on Minimum Wage, minimum wage refers to the lowest payment to employee by employer under the condition that employee provides normal labor service, which means that employee provides labor service according to the labor contract in accordance with the labor law. However, during the period when an employee has his/her legal statutory holidays, such as paid annual leave, home leave, marriage and mourning leave, maternity leave, etc., he/she is treated as having provided normal labor service.

Under the circumstance when employees provide normal labor service, based on reasonable and scientific basis, any employer shall pay employee less than the minimum wage after the various allowance and overtime wages are deducted. However, if employee does not provide the normal labor service due to his/her personal reasons, the minimum wage standard shall not be enforced.

C. The fixing and adjusting of minimum wage standards

According to the provision of Regulations on Minimum Wages, in the fixing and adjusting of minimum month wage standard, many elements shall be taken into account, including the lowest living cost for employees and family members who depend on them, consumer price index for people living in the cities and towns, social insurance premium and housing fund paid by employees, the average wages, economic development level, employment situation, etc. in fixing and adjusting the minimum hour wage standard, besides the elements taken into account in minimum month wage standard fixing and adjusting, other elements, such as the medical insurance and pension fee, work stability, working condition and labour intensity, and welfare etc. shall be considered. After the minimum wage is enforced, if the elements change, the minimum wage standard should be adjusted in a suitable time. Normally, minimum wage standard shall be adjusted once within two years.

Also, an attachment named universal method in fixing the minimum wage standards follows the text of Regulations on Minimum Wages. The first section of the attachment lists the elements that need to be considered in the fixing of minimum wage standards. The second section of the attachment illustrates the universal method in fixing the minimum wage standards, in which it is mentioned that in accordance with the international common practice, the minimum wage should be between 40% and 60% of average wage.

D. The body and procedure in drafting up minimum wage standard

In accordance with Regulations on Minimum Wage, the draft of minimum wage standard shall be put forward by department of labor, trade union and confederation of enterprises, and then be reported to Ministry of Labor. The draft shall include the basis of fixing and adjusting the minimum wage, application scope of the standard, the proposed standard and relevant explanation. After receiving the draft, Ministry of Labor shall seek for the opinions from All China Federation of Trade Unions and China Enterprise Confederation. Ministry of Labor is entitled to put forward suggestions on revision of the draft; however, the draft shall be deemed to be agreed upon when no revision suggestions are put forward after 14 days from the date when the draft is received. [43]

Based on the state regulations, some local provincial governments have issued their own regulations to make the procedures more clear. For instance, Article 11 of Regulations on Minimum Wage of Hunan Province stipulates that “the minimum wage standards are established by the following procedure: (a) labor department of governments in districted cities and autonomous prefectures shall discuss the minimum wage standards with statistical office of the government, trade union and enterprise confederation and report the standards they have decided to Department of Labor and Social Insurance of the provincial level before April every year; (b) Department of Labor and Social Insurance of the provincial level shall discuss the minimum wage standards with statistical office of the government, trade union and enterprise confederation in the provincial level, and decide the different levels of minimum wage standards that have been applied to different districts in the province and disclose the standards to the society to ask for advice, and enforce the standards after reporting the draft to Ministry of Labor and Social Security of State Council and having obtained improvements; (c) Departments of governments in districted cities and autonomous prefectures shall draft their own minimum wage standards based on the standards disclosed to the society and the regional situation and ask for the opinion from the public and enforce the standards after being approved by the governments in districted cities and autonomous prefectures, and then report to the Department of Labor and Social Security for record.”^[44]

Actually, in practice, the procedures are dominated by the administration, because the evaluation of minimum wages and the standards put forward are all dominated by governments. Of course, in accordance with the current regulations, the delegates from trade union and enterprise confederation are entitled to put forward suggestions, but the fact is that trade union and enterprise confederation are semi-official institutions. Accordingly, it is hard for both the delegates and those two organizations to put forward suggestions favorable to the employees. Besides, although Regulations on Minimum Wages authorizes Ministry of Labor to improve the standards of local government, it has never had a case that the minimum wage standards put forward by the provincial government are improved. Therefore, the current minimum wage standards are in fact decided by the provincial government.

II. Current scope covered by minimum wage standards

i. Employees covered by minimum wage standards

A. Full-time contracted workers

In the beginning when Ministry of Labor issued Regulations on Minimum Wages, the employees and employers covered were relatively narrow, which only applied to “various enterprises and their employees within People’s Republic of China.”^[45]The contracted employees who worked in government offices, intuitions, social groups and non-enterprise unit run by private owners were not covered in it. But soon after that Ministry of Labor issued “Announcement concerning the Enforcement of Minimum Wage Security System”, which required that government offices, intuitions, social groups and the employees who had entered labor contracts with them shall enforce the minimum wage standards under the guidance of Regulations on Enterprise Minimum Wages.^[46]But at that time, the employees only referred to the employees in the narrow meaning, which only included full-time workers.

B. Part-time employees

In 2004, Ministry of Labor and Social Security enacted new Regulations on Minimum Wages. Compared with the former regulations, the word “enterprise” was deleted, the new regulation clearly provides that enterprises, non-enterprise entity run by private persons, and individual industrial and commercial establishment which hire workers and the workers they employed shall all covered by the regulations, and also official organs, institutions and social organizations shall be covered by the regulations. Article 5 of Regulations on Minimum Wages stipulates that minimum wages include the month minimum wage and hour minimum wage. The month minimum wage applies to full-time employment, while the hour minimum wage applies to part-time employment. Therefore, part-time workers are included in the minimum wage protection for the first time.

ii. The enforcement mechanism of minimum wage in China

The payment insurance systems of minimum wages are consisted of three levels of guaranty systems, which include:

A. The guarantee mechanism of administrative enforcement

In accordance with Regulations on Minimum Wages, if employer violates the regulation and pays employee less the minimum wage, labor administration organ is entitled to order the employer to pay the unpaid part of wages in a certain limited time and may also order employer to pay 1-5times of the part of delayed wages. [47]

Apart from the measures mentioned above, in accordance with “Regulations on Labor Security Inspection” (2004), the Labor Inspection Bureau is entitled to supervise the enforcement of minimum wage.[48] Where employer pays employee less than the minimum wage, the administration of labor and social security shall order the employer to pay the delayed wages back in the limited time. If employer does not pay in the limited time, the labor administration should order the employer to pay damages of 50% – one time of the wage delayed paid.

B. The guarantee by supervision of trade union

In accordance with Regulations on Minimum Wages, trade union of all levels is entitled to supervise the enforcement of the minimum wage system, whenever trade union finds out the employer is in violation of the provisions. It is entitled to request the local administrative department of labor and social security to deal with that. Furthermore, in accordance with Trade Union Law, where enterprises and institutions pay the arrears and deduct wages in violation of law, the trade union should represent the workers to talk about it with employer and demand employer to correct the error. If employer refuses to correct, trade union can demand the local government to deal with it (article 22 of Trade Union Law).

C. The self-help system of employee

Among the enforcement mechanism, apart from administrative inspection and trade union supervision, the self-help system is the most important one. In accordance with Regulations on the People’s Republic of China on Settlement of Labor Disputes in Enterprises (1993) and Labor Dispute Mediation and Arbitration Law of the People’s Republic of China, where employee has disputes concerning minimum wage, he/she may bring the case to labor arbitration, and if not satisfied with the result, he/she can also bring the case to court.

Also, there are many convenient measures to make for the self-help of employees, for example, the labor dispute arbitration charges no fees. If a case is brought to court after arbitration, the court only charges 10 RMB, which is nearly free for the disputed parties. Moreover, the government provides legal aid for those who could not protect their own rights. For the cases concerning minimum wages, it would be easier to get legal aid inChina, for the employees concerned are usually very poor.

Another provision that need to be mentioned is that, the employer who pays less than the minimum wages in violation of the law shall not only pay the balanced wage, but also shall pay 25% of the balanced wage in accordance with “Regulations on Economic Compensations in Breaching and Terminating Labor Contract”(1995).

Labor Contract Law (2008) further provides that if employer who pays less than the minimum wages in violation of the law, employee is entitled to terminate the labor contract and demands to pay compensation in the sum of one year and one month according to the years that the employee has provided labor service to employer (article 38 and article 42). This new rule increases the cost for employer’s violating the minimum wage standards.

III. The existing problems in the minimum wage system in China.

i. Too many employees are under the protection of minimum wage

Many unfavorable factors, such as undeveloped collective negotiation system, immature market mechanism etc. have hindered employee to elevate their wage standards by the way of collective bargaining. Only a small fraction of employees have the power to bargain with employers on the wage by their own competition ability. Under such a circumstance, the minimum wage often becomes the universal wage standards in some enterprises^[49]. Minimum wage becomes standard wage at least in the written labor contracts in lots of enterprises. For instance, in the city of Ningbo, a developed city in Zhejiang Province, labor inspectors reveal that “if you check the wage list, nearly all the wages are 960 RMB, the minimum month wage, especially for the ordinary waiter and waitress in restaurants, cashiers in supermarkets, security guards.” [50] In the enterprises where piece-work wage system is practiced, employers often calculate the price of piece work based on the minimum wage standards, about one thirds of the workers are living on the minimum wage standards. [51]

ii. The increasing rate is slower than the rate of economic development.

In 1992 when Shenzhen first enforced minimum wage, the minimum wage at that time is 49.9% of the average wage. After November 24, 1993when minimum wage system was enforced in whole China, in some of the provinces the minimum wages were over 50% of the average wages, in FujianProvinceeven nearly 70%. However, in 2002 the rate in most of provinces was about 40%. In ZhejiangProvincethe rate was lower than 30%. Although “Migrant Worker shortage” once forced government to raise the minimum wages as a signal to attract migrant workers, the average wage is lower than 50% of the average wage. [52] In the developed cities like Shenzhen andShanghai, the minimum wage standards are declining (see the data below). In other cities the situation is the same.

The Changes of Minimum Wage in Shenzhen

 

The Changes of Minimum Wage in Shanghai

iii. The unbalance between the standards in different district.

Chinahas a vast territory and great difference existed in the economy development in different districts. Therefore, it is reasonable that different parts need to have their own minimum wage standards. However, the local minimum wage standards need to connect closely with the local average wage so as to establish a reasonable base for the minimum wage standards. But the problem is that the ratio between minimum wage and average wage is not mandatory, which has resulted in the great difference between minimum wage and average wage. For instance, in 2008 the ratio is 18% inHefeiand 36% inKunming. The present mechanism in minimum wage system cannot ensure the employee to have a good protection and in the long run it would influence the stability of the society.3

The Minimum Wage in Important Cities inChinain 2008

District	Minimum wage	Average wage	District	Minimum wage	Average wage	District	Minimum wage	Average wage
Beijing	800	0.21	Ningbo	960	0.35	Nanning	670	32%
Tianjing	820	0.28	Hefei	560	0.21	Haikou	630	29%
Shijiazhuang	750	0.32	Fuzhou	750	0.38	Chongqing	680	35%
Taiyuan	720	0.40	Xiamen	750	0.31	Chengdu	650	29%
Huhehaote	680	0.31	Nanchang	580	0.29	Guiyang	650	34%
Shenyang	700	0.31	Jinan	760	0.34	Kunming	680	36%
Dalian	700	0.30	Qingdao	760	0.34	Xian	600	20%
Changchun	650	0.32	Zhengzhou	600	0.32	Lanzhou	620	30%
Harbin	650	0.35	Wuhan	700	0.33	Xining	600	34%
Shanghai	960	0.23	Changsha	665	0.29	Yinchuan	580	30%
Nanjing	850	0.28	Guangzhou	860	0.25	乌鲁木齐	800	34%
Hangzhou	850	0.28	Shenzhen	900	0.28	拉萨	630	26%

IV．Comparative research on the minimum wage system

i. The argument of effects of minimum wage and Chinese problems

Under the assumption of homogenous labor, minimum wages are either harmful for employment if they are set above the market equilibrium wage or are ineffective and useless if they fall below the market determined equilibrium wage.^[53] However, there are researches in China showing that in a long run, the relationship between employment rate and change of minimum wage is stable, higher minimum wage will not bring unfavorable influence to the employment rate in China. One reason is that the minimum wage standards in China are generally low, though the minimum wage standards are increasing, the increasing rate in very limited compared with the increase of the price resulting from inflation. [54] The changes in minimum wages also show that minimum wages standards have been decreasing compared with the average wage standards.

Under the background of globalization, the argument of negative and positive effects of minimum wage should also be discussed in connected with the world trade. In the past thirty years it seems that Chinahas made a big progress and now has become the second economic entity in the world. However, on one side Chinese economy is an export-oriented economy, under such a mode the government, foreign investors and domestic employers have made a great fortune, on the other side, the common employees have been struggling to survive.

Since the financial crisis, Chinese government has been advocating to change the development based on boosting domestic demand. However, if the minimum wage standards are quite low, it will be very difficult to boost domestic demand. As households which receive minimum wages tend to have a higher propensity to consume compared to rich households, the level of consumption is also expected to be enhanced which will have a positive impact on aggregate demand, output and employment.[55] The question is that under the globalization, the government worries that the capital would flow out to other countries. So there needs unification among developing countries, which is still a very difficult thing to do considering of the interest conflicts among them.

ii. The scope of minimum wages

Article 8 of Regulations on Minimum Wages (2004) provides that minimum wages refer to the payment by employ where employee provides normal labor service in accordance with the law or labor contracts. According to the definition the part of social insurance fees paid by employees may include in that. Therefore, sometimes there maybe some misunderstanding to the minimum wage standards for in some districts the part of social insurance fees paid by employees are included and in other districts it is not included. This should be improved so as to clearly indicate the level of minimum wage standards the insurance fees paid by employees should be deducted.

In a number of countries there is a link between minimum wage and certain social security payments. Brazilis an example of such a country as pension payments and unemployment benefits are directly linked to and calculated on the basis of minimum wages. Russia, Nigeriaand Iranfollow similar institutionalizations. On the one hand it is beneficial for the pensioners or the unemployed as their income is kept in line with the incomes of the lowest-paid workers. But on the other hand, increasing minimum wages implies a bigger burden for the government’s budget.^[56]In China, there is a loose connection between unemployment benefits and minimum wage standards. Article 18 of Regulations on Unemployment Security provides that the standard of unemployment benefits shall be lower than minimum wage and higher than the lowest living standards and the concrete standards are decided by the governments in the provincial level. There is no direct connection between pension and minimum wage, however, the pension is usually higher than minimum wages.

According to the International Labor Conference Resolution on decent work and the informal economy in 2002 the informal sector is (not very precisely) defined as “all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements” (ILO 2002). Thus they either operate outside the reach of the law, or they operate within the law but the law does not apply to them or cannot be enforced. The informal economy has grown rapidly in developed, but especially developing countries.^[57] The problems for Chinese informal sections are that workers in the informal sectors are not covered in the social insurance scheme for those workers do not have employment relationship with employers in accordance with Labor Contract Law of China.

iii. The fixing mechanism and problems in China

In some countries statutory minimum wages are set by the government without formalized consultations with unions or employer’s associations and no formal consultation body exists. For example, this is the case in Brazil, where only lately the government started informal consultations with the unions. In many countries statutory minimum wages are set by the government, albeit after the government has had formal consultations with a tripartite body comprising of representatives of trade unions and employer’s organizations. The role of the social partners varies in each case. In most countries the government consults with the unions and employers’ associations about the amount and other aspects relating to the minimum wage. But when it comes to the final decision, it is the government that makes it autonomously. Examples are Russia, China, Nigeriaor Iran.^[58]

The UKalso fits in the category of countries with tripartite institutions. A recommendation is made to the Low Pay Commission consisting of members coming from the unions, employers’ associations and academics. Politically it is difficult, but possible, to reject the proposal by the Low Pay Commission. A tripartite body which includes independent members of academia instead of the government is more recommendable than having the government as the third party.^[59]if China can learn from the UK to have a low pay commission consisting of members coming from the unions, employers’ associations and academics it maybe more helpful and reasonable for the mechanism for fixing the minimum wages.

V. Some reflections on the minimum wage system in China

i. Improving the mechanism in fixing and adjusting the minimum wages

Article 8 of Regulations on Minimum Wages (2004) provides that the fixing and adjusting the minimum wages shall be jointly responsible by Department of Labor and Social Security, Trade Union and Enterprise Confederation in the provincial level, but under the dominion of Department of Labor and Social Security. However, the competition among different districts makes it hard to form a stable increasing system without rigid legislation standards.

Another thing that should not be ignored is that at present a large amount of employees are living on the minimum wage. If the minimum wage standards cannot increase with the development of the economy development, the employees could not share the benefits brought about by the economic development and would live in poverty forever. Meanwhile, because of the slow development of the collective negotiation system and the rich resources of human labor, it is very difficult for employees to realize the increase of wages by their own competition. Zheng Hangsheng, a famous sociologist, points out that “a harmonious society is a win-win society, which means that every party in the society should work together with others to achieve the win-win result instead of sacrificing the interests of the other party. Where one party gains interests by sacrificing the interests of others, it is contrary to the harmonious society and it is impossible to construct a harmonious society”. [60]

A researcher points out that in order to limit the competition of racing to bottom, it is necessary to establish a lowest national standard in minimum wage. Different districts can then fix the local minimum wage standards basing on the national lowest minimum wage. Due to the unbalanced development of the economy in China and the great difference in the consumption level, therefore, on the one side the national lowest minimum wage standard should take into account of the consumption level of the poor areas; on the other hand, the local minimum wage standards should consider the elements of the lowest consumption level and turn the standards into the local minimum wage standards. Within every province, there should be a lowest minimum wage standards, while the other districts within the province can fix their own minimum wage standards basing on that. [61]

Besides establishing a universal minimum wage, some suggested that Chinacould make experiment to adopt the minimum wage standards that applied to certain industries. The city of Shenzhenhas made some experiment on this. For example, in the Tianan Digital Industrial District, the first district collective negotiation agreement in minimum wages was entered in September2006. With the gradual extension of this kind of practice, Shenzhen started the collective negotiation experiment on lowest minimum wage standard in the construction industry and food service industry in 2008, so as to improve the minimum wage system, wage guiding line system and wage guiding price system. [62] The improvement of minimum wage standards is very meaningful in improving the minimum wage mechanism inChina.

ii. Improving the administrative supervising over minimum wage system

The guarantee system of the minimum wage mainly depends on the force of the self-help from the employees. The legislation of Labor Contract Law has increased the cost of employers in violation of laws, which has improved the enforcement of minimum wage standards. This is the favorable side of the minimum wage standards. However, the supervision of trade union has not played the rule it should have, and what’s more important is that, labor inspection, though having the power to list high fines, has not functioned well. Therefore,Chinaneeds to improve its enforcement mechanism in minimum wage system.

iii. Improving the collective bargaining system

At present, Chinastill does not have the basic conditions required by a free labor market, which includes that there are no free labor organization and well-established social security system, and the country is not operated on the basis of rule by laws. Under such a circumstance, if the pricing of labor totally depends on the force of the market, it would be misled by the labor market, and result in injuries for both employees and employers. Under the conditions where the force between labor and capital is not balanced, if the price of the labor is totally decided by the free market, the result would be as what we have seen in the initial period of capitalism, endangering the survival of the poor. The result would be that employers and employees all suffer from the unbalanced forces and the efficiency of the market could not be achieved.[63] Under the current circumstances, on one hand,China needs the minimum wage system to provide basic protection to the employees. On the other hand,China needs to gradually develop a mechanism in which the wage of the employees could be elevated with the economic development; otherwise social crisis will be brewed, burst out eventually and greatly influence the social stability.

Some researchers have pointed out that the interests have dropped greatly for some domestic enterprises. Under such a circumstance, the enterprises are inclined to transfer the cost to the labor. This conclusion is convincing in that the enterprises, as “reasonable economic person” will naturally try to get profits from cutting down the cost. Therefore, the aim policy of the minimum wage system of Chinashould focus on the prevention of the brewing of conflicts between employers and employees.^[64] With a purpose of achieving such a goal, in a long run,China must gradually improve the current collective bargaining system.

Conclusion

In the time of more than ten years when the minimum wage system is practiced inChina, the minimum wage system has played an important role in many aspects, such as elevating the wage income of the employees, improving the stability of labor relation and social harmoniousness. However, with the swift development of the economy, the increasing rate of minimum wage is becoming slower than that of the average wage, which has weakened the security function of minimum wage system. After the abruption of financial crisis,Chinaonce slowed down the pace in elevating minimum wages, which caught the focus of the whole society.

Meanwhile, it has been noticed that the improvement of minimum wage system largely depends on the improvement of other relevant systems, such as the compulsory education system, low-rent housing system, social insurance system and rural policies. All of these would bring active influence on the minimum wages if they get improved. The author believes that the problems existing in minimum wage system would gradually be solved with the central government’s focus on it.

A Snapshot of Social Protection and Minimum Wage System in Pakistan: Impact and Challenges for Workers’ Rights

Khalid Mahmood*

Summary

The broader objective of this paper is to look into the overall status of present social protection system and mechanism and status of minim wage implementation in the country, existing legal framework, effectiveness, challenges, ongoing activism for improving the system and recommendations. The text of this paper is based on the outcome of the activities conducted by Labour Education Foundation, real life stories of workers, informal interviews with relevant activists and different documents.

Country Context and Framework

Constitutional Guarantees: The constitution ofPakistan declares that the state would be responsible for enabling people to be engaged in employment. It also enshrines just and humane conditions of work (Article-37) together with developing a social security system that covers infirmity, sickness and unemployment. The constitution ofPakistan also prohibits all forms of slavery, forced labor and child labor (Article-11), provides for the fundamental right to exercise freedom of association and the right to form unions (Article-17). It guarantees that all citizens are equal before law, entitled to equal protection and no discrimination on the basis of sex alone (Article-25).

International Commitments: Pakistan has ratified international instruments, ILO Conventions, Convention on Rights of child, Convention on Elimination of all Forms of Discrimination Against Women (CEDAW).

As the ILO conventions and CEDAW are international laws so by virtue of ratifying,Pakistanis bound to show the extent to which the law and practice conforms to the provisions of the convention by legislation, administrative actions, collective agreement or otherwise and submission of report in regard with the implementation of different provisions of Conventions.

Status of Poverty in Pakistan

Intensifying poverty is a growing concern in Pakistan. Although the middle-class has grown into 35 million, nearly one-quarter of the population is classified poor as of October 2006. As of 2008, 17.2 % of the total population lives below the poverty line, which is the lowest figure in the history of Pakistan. It is hard to believe the official figure regarding poverty in particular. The recent devastating floods have exposed the extreme extent of poverty particularly among the agriculture workers. The declining trend in poverty as seen in the country during the 1970s and 1980s was reversed in the 1990s by poor federal policies and rampant corruption. This phenomenon has been referred to as the poverty bomb. The government of Pakistanwith help from the International Monetary Fund (IMF) has prepared an Interim Poverty Reduction Strategy Paper that suggests guidelines to reduce poverty in the country. Unfortunately all the poverty reduction schemes proposed by the IMF and World Bank have not resulted in declining poverty, on the other side; it has broadened the gulf between rich and poor. There is a great class disparity at present. Most of the poverty reduction schemes are based on the new liberal agenda and the safety nets proposed and implemented are making the poor more dependent on the government schemes, it does not address the empowerment of the working people. As of 2009, Pakistan’s Human Development Index is 0.572.

Definition of Social Protection

No specified and agreed definition of social protection exists but various explanations are available in different documents.

Mid Term Development Framework 2005-2010 sees social protection as means of strengthening poor people’s capabilities to mitigate and manage risk and vulnerability, and thus, of impacting positively on underlying poverty and inequality.

In a nutshell – social protection is conceived as a broad conceptual framework that integrates cross sector safety nets, other multiple programs and informal transfers. Social protection identifies risks against which the vulnerable are to be protected, assist chronically poor by raising their incomes through conditional cash transfers and income generating programs, strengthens social contract and promotes growth.

 

Existing Social Protection System and spending

A social Protection Strategy has been put in place and it is an integral part of the overall Development Policy Framework (2005-2010). The goals and instruments of the strategy are given below in the box.

Social Protection Strategy

Social Protection Strategy is the cornerstone of building a harmonious society.

The goals of the Social Protection Strategy:

•   to support chronically poor households and protect them against destitution, food insecurity, exploitation, and social exclusion;
•   to protect poor and vulnerable households from the impact of adverse shocks to their consumption and wellbeing that, if not mitigated, would push non-poor households into poverty, and poor households into deeper poverty; and
•   to promote investment in human and physical assets, including health, nutrition,

and education, by poor households capable of ensuring their resilience in the

medium run and of interrupting the intergenerational cycle of poverty

The Core Instruments of the Strategy include:

•   expanding the coverage of cash transfers using Conditional Cash Transfers

(CCTs) supplemented with unconditional transfers, through the Food Support

Program (FSP) and Zakat;

•   a new public works program based on low-wage employment;
•   child labour programs, and various new pilots such as (i) combination of cash

transfers and basic skills development aimed at enabling the poor to qualify for microfinance and (ii) programs for bonded labour; and

•   Scaling up school feeding and social care services

Reaching the Poorest, Short-term Measures:

•   maintaining the current level of benefits and effecting a transition to better and

more comprehensive systems;

•   introducing new means of testing and development of databases through some

pilots across chosen rural and urban areas;

•   scaling up successful pilots across the country following assessment of lessons

learnt;

•   extension of the current level of benefits to the target population of the poorest of the poor;
•   introduction of pilot CCT programs; and
•   scaling up successful pilots to the whole target population.

Speedy implementation Requires:

Being inter-sectoral and inter-provincial, coordination problems will require high level policy decisions and effective monitoring. Oversight of Cabinet Committee on Social Sectors recommended with Centre of Poverty Reduction/Planning Commission as focal institution and technical secretariat for Social Protection Policy implementation.

Cabinet Committee on Social Sectors to meet regularly to monitor social sector policies, programs and projects.

Source: Social Protection Strategy to Reach the Poor and Vulnerable, Planning Commission June 2007

Government Social Assistance

 

Zakat: (Literal meaning grow (in goodness) or ‘increase’, ‘purifying’ or ‘making pure’. So the act of giving zakat means purifying one’s wealth to gain Allah’s blessing to make it grow in goodness) system was introduced through an Ordinance titled “Zakat and Ushr Ordinance, 1980”.  It is an Islamic tax on the wealth of the rich at the rate of 2.5 percent. It is not applied on Shia community as they do not accept this as a genuine Islamic tax. The commercial banks inPakistan deduct this tax from the saving bank accounts once a year.

According to official distribution of this tax, twenty five percent Zakat budget is being divided among institutions against various schemes like Educational Stipends (General and Technical), Stipends to students, Health Care (Provincial and National), Social Welfare, Leprosy patients etc. and remaining 75% direct to individuals. Formally, Zakat Committees are been nominated by the governing political parties to distribute Rupees 400 (approximately 85 Rupees in a Dollar) to per person per month to the most needy persons. This amount is too little and a lot of political favoritism is been witnessed while distributing this meager amount.

Pakistan Bait-ul-Mall (PBM): (the national treasury. Everybody in the Muslim state that pays taxes has the money go into the bait ul mall (the house of currency). This money is used to fund the state, its endeavors and to support the poor) PBM was established as an autonomous body in 1992 with the objective of providing assistance to those groups of people that for certain reasons have been excluded or are not eligible to receive Zakat. This includes the minorities and certain sects of Muslims. The PBM disburses to the poor under a wide variety of programs that encompass Food Support Programs, Individual Financial Assistance, Child support through the National Centre for Rehabilitation of Child Labour, and Institutional Rehabilitation (Grant to NGO’s). This institution is normally headed by a political nominee of the governing party to make sure that the amount is spent on their political allies and could be used as a sort of bribe.

The Benazir Income Support Program( BISP): Funded through the federal budget in 2008, the BISP is a new initiative taken by the present government with the objective to provide unconditional cash grants to the poorest families in the country. BISP has been initiated with an initial allocation of Rs.34 billion (US $ 425 million approximately) for the year 2008-09 which is the third largest allocation in the total budget and is 0.3% of the GDP for the year 2008-09. The maximum amount that could be given to one person is Rupees one thousand and is been used once again to the favourite ones. In almost all the bi-elections that have taken place during the last two years of the present civilian government, this Benazir Card is been used particularly in the constituency where the elections are taking place.

Social Security/Social Insurance

 

Government Servants Pension Fund: The scheme began in 1954. It is a compulsory scheme and covers all government employees after retirement of at least 25 years of service. Pension and provident fund are two benefits granted to government employees. The old age pension is financed through government expenditure, while provident fund is deducted at source from the monthly salary of employees.

Provincial Employees Social Security Scheme or Employees Social Security Institutions: The scheme was initiated in 1967. Initially, this scheme specifically covered workers in the textile industry with the objective of providing protection against contingencies of sickness, maternity, work-related injury, invalidity and death. In1969, the scheme was broadened with the inclusion of workers from commercial and other industrial establishments having ten or more employees; and later in July 1970, it was reorganized on a provincial basis. The scheme include a compulsory contribution by the bosses which is minimal, however, out of a total workforce of over 49 million, only 2.1 million workers are enjoying the benefit of this scheme. The bosses are not ready to pay the due amount to the department.

Food Support Program: The coverage of the food support program benefited to 1.2 million poorest households in 2003-04 with monthly income of maximum Rs. 2000. Cash support of Rs. 2400 is provided to them through biannual installments. Another scheme of Sasti Rooti (cheap bread) was introduced by thePunjab government in 2009 subsidizing the flour mill owners to provide cheap wheat flour to the tandoors (clay ovens) acrossPunjab. Thus, providing an opportunity to their own class to benefit from the scheme. This was abandoned within a year during the devastating floods in 2010.

Employees’ Old-Age Benefits Institution (EOBI):  A small number of employees of registered industrial or commercial establishment have been covered under EOBI scheme. The EOBI is funded by an employer contribution of 5% of wages and a limited Federal contribution and provides monetary benefits to its insured persons in their Old Age, in the event of their becoming disabled/invalid owing to injuries/diseases. Survivor pension is also provided in the event of the death of an insured person to the widow/widower for life.

Workers Welfare Fund (WWF): The major objectives of the Fund is to finance development projects like establishment of labour colonies and construction of houses, hospitals and schools for the industrial workers and finance education, training, re-skill and apprenticeship for the welfare of workers, marriage grants and death grants. Employers of industrial establishments in the private sector under the Workers Welfare Fund (WWF) Ordinance established in 1971 are required to pay 2 per cent of their assessable income exceeding Rs. 0.1 million in any year of accounts to the Fund. The funds have been used by all the successive civilian and military governments to favour their own banks and insurances and most of the deals of buying the bonds from the market resulted in great losses to this fund.

Educational Stipends (Technical): Started in the year 2002-03 with annual allocation of Rs. 1 billion. On successful completion of training, Rs 5000 are given as one time grant to each trainee for purchase of relevant tools/equipment. Punjab Vocational Training Council is running 65 Vocational Training Institutes.  Governments of Balochistan and Sindh have shown keen interest in implementing thePunjab model.

 

Current Scenario, Labour Laws and 18^th Amendment:

18^th amendment, introduced in 2010, withdrew “Concurrent List”. Implying that policies and legislations hitherto done by the Federal Government/Legislatures on its 47 entries now stand transferred to the provinces.

The concurrent list also included 6 labour related issues – dealing with:

•    no 26 on welfare of labour, conditions of labour, provident fund, employers’ liability, workmen’s compensation, health insurance including invalidity pensions, old age pension
•    no 27 on trade unions; and industrial and labour disputes
•    no 28 on setting up and carrying out of labour (employment) exchanges employment information bureaus and training establishments
•   no 30 regulation of labour and safety in mines, factories and oil fields
•   no 31 on unemployment insurance, and
•   no 45 on inquiries and statistics for the purpose of any matters in this list

Concerns:  Although, 18^th constitutional amendments have many progressive aspects and it has taken away many changes that were made during the military dictatorship of general Mushraf, it has not taken all aspects concerning the labour practices while deciding the labour issues as provincial matter. This was done without the consultation of the trade union movement. It has complicated the process of registration of trade unions. If it remains at the present form, there will be no national level unions or federation and there will no institution at federal level to register the unions. Agriculture workers, self employed, contributing family workers, casual, piece rate, apprentice and home based workers mostly remain out of the purview of labour legislation and administration.

Compliance with global commitments including reporting requirements and Federal oversight for labour inspection and enforcement of labour laws, modality of functioning and coordination with regard to the federal intuitions to be transferred to the provinces for example Workers Welfare Board, Employees Old Age Benefit Institutions and the legal framework with regard to union and association formation, unfair labour practices, collective bargaining, dispute settlement, adjudication, judiciary and other related matters will be a challenge to address.

 

Minimum Wage

As per Labour Policy 2010, there exists a national minimum wage, which is Rs. 7,000 per month. Section 4 of Minimum Wage Ordinance, 1961 allows minimum wage Boards, for each province, to recommend minimum wage rates for adult unskilled workers and juvenile workers employed in industrial undertakings. Section 5 of MW Ordinance gives the power to each province’s MW Board to fix MW rate even for workers in industries where there is no effective regulation of wages. As per the information available on the websites ofPunjabgovernment, it fixes MW rates even for skilled workers. The list of industries covered also varies from province to province. The Government can fix the wage rate for skilled workers because Section 2(9) defines worker as “skilled or unkilled, intellectual, technical, clerical, manual, or other work including domestic work for hire or reward”. So, it has the authorisation to do that.

The rationale and basis for fixing the minimum wage inPakistanhas never been based on consultation with trade unions and workers’ representatives.  While minimum wage in most other countries is fixed logically, inPakistanthe same is done unilaterally and based on political expediency.

For instance, the minimum wage of Rs 2,500 a month in 2001 was revised to Rs3, 000 in 2005. Since then it is being revised almost every year and its existing amount is Rs 7,000 a month, effective July 2010.

The fact is that no one can work out a budget in which a family comprising, say, six members can have a decent living with the monthly income of Rs 7,000.

Trade unionists lamented that some of the employers, especially the contractors of outsourced services, pay even less than Rs 7,000 a month to their workers, taking advantage of the unemployment situation in the country.

Exploitation of and capitalization on the unorganized, or poorly organized, workers continued unabated as the labourers were unable to get implemented Rs 7,000 minimum wages notification issued by the government the previous year. The Trade Union Defence Campaign claims in 60 percent factories the workers are being paid Rs 4000 to Rs 5000 per month. The earnings, it says, are insufficient to run one’s kitchen while one has to pay power, gas and water bills as well as fees of one’s school-going children too. Lacking a political will and without suggesting a mechanism to ensure execution of its orders, the federal government enhanced the minimum wages to Rs7, 000 per month in the budget for 2010-2011. The decision, however, boomeranged for the employees as it made the employers to downsize their staff, while office hours for the rest of the force were increased. Those demanding overtime for the increased timing were removed from jobs. At least 70 percent owners are refusing to implement the government’s notification regarding the minimum wages.

What to talk of the private sector, compliance to the minimum wages notification could not be ensured in the public sector too. The government was paying lady health workers Rs 3,200 while it had notified the minimum wages at Rs 6000 even for the private sector. Punjab Assembly woman member Zobia Rubab Malik protested the disparity and wrote to the prime minister.-(Nawa-i-Waqt/February 15)

Ironically, under the very nose of the federal government, at least 50 employees working in different departments of state-run Pakistan Broadcasting Corporation (PBC) were getting their monthly salary ranging between Rs 3,450 to Rs 5,000 which is not equal even to the minimum wage of Rs 6,000 notified in the 2008-09 budget what to talk of a further Rs 1,000 raise given in the 2010-2011 budget. The federal government approved the labour policy 2010 on World Labour Day fixing the minim monthly wages at Rs7, 000.-(The News/June 22)

The lowest ceiling for minimum wages has never been such a puzzling question as it is today, the era of highest inflation as well as recession. For, no increase in wages has matched the ever-rising prices. The workers have been demanding that the minimum wage for unskilled workers should be fixed at Rs 15,000 per month as none can run one’s house on a meager income of Rs7, 000 per month.

Even the Senate Standing Committee on Finance suggested fixing Rs 9,000 as the minimum wages and enhancing the minimum pension amount from Rs2,000 to Rs4,000 per month.-(Jang/June 12)

Besides the private sector workers, members of the All Pakistan Clerks Association (APCA), teaching community, Parks and Horticulture Authority, Civil Secretariat Employees Union, law-enforcement agencies like police and Rangers, lady health visitors, telecommunication, irrigation departments workers, doctors and paramedical staff, railway workers and others continued protesting throughout the year to press the government for increasing their salaries. Their protest included press conferences, presentations, rallies and demonstrations, which occasionally got unruly. All their efforts could not bring them more than 50 percent increase.  On the other hand, their representatives in the parliament not only continued to receive the raise given to the employees in budgets but, through their own legislation, also laid claims on further raises over and above what was offered to the government servants.

Real Life Stories

 

The following two case studies were conducted to take the stock of ground realities in terms of existing situation of social protection for workers:

Niaz Khan, resident of house no 28 street 16 Ghazi Mohalla, Ghari Shahu,Lahore worked in a carpet factory. He migrated from Abotabad, a city in Khyber Pakhtoonkhuwa province toLahore to look for work while he was only 12 years old, as his father was not earning enough to support the family of eight members. One of his uncles was already working in a carpet enterprise and he introduced Niaz in the same field.

Niaz left school from seventh standard and started working in 1976. Niaz married in 1986 and has four sons and a daughter. Before starting work, he got some training for cutting carpet wool for three months from an experienced worker. He worked both as employee and under contractor and changed three factories during his job period. The longest span was 20 years until the factory was closed as the new owner (because the business was divided between three brothers after the death of the father) based inLondonwas not able to compete with the market in terms of designing and strategizing.

Niaz explained different stages of carpet production e.g. weaving, washing, cutting, preparing, edge cutting, knotting of fringes and carpet back cleaning. The cutting work that he was involved was necessary to make the carpet soft and design prominent and visible. He explained that the factory owners hired contractors in different villages to take care of the weaving of carpets at homes. This is the area where women and families are suffering more due to very low wages as a woman work eight to ten hours and earns around 50-60 Rupees a day. Time of completing a carpet depends on the size and quality of the carpet. The handmade carpet usually takes ten months to one and half year.

Besides weaving carpets at home, women were hardly hired in other work related to carpet production. When Niaz started work in 1976, the rate was twelve paisa per square feet but he got 10 paisa for being a child and his first monthly wage was around rupees 115 against working 10-12 hours a day. His latest monthly income was around rupees 6000. Now most of the work of cutting is being done through machines and operators are getting rupees 1.50 per square feet and wages around 10,000 to 14,000 rupees if they work on monthly salary. Wages remained very low and there were no increase in wages even after 5 years. Workers were totally unaware of the existence of any Minimum Wage Act, Industrial Relations Act and other policies and laws that could be beneficial for them.

Niaz started work as a cutter and after working for almost 36 years, he retired as a cutter due to the reason for not having information, training or opportunity to enhance his skills in terms of earning more.

During this long span of working, Niaz hardly seen any improvement in his working conditions, benefits and contrary to this he witnessed deterioration in circumstances around him. He was never a permanent worker so was not entitled of any leave and medical treatment in case of disease and injuries. He noticed that workers were injured during shifting of heavy wet and dry carpets, got cuts due to use of scissors, burned because of the use of chemicals while washing carpets and developed other diseases for example eye infection, breath related problems, backache etc, but no leave and medical treatment was provided by the factory owners. The normal excuse in such cases was that the workers were not careful enough while working.

As Niaz Khan was an active worker and participated in different rights’ related workshops and seminars, so he felt that though there were few institutions to provide trainings and benefits to the workers but the coverage was very low. This was due to multiple reasons but most importantly because of the owner’s efforts not to shift workers in regular category. He specially mentioned the facility of Social Security in terms of getting medical treatment, education for children, death grant, marriage grant, housing etc.

According to the law, every factory having five workers should be registered for Social Security but only big factories arrange and issue Social Security Cards to their few workers and even here, not for all of the workers. There are 49 million work forces inPakistanand around 2.1 million workers (approximately 3 percent of the total labour force) have been registered with the Social Security thus a large majority of workers remain outside the ambit of this facility. He was of the opinion that military dictator Zia ul Haq’s period was the most depressing with bashing democracy, he put ban on Social Security benefits in carpet industry. Owing the backing of almost all civilian and military governments, owners became so dominant that the labour inspectors were hesitant and not dare to enter in factories and check out the working conditions.

Niaz Khan felt that the carpet industry was on peak till 2000 but after that especially during the last four and five years, due to overall recession and intensifying terrorism, buyers stopped coming toPakistan. The handmade carpet industry was affected the most. Despite this fact, still over half million workers are in this industry and unofficial estimate stands around 1.2 million.

Same was the case with Employees Old Age Benefits. If the workers are registered with this institution, their widows and minor children can claim pension but again very limited number of workers were registered as employers have to contribute a small sum to provide this benefit and majority of the employers refused under the plea that this contribution will increase the price of their products. The lack of awareness about existing laws polices and schemes remained a main impediment in terms of workers claiming and enjoying their rights.

Training programs conducted under government institutions during the last 10- 12 years focused on health and safety issues; lack the prospect of human rights, gender issues and mechanisms to ensure rights. The crux of these programs were on developing obedient workers (he attended few) by insisting and promoting that the factory should be profit oriented and the workers should be hard working, not interested in putting forward demands and go on strikes but to continue profit making and thus the availability of their salaries.

Razia Liaqat Ali a piece rate worker in Vandalla Diyal Shah, outskirts ofLahore. Her story depicts the total absence of a social protection system for home based workers as a citizen and especially as a worker. Her both sons started as garment factory workers at the age of 12 and 14 while two daughters were school going. She resided in the area where lots of women were involved in piece rate work for different contractors. The work she started six years ago involves making of different decoration items e.g. pots, bolls, garlands, ornaments, and other materials used in wedding functions and religious celebrations. Her elder sister was doing the similar kind of piece rate work and with the idea of supplementing her household income, Razia also started that. An agent to a shopkeeper, who owns shops in a main market, provides this piece rate work.

After doing household chore in the morning, she sits for work and leaves only at a time for preparing and serving lunch to her family. Her two sons also work with her after lunch. Sometimes, her husband also joins them. There is no specific time to stop the work and sometimes it continued till late night if work was available to earn more money to meet the both ends. The wages were very low and she managed to earn around Rs 2000 -25000 in a month with the help of her family members and her average working hours remained between 12-16 hours a day.

There were lot of challenges and difficulties related to her work. The work was seasonal so at times she had less work to meet her expenditures and in season she had to work for long hours to meet the demand. She used hot candle wax and got boils and burns on her hands. She developed health related problems such as backache, headache and weak eye sight. Contractor also cheated her at different occasions in paying against the completed items under the pretext that the work was not up to the described quality. All her negotiations to increase the wages never met success and she faced threats of not getting work on the demand of increase in per piece item. The contractor always narrated that how the investor was suffering due to a decline of purchasing power of people so it is next to impossible to increase the rates. She herself was convinced that due to worsening economic conditions, there were lots of women available around to work on even lower rates.

There were no institutions, network or information dissemination system from the government side to look into the matters of the home based women workers to protect them from the violations of contractors. As these women work in their homes thus have no access to training programs, awareness,  workers’ rights, available opportunities for employment and social safety nets to ensure their survival in case of any crises. She was aware that even regular factory workers were suffering because of not having progressive labour laws, lacunas in implementation and denial of access to social protection. It was even more difficult for women working at homes.

She took part in some activities organized by Labour Education Foundation regarding workers’ rights in the last couple of years so she had an idea that government has to install a social protection network for poor, marginalized and workers. She was aware of the fact that whatever facilities like EOBI are available are for regular workers only. “I have seen on television that there are schemes for poor such as Food Stamp Program, Benazir Shaheed Watan Cards etc. but these benefits are only for some unknown people”. She was aware about the formation of Zakat committees and the distribution of forms for Benazir Income Scheme Program and knew the practice that these schemes are very limited and distributed on the bases of political affiliations.

Home based workers had no concept and practice of sick, maternity or any other kind of leaves and they lose money whenever there are intervals in their work. She questioned how home based workers can ask and get the benefits of social protection if they are not considered workers in the eye of existing laws and women are further marginalized when they enter in the labour market. She told that there are no programs of providing food, education and health related facilities to the poor, and people are subject to pay heavy fee for the education of their children and other utilities.

She shared that one organization in her area is working to provide loan for business but she was skeptical about the effectiveness of this loan scheme due to heavy mark up, cumbersome process of obtaining loan and limited amount offered to start an enterprise . She refrained from taking this kind of loan even in very harsh economic situations and in off seasons due to avoid further difficulties in life.

Analysis: While reflecting on the narrated stories, a major concern occurs that how visible, effective and accessible the existing system of social protection is for the people.  Nevertheless different official documents highlight various programs existing in the country in very inspiring fashion and so are propagated on the national television, but at the intervention level, very few people have benefitted or find them effective. Social protection has been propagated on political bases and promoted as a privilege extended by different political fronts instead of a right as citizens and workers. In real life stories, Razia highlighted a dire need for availability of an effective social protection system as she was very upset with the fact that both of her sons had to work in a factory and also helped her due to the hard financial needs. If she would have been in a position to earn enough, she would have sent them to school. She also felt that due to not having enough income generation options she and other home based women were vulnerable to the violations of middlemen.  The overall issues are related to invisibility of home based workers, lack of access to resources such as land, labour, capital and markets and lack of social protection.

Similar was the case with Niaz Khan as he had no entitlement or benefits even after working around three decades in the carpet industry. He specially mentioned the EOBI where all employees should be registered so they and their dependents would be entitled to pension, widow pension, free medical care and education of children.

The real challenge is that public spending on key safety net programs is shamelessly low at 0.5% of the GDP and even this low spending was not used effectively. The coverage of the existing social safety nets is inadequate and lack efficiency. The numbers of beneficiaries of the two major programs of Zakat and Bit-ul-Maal remain disputed as not much consideration has been given on the means of developing data base about the number of beneficiaries and its effectiveness. There are concerns about the high administrative costs of implementing these programs as well.

The core government department to implement and oversee social protection related activities is Social Welfare Departments in different provinces and the capacity of its staff, concepts regarding human rights and gender prospect, selection process and distribution system always remain a concern amongst the civil society. The department lacks systematic planning in terms of implementing the social protection schemes and beneficiaries are selected on the basis of biased and politically determined criteria instead of merit thus the most deserving citizens remain outside this preview.

There are concerns that the organizations implementing safety net programs are involved in multiple activities not part of their core competency (running schools, hospital, training centre etc). There is a serious lack of coordination at various levels e.g. between different components of government departments, with organizations and within organizations implementing social protection related activities.

Lack of an effective monitoring and evaluation mechanism for social protection is another problem. The government departments hardly have any internal review system, third party validations and evaluations. There were evaluations about different projects funded by donors but an overall assessment of the Social Welfare Department as an entity, the effectiveness of social safety programs and the assessment of the benefits reaching the intending beneficiaries are unheard of. The Poverty Reduction Strategy Paper (PRSP) also highlights the fact that the social protection framework contains duplication and overlapping programs and recommends working towards an overall integrated and efficient social protection strategy.

Recommendations

Taking into account the real life stories and informal interviews with different activists, following recommendations were stated to improve the overall status of existing social protection system.

•   A comprehensive awareness campaign to introduce people with the concept of human rights, existing constitutional guarantees and legal rights to enable them to claim their rights.

•   Effective campaigns at the state and organizations level to disseminate information about existing schemes and programs for social security and minimum wage.
•   Pro-active role of expert organizations and individuals in identification of ways to ensure input of relevant stakeholders while policy and laws related to social protection and minimum wage are envisaged.
•   Lobbying with the government to increase allocations of the programs, expansion in coverage and scope of cash based social safety nets to cover all extremely and chronically poor households.
•   In relation with workers’ rights, an analysis of existing labour laws, policies, practices and mapping of the already done work to reform legal framework and incorporate provisions for ensuring availability, access and effectiveness of the laws and policies.
•   Lobbying for the implementation of the National Policy for Home Based Workers to bring them in the domain of national legislation.
•   Effective planning, implementation and monitoring infrastructure at all levels including participations of trade unions, community based organizations and mainstream civil society organizations.

Minimum Wage Policies in Viet Nam –

Ways to a Minimum Living Standard

Thu Ha Van Thi*  

 

Introduction

The paper will try to provide an overview on minimum wage (MW) issues inViet Namfrom the perspective of a safety net to secure a minimum living standard for the workers and their families. In order to achieve this objective, the paper will focus its analysis on three questions: 1) How has the minimum wage been determined? A chronological approach is used to review the progress for fixing the minimum wage. 2) What has been the minimum wage policy’s impact on workers’ lives? Giventhe common assessment that minimum wages in many countries, especially in developing countries, are far below minimum living wages,Viet Namis not an exception. Is it that low minimum wages are a necessary or a compulsory price for development? The paper will base its argument on statistics and real practices of both employers and workers in factories. 3) How have the social assistance targeted groups benefited from the minimum wage policy? The circle of “low minimum wage – low pension fund – more social assistance – State budget limitation – then again low minimum wage” suggests another way is needed to approach minimum wages levels as a tool for development.

How the Minimum Wage Has Been Fixed

There were four wage reforms in Viet Namin the years 1960, 1985, 1993 and 2003. In the first two reforms, the minimum wages were government statutory decisions as a tool for a centralized planed economy and were applied in the State sector only[65]. Since 1993, minimum wages have been fixed in a more suitable direction towards a socialist oriented market economy. Following this direction, the principles for determining the minimum wage were regulatedby the Labour Code. The minimum wage is based on the cost of living to ensure that an employee performing the most elementary work in normal working conditions recuperates his/ her basic work capacity and partly accumulates reserves for regenerating enhanced capacity. The minimum wage serves as a reference for calculating the wage rates for other categories of work and will be adjusted to safeguard the workers’ real wages accordingly when the cost of living increases (Article 56). The adjustment of the minimum wages depends on the economic development level, consumer price index (CPI), and labour supply and demand[66]. Adjustments are made in accordance with the increasing level of inhabitant income in the society to ensure a balance among workers and farmers[67].

Methods to fix the minimum wage inViet Namhave been based on the above principles, while taking into account International Labour Organisation (ILO) suggestions and the specific conditions of the country’s transitioning economy.Viet Namhas a general minimum wage, regional minimum wages, and forthcoming sectoral minimum wages.  The Government has periodically established these minimum wages after consulting with the General Confederation of Labour of Viet Nam (VGCL) and the employers’ representatives. There are two minimum wage systems: one for the State sector including the administration, public services, State owned enterprises (SOE), and domestic private enterprises; the other for foreign development investment (FDI) enterprises. There are three wage payment systems: one for the administration and public services sector, one for SOEs, and one for the private sector. This part of the paper will provide an overview on the general minimum wage as well as the regional and sectoral minimum wages.

General Minimum Wage[68]

Taking into account the ILO-C131 Minimum Wage Fixing Convention and the R135 Minimum Wage Fixing Recommendation[69] as well as Vietnamese conditions, the proposals on wage policies in 1993 and 2004 used four methodologies (four indicators) to fix the general minimum wage.

1. Calculate the minimum living needs of a worker doing the simplest job in normal working conditions and having children to feed. A system of minimum living needs includes staple food and other food stuffs calculated following a necessary goods basket that ensures an essential amount of calories consumed by a worker, non food needs calculated by taking a percentage of expenditure for non-food items in a family budget (based on statistics), and the need for feeding children.
2. Survey the market wages paid to a worker without technical skills doing the simplest job in normal working conditions.
3. Calculate the economy’s capacity (GDP) and the inhabitant’s expenditure fund.
4. Calculate the Consumer Price Index (CPI) compared to the original period that fixed the general minimum wage.

In the proposal for fixing minimum wages during the period of 2006-2012, there are two more methods (technically supported by the WB) to figure out  indicator 2, average wages, and indicator 3, comparison of the GDP with the minimum wage, by analyzing national statistics. Calculating an average minimum wage based on collected market information, although highly reflects the reality of the labour market and has high objectivity, it depends a lot on the surveys’ accuracy which according to MOLISA is very difficult to achieve inViet Nam. If applying the experiences of countries that have similar conditions to Viet Nam to review the indicator 3 (applying the formula that if GDP increases 1%, the minimum wage could increase 0.91%), the annual increase of the minimum wage will be very low and might not guarantee the minimum living needs of workers. This is due to the fact that the general minimum wage ofViet Namwas fixed at a low level and is not fully reflected in wage scales and tables. Therefore, MOLISA did not apply these two methods, using them only for reference purposes.

The indicators used to adjust the minimum wage are essentially qualitative, so that identification of when and how much to adjust have been flexible depending more on policy decision makers’ subjective will rather than on market mechanisms. Among these four indicators, MOLISA has depended mainly on indicator 2 – market average minimum wage. The other three indicators have had only a supportive role. However, when the Government needs to take a final decision, the capacity of the State budget becomes a barrier for choosing what option to fix the minimum wage, and the CPI becomes the decisive indicator.

The general minimum wage fixed in 1993 was very low (see box 1). This low level has affected the whole adjustment process so far. As a result, the minimum wage adjustment has been only oriented towards workers’ minimum living needs, rather than to ensure the workers’ real minimum living needs.

 

There have been 10 minimum wage adjustments since 1993. The first two adjustments in 1997 and 2000 were essentially to compensate for inflation (the minimum wage has increased 50% from 1993 to 2000 and the CPI has increased 53% for the same period).

The following table (table 1) demonstrates how the general minimum wage was fixed and adjusted based on the above methods in reality during the period of 2000-2010[70].

It is clear in Table 1 that the general minimum wages increased faster than the CPI in the first half of the period, especially in 2001, 2003 and 2006, then strongly slowed in 2008 and after that, the minimum wage increased just to compensate for inflation. During 11 years, the general minimum wage has doubled compared to CPI. With such a rapid increase and without consideration of population consumption, the minimum wages have improved workers’ living standard. It also increased faster than the market average minimum wages by 1.45 times[71] and just 1.01 times above the GDP per capita. From this perspective, although the minimum wage is still far below the GDP, it has been gradually increasing and has brought the minimum wage from 37.97% compared to GDP in 2000 up to 38.44% in 2010. Nonetheless, according to Prof. Nguyen Ba Ngoc, vice director of the institute of labour sciences and social affairs (ILSSA), although the minimum wages have been increasingly and continuously adjusted, they only met 60-65% of the workers’ basic needs and were 20% below the real market minimum wages[72].

In order to imagine how low the minimum wage was in Viet Nam, we can take an example in 2005, when it was only equivalent to 22 USD per month, lower than several countries in the region from 40% to 70%[73]. In 2007, the level of minimum wages in Viet Nam was ranked 79^th (from higher to lower PPP US$ among 102 countries surveyed by ILO[74]). MOLISA has targeted that by 2020, Viet Nam minimum wages will be equivalent to 85% of the ASEAN average minimum wages[75]

 

Regional Minimum Wages[76]

The regional minimum wages were fixed following similar indicators as the general minimum wage but they have been specialized by region and aimed at attracting investment for socio-economic development strategies (Table 2[77]).

The regional minimum wage was first adjusted to the FDI sector in 1990 at 50 USD per month[78], which is considered an appropriate wage level, and was fully calculated to ensure the minimum living needs of labourers. However, in 1992 this minimum wage was decreased and divided into 2 regions with 35 USD and 30 USD respectively in order to attract FDI. Until 4 years later (1996), the regional minimum wages increased, adjusted, and divided into 3 regions (45-40-35USD). In 1999, the regional minimum wages were kept the same but transferred into equivalent VND and were frozen until 2006 (the 4^th region was removed in 2003 so that the average regional minimum wage was increased a little bit). It was explained that the monetary crisis in South East Asia had influenced the formulation of this frozen policy (in 1999, the VND lost its value by almost 30% compared to the USD). Therefore, government should help enterprises to overcome this difficult circumstance. The main reason was still FDI attraction strategy. As a result, the position of the average regional minimum wages dropped from higher than the minimum living needs during 1992-1999 to lower in 2005, higher a little bit in 2006 then dropped again. Since 2008, they have always remained below the minimum living needs level (from 92% in 2008 to 95% in 2010 and 93% in 2011[79], Table 3[80]).

The first regional minimum wages applied to the domestic private sector were set in 2008. Before that, they were regulated by the general minimum wage. The lowest regional minimum wages were the same as the general minimum wages. In general, the regional minimum wages applied for this sector were rather small; almost all levels were below the minimum living needs. However, they have been constantly approaching the minimum living needs since 2008 (gradually increasing from 33% to 80%, Table 3).

So far regional minimum wages have not applied to SOEs but there were several region-like allowance policies, such as regional allowances, incentive allowances, and special allowances. From 1997 to 2001, there were three additional regional coefficients (0.1, 0.2 and 0.3) compared to the general minimum wage regarding production or business effectiveness. Because of this flexibility, it is difficult to figure out an average minimum wage considering the regional element in the State sector.

MOLISA is developing regional minimum wages for the State sector. At the same time, they are proposing to fix a separate minimum wage for the State sector paid by the State budget and merge minimum wages for all kinds of enterprises based on the general minimum wage. The merging process is expected to take place in 2012 in the MOLISA proposal of wage policies for the period 2006-2012. This expectation might be met earlier, in upcoming October, as Mr. Pham Minh Huan – vice minister of MOLISA – said in the State press meeting on July 1^st in Ha Noi, “The minimum wages will be adjusted three months earlier than the merging plan because of the decrease in labourers’ real income situation”[81].

Sectoral Minimum Wages[82]

The sectoral minimum wages are based on the general minimum wage and have specific conditions regarding the level of complexity and the lowest technical skill in a sector. Although there are sector-based-preferential treatments designed through wage coefficients[83] or allowances and subsidies, there are no official sectoral minimum wages. A sectoral minimum wage has been piloted in the garment sector with the main difference being in wage scales and tables based on regional minimum wages[84].

To conclude, it can be said that the minimum wage policies have had an impact in ensuring the minimum living needs for the labourers (Table 3). Nonetheless, as evaluated by MOLISA, “In reality, the minimum wage was fixed at a low level due to the limited capacity of the economy and its dependence on the State budget balance. So much so that the objectives of the minimum wage policies – although theoretically suitable to the market economy and international practices – have not been achieved, especially the objective of guaranteeing the recuperation of the labourers’ basic work capacity and partly the accumulation of reserves for regenerating enhanced capacity.”[85] The following part of this paper will discuss this issue further.

What Has Been the Minimum Wage Policy’s Impact on Workers Lives?

Table 3 shows only a primary picture, not yet reflecting the reality because the minimum wages are baselines to calculate wages for other types of labour. The mechanism to use the general minimum wage has been adjusted with some flexibility. Government regulates wage scales and tables in the State sector. SOEs have the right to apply coefficients to double the general minimum wage to the highest level (since 1/10/2006 it has been 1.34) in order to calculate for a wage unit in accordance with productivity and business effectiveness. FDI and domestic private enterprises have the right to negotiate a real minimum wage higher than the official minimum wage (no ceiling limitation) depending on production and business effectiveness as well as market labour supply and demand, while developing wage scales, wage tables, and labour norms that follow the Government guidelines (Article 57, Labour Code).

Within this legal framework, there is a big difference in the practice of the development of both wage scales and wage tables between state and non-state sectors. In general, the SOEs have complied more strictly with the government regulations regarding wage scales and wage tables. It is widely considered a popular practice that the non-state sector has not “fully and correctly” calculated the workers’ wages in their own wage scales and wage tables. We can take an example from the figures of a MOLISA survey on small and medium enterprises in 2006 (Table 4[86]). The ratio of real wages, including overtime pay, in the structure of workers’ income was lower in the SOE sector than in the domestic private and FDI sectors and in contrast, the ratio of other incomes (including allowances, social and health insurances, etc.) was much higher.

In reality, the majority of the SOEs have applied a minimum wage that is higher than the general minimum wage. They have tendentiously pushed the real minimum wage to the ceiling level allowed by the government while their productivity has been lower than in the FDI sector. The FDI enterprises, conversely, have pressed the real minimum wages down to minimum levels, as regulated by the government, while the workers still have to work intensively, including overtime, without a fair pay.  This is one of the reasons to explain why women workers and domestic migrant workers often have lower pay than men and local workers. In the same survey, women workers’ wages were only 82% equal to men in the FDI sector, due to the fact that the majority of them worked in labour intensive enterprises such as garment, footwear, or food processing enterprises. Migrant workers earned only 75% the wage level of local workers because they were more engaged in simple or semi-skill jobs. The domestic private enterprises have tendentiously applied the lowest regional minimum wage. The wage gaps (between the highest and the lowest levels) were not as high in SOE and domestic private sectors, but were in the FDI[87]. The non-state enterprises develop wage scales and wage tables by themselves in a way that minimizes the differences between wage levels, divide the wage ladder (scale) into many small steps, pay technical workers equally to or just a little bit higher than the minimum wage level, and add more allowances with other wage related payments. That way they can cut or reduce (appropriate –  as said by Mr. Dang Ngoc Tung – president of Viet Nam General Confederation of Labour) the social and health insurance contributions from the employers side, as well as easily deduct workers wages without legal violation. The following example in 2009 can be seen as a typical case.

Currently, the popular income of workers in the footwear industry is about 2.2 million VND per month. In the Pou Yuen company, this income level has been divided into many parts including the basic salary of 1.3 million VND, a productivity incentive of 100-200 thousand VND, overtime of 250.000 VND, and others such as hard working and professional allowances, etc. If a worker is not able to work 26 days a month,  her or his hard working allowance will be cut,  if they do not meet the product norm, their productivity allowance will be cut, and so on. Ms Huynh Tuyet Huong, working in the A5 area, showed that her basic salary is 1.35 million VND. Last September, she performed 70 hours of overtime and took 2 days leave, so in the end she received only 1.6 million VND. This income level is not enough to make a living.[88]

In addition, the employers also use other tools during minimum wage adjustment periods such as reducing piece prices or increasing labour norms to force workers to work longer.

What is the result? Reflecting on these wage payment mechanisms, there has been three instead of two wage systems, which have added a completely new character. The real wage increase in the State sector has surpassed the FDI real wage since 2005 (table 5[89]). It is clear that the real average wages in SOE and domestic private sectors have regularly increased together with the minimum wage. The frozen wage policy applied to the FDI sector caused almost no changes in the workers’ real average wages during the period of 1999-2005. Then the FDI sector had to give up its first place position in the area of workers’ average income to the SOE sector. In 2005, the average workers’ real wages in the FDI sector in Viet Nam were only about 50% in comparison with similar enterprises in the region[90]. Meanwhile, the FDI enterprises’ profit per every VND in workers’ wage was a super-profit equal to 2.24 VND compared to 0.88 VND in the SOEs and 0.24 VND in the domestic private sector[91].

Table 1 in the earlier part of this paper showed that, without taking into account the inhabitants’ expenditures changing pattern, the increasing minimum wages have significantly improved the living standards of workers (assuming that people’s expenditures habits and expenditure levels  have not changed at all since 2000). Nevertheless, the picture becomes less optimistic when we take into account this factor (Table 6[92]). Currently, to the worker earning a minimum wage, it is a hard life falling into or just a little bit above the living conditions of the people with the lowest expenditures; put differently, they are the working poor or close-poor. Since 2008, although the minimum wages have been increased, they are still increasing slower than the expenditure of the poorest group, meaning that a worker’s livelihood based only on a minimum wage has become poorer and poorer. The situation has become even worse since the end of 2010 with the price storms in petrol and electricity, followed by many common goods for daily consumption. “No-living-wage” has been mentioned often in the media. To acquire a living wage, the most popular way for workers is by doing overtime – until their flesh and blood cannot stand it – and by minimizing their living expenditures until they are unable to bear it (Box 2). Work stoppage or job jumping can be short-term solutions. Trying to upgrade education and working skills is also a method to gain a living wage in the long term, but not every one can do so.

However, is that the compulsory price for development? If Table 5 shows how important the minimum wage policies have been in improving workers income, then Table 6 shows another role of the minimum wage policies, which are how much weight they could have on ensuring fairness for the workers living on minimum wages. The point here is that there should be a fairer correlation between companies’ profit and workers’ income as seen from two perspectives. First, at the micro level, the wage and other wage-like items paid to workers are a part of the enterprise’s production costs whereas bonuses and other benefits is a share in the re-distribution of the enterprise’s profit. Second, at the macro level, there should be a fairer relationship between transnational companies and local sub-contractors, where the race to the bottom, in order to fight over orders in the global supply chains, has become a common practice. In the end, it puts all the corollaries on the workers shoulders including low wages, bad working conditions, precarious employment, etc. These relationships can be totally improved if we look at Table 7. Enterprises’ profits, especially in the FDI sector, were very high compared to workers’ real wages even in 2008, when the economy was affected by the world financial crisis. Of course, it is not easy to get employers to cede voluntarily a part of their profits to workers. It is even more difficult to get the buyers to offer to pay higher prices for their orders, so that the suppliers can improve their workers’ wages. Aside from the fact that workers should save themselves before “God supports them”, the government plays a very important role in facilitating these relationships through minimum wage policies.

In the above described practices of developing wage scales and wages tables, from the labour relation management perspective, faster increasing minimum wages and unifying minimum wages levels by the government are effective mechanisms to balance benefits between the enterprise (employers) and the workers as well as between companies and sub-contractors. At least the faster increase of minimum wages will make it less unfair for the workers living on minimum wages. Again, at least the unification of minimum wages among enterprises in different sectors will bring more justice in the production and business of different enterprises, a necessary condition to reduce pressure on piece prices from the buyers’ practice and to bring more justice to workers working in the same conditions with the same required skills. It seems the wage adjustment steps were taken too cautiously, being worried to exceed the enterprises’ paying capacity, State budget’s capacity, and the economy’s capacity, which might have an impact on employment and push up inflation, an obsession since the mid 1980s. Hence the story that the minimum wages have crawled behind the real market minimum wages[93]. This has had an impact on workers’ lives. It is the right time for the government to come up with a stronger decision to use the indicator of workers’ minimum living needs as the main method to fix the wage polices, not just as a reference indicator to take a step-by-step approach, which is the current practice[94]. Besides faster increasing minimum wages, it is necessary to reform and enforce the mechanisms for determining wages scales and wages tables. At the enterprise and industrial sector levels, an appropriate legal framework facilitating dialogue and negotiations among employers and workers through collective bargaining is also an effective mechanism for balancing employers – workers benefits. This has been proven successful in Viet Nam and other countries. A survey by ILSSA in 5 provinces and cities in 2006 showed that the real average workers’ income in the enterprises with collective bargaining agreements was 32.16% higher than in the enterprises without them (Nguyen Quang Hue, ILSSA, number 15/2008). An ILO evaluation also concluded that a 1 per cent increase in the annual GDP per capita translated into an average wage growth of 0.87 per cent in countries with superior collective bargaining coverage, as compared to a wage growth of only 0.65 per cent in countries with weak coverage[95].

How Have Social Assistance Targeted Groups Benefited from the Minimum Wage Policy?

InViet Nam, the minimum wages are basis for calculating social allowances for workers such as health care, occupational diseases and accidents, losses of working capacity, maternity, retirement, death, and unemployment allowances. Besides, the general minimum wage is also used to calculate health care allowances for social protection groups, severance allowances for redundant workers, pensions for commune officers, and pension adjustments, as well as to calculate salary scales and salary related allowances in the State budget benefited sector. Therefore, wage attached social allowances have been adjusted together with the minimum wages.

In reality, the levels of pension adjustment reflect the diversity of pensions resulting from the transition character of the economy with a consideration for inflation. Table 8 compares the increase of minimum pensions with CPI[96]. It can be seen that the adjustment of pensions has closely followed CPI (equal to 0.93 of CPI increase). It means the government has tried to keep the real value of pension benefits. Nevertheless, taking into account the changing pattern of inhabitants’ expenditures, people who live on pensions can maintain their living standard at the level of 2003 only. It means pensioners’ lives have become more and more difficult.

The greatest impact of minimum wages policies on workers’ social benefits is the fact that the minimum wages have been fixed at too low levels and they could not effectively play their role as the basis for calculating different salary levels in the systems of wage scales and wage tables. As a result, these systems have become only useful for calculating social and health insurances and have not reflected market labour value. This is valid for all SOE, FDI and domestic private sectors.

Taking an example in the SOE sector during the period 2001-2005, the average wages in the wage scales and wage tables regulated by the government were only equal to 30-40% of the real average wages (Table 9). This means that the workers’ benefits regarding pension, maternity, health care and compensation, severance or unemployment, etc., were also reduced accordingly; and the insurance funds have lost their revenues remarkably as well. Dealing with insurance pay, the FDI and domestic private enterprises have not fully declared their labour force and only a part of workers’ wages have been used to calculate for the insurance payments – to quote Ms. Nguyen Thi Dan (head of wage division, DOLISA, HCMC) – “They chop up the wages. As a result, the main part of wages is often smaller than the sub-part of wages. They pay for workers’ social insurances based on the basic salary recorded in the labour contracts, which is only the main part of wages.”[97] In 2005, real payment for workers’ insurances was only from one third to a half of the amount equal to 17% of the salary payment that was subjected to workers’ insurance contributions[98]. A similar figure was also reflected in the 2006 survey (Table 4).

What is the consequence? Many pensioners are living in poor situations. At least, 9.4 million workers participating in social insurance schemes (18% of the labour force in 2009) will form a new poor group of people when they retire. Among them, the working poor will become impoverished pensioners and thus they will join social protection groups.

A new generation was born in a mother’s worry regarding her means of subsistence:

Ms. Tran Thi Nhan, working for the Phuong Khoa garment company in the district 12 of HCM city will deliver her baby in two months. She is very tired but dares not to take her maternity leave yet because if she does, she will receive a maternity allowance of about 1.2 million VND per month (as the company has paid social insurance for her based on the basic salary of 1.2 million VND). She could not even feed herself with that income. She counted that only expenditures for house rent (400 thousand VND) and food (900 thousand VND) are not enough, let alone hospital costs, milk, diapers, etc., for the baby. This allowance helps to keep body and soul together only.” If I want to feed my baby, I need an amount that is three times higher than that.” Therefore, she has to keep working until the delivery to earn a real wage of 2.1 million[99].

 

Such insurance mechanisms, that disadvantage workers, are considered to dodge the law and should be adjusted, but how? It seems clear that separating the state budget benefited sector (public administration and services) out of the minimum wages systems applied to the production and business sectors, in order to remove the budget barrier of faster increasing minimum wages, is one solution. Another clear solution is the development of regional minimum wages for the SOE sector in line with other sectors in order to reduce inequality in the workers’ income. Nonetheless, perhaps it will be difficult to remove the barrier of wage scales and wage tables that have complicated the SOE sector and at the same time are very loose in the FDI and domestic private sectors. It will require a brave and innovative spirit. Making state management stronger in wage scaling and wage tabling will have to face the shortage of Government human resources, while totally leaving this role to the market is lacking an effective mechanism that facilitates a fair negotiation between employers and workers.

Minimum Wage Study最低工资保障研究

－从《武汉市餐饮行业工资专项集体合同》说起 (the Special Collective Contract of Wage for Catering Industry workers was made in Wuhan)

韩桂君Han guijun*

Abstract: OnApril 23, 2011, the Special Collective Contract of Wage for Catering Industry workers was made inWuhan. The media praised it was a good result and could protect worker’s rights and interest. And National General Union thought it as a new model for collective negotiation because Wuhan General Union appointed business and financial trade union as representative for catering Industry workers. It has Chinese Characteristic. However, there are some wrongdoings. No due process to elect workers’ representative and Wuhan General Union has no authority to appoint representative for catering Industry. The Collective Contract is not much meaning for catering industry and it is more like ordnance than like a contract. The minimum wage is not much help because the standard of minimum wage is low and no specific measure to prevent employer from extending working hours without overtime wages.

一、《武汉市餐饮行业工资专项集体合同》制定的相关信息

2011年4月23日，由武汉市总工会牵头，该市餐饮行业企业和职工代表共同签订了《武汉市餐饮行业工资专项集体合同》，对工资标准、薪酬涨幅及福利待遇都做了具体规定。

鉴于武汉市尚未建立餐饮行业工会联合会，武汉市总工会确定采取“以上代下”的方式，由武汉市商贸金融烟草工会联合会代表职工方，由武汉餐饮协会代表企业方，进行集体协商。

据了解，这是截至目前我国涉及从业人员最多的一份工资专项集体合同。全国总工会集体合同工作部部长张建国说，它的签订对于探索建立工资集体协商机制，切实保护劳动者权益具有重要意义。

这份合同到底如何出台？中间经过多少波折？昨日，职工方代表周国华和企业方代表刘国梁，揭秘了合同背后艰难的谈判过程。

职工方代表周国华：

谈判60天，前期准备两年

“从双方代表第一次协商到正式文本签订，时间不到60天。但为了这60天，我们准备了整整两年。”职工方代表、武汉市商贸金融烟草工会联合会常务副主席周国华表示。

两年里，他们走访了近100家餐饮企业，和1000多名从业人员沟通，完成600份针对劳资双方的调查问卷。完成一系列准备工作后，今年3月24日，劳资双方代表草签了合同文本，并进行公示。为期一周的公示期中，热线电话几乎被餐饮企业和员工打爆，意见主要集中在17个地方。

公示期结束后，劳资双方代表再次进行协商。“这期间双方争执得很激烈，互不让步。”周国华说，尤其是针对合同第八条“企业职工患病或者非因公负伤医疗期间，当月实发工资在扣除个人应缴纳的各项社会保险后，不得低于本合同规定行业最低工资标准的80%。”企业方代表认为，只能支付武汉市最低工资标准的80%。“实在谈不下去时，只好休会。”周国华说，谈判双方分别开起“会中会”。经过反复休会、分头商议，职工方代表的建议最终被采纳。

企业方代表刘国梁：

起初，反对的声音很激烈

“和职工方代表谈判3轮，我们给各个企业做工作多达五六次。”武汉市餐饮协会会长、小蓝鲸酒店董事长刘国梁说。在集体合同出台的过程中，武汉市餐饮协会征求了数百家企业的意见，其中既包括规模很大的酒店，也包括只有几张桌子的小餐厅。“一开始，反对的声音很激烈，但通过沟通和做工作，大家认识到，尽管从短期来看，会增加支出，但长远来看，对行业的整体发展是有好处的。”

刘国梁认为，遵守集体合同的相关规定，既能擦亮企业品牌，又能提高企业家形象，最重要的是能稳定员工队伍，对缓解用工荒有积极作用。“总的来说，我是乐观的。”刘国梁说，执行集体合同可能对一些中小餐饮店有难度，“但市场调节会形成倒逼机制，人家都涨了工资你却不涨，员工就会‘用脚投票’。”

餐馆服务员：

合同内容好，能否做得到

“整体来看，将对武汉餐饮行业健康发展产生积极影响。”湖锦娱乐发展有限公司办公室主任谢华柱表示，该酒店员工的最低工资已经高于合同规定的最低工资，落实合同内容问题不大。餐饮行业用工量大，没有好的待遇，很难留住人。“该合同的出台，对中小餐饮店来说是一种压力，可能导致武汉餐饮业重新洗牌。”

周国华也估计，约5%的小餐饮店可能会被市场淘汰。

记者走访了武昌、汉口的多家小餐馆，发现员工工资一般都能达到合同规定的最低月薪1196元，但也有一些餐馆的洗碗工收入很低，月薪不到900元。

武昌东亭路上一家餐馆的负责人彭先生称，该店员工的最低工资都达到合同的要求，但对于“今年工资涨幅不低于9%等规定”，落实起来就有一定困难。

不少小餐馆的服务员看了记者打印的合同内容后表示，合同内容虽好，但不知道能不能落实，她们经常加班，没有加班费，餐馆也没有给她们买社保、医保。

家住汉口古田的龚先生担心，酒店员工的收入不断提高，增加的这部分成本会不会转嫁到消费者头上？

3项措施促进合同落实

武汉市有近4万家餐饮企业，中小企业占到84%，常态从业人员达45万人，其中八成企业只在乎保证大厨和服务总监等高端员工的福利待遇，普通员工的权益缺乏保障。2009年底起，省总工会、武汉市总工会开始推动餐饮行业工资集体协商。但当时受全球金融危机影响，时机并不成熟。

随着全球经济回暖，就业难变成用工荒。“餐饮企业也逐渐意识到要突破发展瓶颈，进行工资集体协商的时机成熟了。”周国华说。

周国华表示，在执行《武汉市餐饮行业工资专项集体合同》的情况下，还鼓励区域性餐饮企业结合当地情况进行二次工资集体协商，一些具备条件的餐饮企业进行企业内部三次工资集体协商。

如何确保集体合同得到执行？周国华说，目前合同正在报武汉市劳动部门审批，一旦通过，将具有法律效力；同时，武汉市餐饮业协会将组织企业家们集中学习合同内容；武汉市总工会则将加强对职工的教育和培训，在餐饮企业中普遍建立工会组织。

武汉市委常委、市总工会主席朱毅表示，将逐步在全市推广区域性行业性工资集体协商，整合政府、协会组织、工会各方面资源，形成推动工资集体协商工作的合力。

上述信息来自新闻报道，未加任何修改，为下面的解析提供素材。

二、对上述信息的法理解析

（一）该集体合同谈判双方的代表权产生缺乏程序正当性

从谈判双方代表产生方式上看，是由武汉市总工会指定的，具有强制命令的色彩，与集体合同主体双方的地位平等、自主自愿协商的内在要求相违背。

从具体的代表者来看，职工方的谈判代表缺乏代表资格。在武汉市总工会“以上代下”的指令下，确定“武汉市商贸金融烟草工会联合会代表职工方”，“子非鱼，焉知鱼之乐？”首先，商贸金融烟草工会联合会能否代表餐饮业职工利益？如何证明其能够代表？代表的一般原理是由被代表者出于真实的意思表示授权给代表人，此处显然违背了代表的一般法理。未经授权的人如何能够代表餐饮业者的利益。其次，商贸金融烟草工会联合会是否真诚的愿意代表餐饮业工人参与谈判。这关乎其参与谈判过程中的行为，确实是为了餐饮业职工的正当利益而行为，否则难免会有勉力为之的不堪之处。

餐饮业业主方面的代表武汉餐饮协会在代表权上也是有瑕疵的。餐饮协会与雇主协会的功能是不同的，尽管其中主要成员和参与者与雇主协会的成员有重合的。餐饮协会宗旨是行业的全面、良好持续发展，在本行业内有一定的规则制定权和执行权、处罚权的。雇主协会主要是为了与餐饮业工会谈判处理与劳动标准相关的事宜，通过其与餐饮业职工工会的协商、沟通以及妥协，达成与劳动者利益密切相关的合同条款，双方自愿达成协议，自愿履行集体合同的各项权利义务。雇主协会与工会在法律地位上是平等的。

由于在代表的产生方式和程序上存在严重的缺陷，在此基础上进行的集体谈判和签订的集体合同，非常具有中国特色，却无法令人乐观，既违背了代表的常识性意义，也不符合集体谈判和集体合同签订的法理性意义。

（二）关于谈判时机的说法有待商榷

集体谈判而签订集体合同的制度在劳动法领域中，不仅仅是保护劳动者的，也同时是协调劳资双方利益的重要机制。在劳动基准法确定的最低基准上，劳资双方根据社会整体经济发展状况和企业自身的经营情况，定期进行集体谈判，适当变更双方权利义务的条款，是企业适应市场波动状况的方式。因此，集体谈判的时机并不一定是在经济回暖的时候。本新闻的说法容易给人造成偏见，即集体合同仅仅是保护劳动者的，甚至会损害雇主利益，因此只能在经济回暖时谈判签订。若此说正确，那么在经济危机时，集体谈判便不可能进行，雇主必须按照经济景气时的标准提供劳动待遇。显然，这是不公平的，同时也是有害于经济发展的。

此处，关于集体谈判时机是否成熟是由武汉市总工会确定的，在一定意义上，是一种越粗代庖的行为，同时也是没有尽到上级工会对下级工会的组织、组建和必要的教育义务的体现。从新闻中可以看出，餐饮业的职工一般都达到了集体合同所定的每月1196元工资标准，已经超出了武汉市最低工资标准每月900元。由此看来，该集体合同的工资条款对职工的意义不大。在没有集体合同的情况下，是劳动力供求的关系促使雇主接受了劳动力的市场价格。而上级工会要帮助所有工人和下级工会组织去掌握本行业的发展状况、利润率以及职工的劳动对利润的贡献大小，由此帮助职工及其代表能够提出合理的谈判诉求，并培训职工和下级工会的判断谈判时机、理性谈判能力和谈判策略。

（三）由此探索建立工资集体协商机制，属于舍本逐末

由类似行政机构的武汉市总工会以行政指令的方式确定集体双方并通过问卷调查、草拟文本、公示征求意见、再次修改的方式来签订集体合同，并以此为经验探索建立工资集体协商机制，属于舍本逐末的行为，其与集体合同制度的立法目的背道而驰。集体合同制度立法宗旨是在国家法定劳动基准之上，赋予劳资双方主体地位平等、因时因地因企业而制宜的解决利益冲突的平等协商机制。其根本在独立而有谈判能力的工会和独立而尊重工会平等地位的雇主协会以及严谨而理性的谈判程序。舍此，则无集体谈判。

由此可以看出，全国总工会仍然没有走出计划经济体制的思维模式，习惯于行政指令式工作模式，满足于表面形式的成绩，没有积极主动的意愿按照市场经济的逻辑履行工会职能。舍本逐末的行为必然造成工会向市场经济体制转型之路漫长！

（四）《武汉市餐饮行业工资专项集体合同》更像一个地法立法，不像自主协商而达成的合同（文本参见附录）

通过平等主体自主协商达成协议而签订的集体合同，基本条款应包括合同主体双方、合同期限、合同主体双方的各项权利义务以及权利义务的旅行方式、义务主体违反合同义务的责任、双方就合同履行和责任追究所选择的纠纷解决方式。对照这些属于合同的最基本条款，可见武汉市餐饮行业工资专项集体合同名义上用了“合同”一词，实质上却与合同条款相去甚远，更像一个单行地方立法。从而显得不伦不类。从被代表者餐饮业职工的担忧中就可以看出，他担忧该集体合同不能得到很好的执行。

在社会生活中，人们基于诚信自愿达成的协议往往能够得到较好的履行，因为协议反映了双方的利益，也是对承诺的信守。由于《武汉市餐饮行业工资专项集体合同》的出台过程未能遵循集体合同的原理，导致其类似一个外部强加给餐饮业的规范，必然面临强加者如何保证其实施的问题，餐饮业员工和业主反而成了一个被实施的对象，而不是自主自愿的信守合同的行为。违背集体合同的原理推行集体合同制度一方面扭曲了集体合同制度，另一方面增加了社会成本，却并未能够实现所期待的社会效果。

在劳资关系中，很多权利义务的配置问题不是外部力量能够合理解决的，必须由其主体双方在力量相对均衡的条件下通过多次博弈、妥协，最后理性接受一个合理的方案。显然，《武汉市餐饮行业工资专项集体合同》的出台过程中，员工方面的自我组织、自我行动和自我利益决断等自主性参与缺失，不能为集体协商和集体合同签订提供具有借鉴价值的经验，反而助长行政化的总工会的政绩意识，不从根本上着手，仅注重形式上的集体合同签订的数量。

（五）工会对职工教育义务的缺失，使职工对自身权益的认知不足

武汉市总工会应承担在工会组织和谈判等方面的教育职能以及持续性的指导基层工会活动的义务。从《武汉市餐饮行业工资专项集体合同》过程中，反映出武汉市总工会宁愿采取“捷径”，不愿意扎扎实实的教育、发动和组织餐饮业员工参与集体合同谈判，却让其他行业的工会代表员工谈判，在中国大陆诸多荒谬的事情上，又增添了一个中国特色的荒谬。

职工权益是广泛的，同时有合理限度的。其广泛性表现在权益内容的繁多，例如平等就业权、自主择业权、报酬权、安全权、职业培训权、决定劳动关系存续的权利、民主管理权、团结权、社会保险权等。这些权益的限度是其权利内容受到社会经济发展的状况、国家法律政策的公平度以及用人单位具体的经营状况等因素的影响，在具体实现程度上需要一个理性的沟通和妥协。在中国大陆，关于职工权益强调个体劳动关系的权利较多，而对集体劳动关系中的集体劳权有故意淡化甚至压制的现象。

武汉市总工会没有对基层员工在理性能力、谈判能力、法律认知能力和自我利益判断能力方面发挥教育功能，使很多员工要么不知道自身权益的内容，要么对权益的内容有超出限度的欲求，前者员工的利益非常容易遭到侵害而没有得到救济，后者员工在超出限度的欲求不能满足时，陷入长期的讼累之中。

三、中国大陆最低工资保障的缺失

最低工资保障是中国大陆工资保障制度的一个基础组成部分，是指当劳动者提供了正常劳动时，用人单位必须支付给劳动者劳动报酬的最低标准。最低工资制度也是劳动基准法的重要组成部分，其立法宗旨是保护劳动者作为人的基本生活保障，防止资方利用其强势地位无限压低工资的可能性。在此意义，最低工资制度有非常积极的意义。然而，从中国大陆最低工资制度实践过程中，存在诸多的问题，与最低工资相关的其他劳动基准没有完全执行，使最低工资制度的积极意义没有充分发挥出来，相反，资方利用该制度侵害劳动者权益。

（一）最低工资标准分档过多，公平性不足

中国大陆最低工资标准制定权授予省级人民政府，为了与各省经济发展状况相适应，这样各省的最低工资标准相差较大。在实际操作中，各省政府又在本省不同区域划分出若干区域，分别制定最低工资标准，导致在一个省内的不同地方工作，其最低工资也有较大区别，其公平性严重不足。虽然，在一个国家内分出30多个最低工资标准已经缺乏公平性了，但还有部分合理性，在一个省内又分为若干区域，尽管其经济状况确实有一些差别，但是人们在生活、子女培养以及劳动者自我提升的费用差别并不大，且人们在一个省内的流动是非常普遍的，其消费也是遍及本省内的，例如一个人可能在最低工资标准低的区域工作，而他的孩子可能在中心城区就学，其费用远远高于户籍在中心城区的孩子，该劳动者的负担就会更重，然而其最低工资标准却是较低的。因此，在一个省内划分多个最低工资标准的公平性严重不足。

湖北省分区域最低工资标准

最低工资标准（元/月）	适用范围
900元/月 9元/小时	武汉市江岸区、江汉区、硚口区、汉阳区、武昌区、洪山区、青山区。
750元/月 8元/小时	武汉市东西湖区、汉南区、蔡甸区、江夏区、黄陂区、新洲区；黄石市市区、大冶市；十堰市市区；宜昌市市区；襄樊市市区；荆州市市区；孝感市市区；黄冈市市区；荆门市市区；鄂州市；随州市市区；仙桃市；潜江市。
670元/月 7元/小时	丹江口市、郧县；夷陵区、宜都市、当阳市、枝江市；襄阳区、枣阳市、宜城市、老河口市、谷城县；石首市、松滋市、公安县、江陵县、监利县、洪湖市；汉川市、应城市、云梦县、安陆市；浠水县、武穴市、黄梅县；钟祥市、京山县、沙洋县；咸宁市市区、嘉鱼县、赤壁市；广水市、随县；天门市；恩施市、利川市、建始县。
600元/月 6.5元/小时	阳新县；房县、竹山县、竹溪县、郧西县；兴山县、秭归县、远安县、长阳县、五峰县；南漳县、保康县；大悟县、孝昌县；红安县、麻城市、罗田县、英山县、蕲春县、团风县；通城县、崇阳县、通山县；咸丰县、巴东县、宣恩县、来凤县、鹤峰县；神农架林区。

（二）最低工资标准成了企业低工资的保护伞

自从实施了最低工资制度后，很多企业在与劳动者签订劳动合同时，都是以最低工资标准作为合同约定工资，且很多用人单位的工作时间超过了法定工作时间标准，因此，劳动者的劳动待遇实际上达不到最低工资标准。且劳动者无法提出更高工资要求的，用人单位也不会因为给付工资低于劳动者的劳动贡献而被追究。最低工资标准成了低工资的保护伞。在没有集体劳权保障的情况下，这种情况在短期内难以有根本改变。

（三）最低工资标准形成机制有待完善

目前各省级政府在确定最低工资标准时，由省劳动行政部门、省总工会和用人单位三方代表组成的小组来确定。目前，工会的代表性不足，无法真正代表所有的劳动者利益。在中国大陆，产业工会和地方总工会在人员配备、机构设置以及运作模式上都是一个行政机构，严重官僚化，脱离基层劳动者，其对劳动者切身利益了解不真切，又因其职位、待遇、升迁都取决于官方，其行为往往与官方保持一致，而官方以GDP为导向的发展模式，使政府往往倾向于保护用人单位的利益。这样，劳动者的利益不能在确定最低工资标准中充分体现出来。劳动者真正能够选举自己的利益代表之日，最低工资制度才能发挥其积极意义。

附录：

武汉市餐饮行业工资专项集体合同

第一条 为维护职工合法权益，促进劳动关系和谐稳定，推动我市餐饮企业健康发展，根据《工会法》、《劳动合同法》、《集体合同规定》、《工资集体协商试行办法》、《湖北省集体合同条例》等法律法规的规定，结合我市餐饮行业实际情况，由武汉市商贸金融烟草工会联合会和武汉餐饮业协会分别代表武汉市餐饮行业职工方和企业方，经平等协商，达成一致，签订本合同。

第二条本合同对武汉市行政区域内的餐饮企业（以下简称企业）和餐饮企业从业职工（以下简称职工）具有法律约束力。企业与职工订立的劳动合同中有关劳动报酬标准不得低于本合同的规定。

第三条工资分配制度

企业以岗位职责、工作绩效、经营风险为主要依据制定的工资分配制度，严格执行国家最低工资保障制度，以及国家劳动法律法规和政策关于工资及职工福利的规定。

企业工资分配制度遵循同工同酬、注重知识与技能、多劳多得、合法合规的原则，使工资与责任、利益、风险挂钩。工资分配制度中的工资分配原则，工资分配方式，以及工资、奖金、津贴、补贴等分配办法，要确保透明。

企业制定、调整、实施涉及工资分配制度等职工权益的方案，应听取工会意见。制定、调整涉及工资分配制度等职工权益的方案须经职工代表大会或职工大会审议通过后实施。

第四条工资支付办法

企业遵循按时足额、优先支付的原则，在每月固定日期，以货币形式按月支付职工工资，不得克扣和拖欠。工资支付日逢节假日、双休日时，应在该节假日、双休日前发放工资。

第五条最低工资标准

企业职工在法定工作时间内提供了正常劳动，每月工资不得低于本行业最低工资标准。

本行业最低工资标准为武汉市最低工资标准的130%。具体为：

工作地点在中心城区（江岸区、江汉区、硚口区、汉阳区、武昌区、青山区、洪山区、武汉经济技术开发区、东湖新技术开发区、东湖生态旅游风景区），最低工资标准为每月1170元；

工作地点在新城区（东西湖区、汉南区、蔡甸区、江夏区、黄陂区、新洲区），最低工资标准为每月975元；

本行业同类岗位最低工资标准具体为（分为工作地点在中心城区或新城区）：

1、厨师长，每月工资中心城区为2184元、新城区为1819元；

2、中式烹饪人员，每月工资中心城区为1560元、新城区为1299元；

3、中式面点人员，每月工资中心城区为1430元、新城区为1191元；

4、西式烹饪人员，每月工资中心城区为1430元、新城区为1191元；

5、西式面点人员，每月工资中心城区为1729元、新城区为1440元；

6、营养配餐员，每月工资中心城区为1534元、新城区为1277元；

7、厨房打荷工，每月工资中心城区为1430元、新城区为1191元；

8、餐厅服务员，每月工资中心城区为1222元、新城区为1017元；

9、餐具清洗员，每月工资中心城区为1196元、新城区为996元；

10、前厅服务员，每月工资中心城区为1248元、新城区为1039元；

11、迎宾员，每月工资中心城区为1248元、新城区为1039元。

本合同所述最低工资标准，不包含下列项目：延长工作时间的加班工资；中班、夜班、高温、低温、井下、有毒有害等特殊工作环境条件下的津贴；法律、法规和国家规定的劳动者福利待遇等。

第六条工资增长机制

企业以本合同规定标准为底线，参照劳动力市场工资指导价位、工资指导线、武汉市职工平均工资水平，综合考虑湖北省城镇居民物价消费指数，根据本单位经济效益建立职工工资正常增长和调整机制，使职工工资随企业经济效益的提高而正常增长。

本行业各企业2011年度职工工资增长不低于9%。

第七条加班工资

企业安排职工加班，所支付的加班工资标准按照国家有关规定执行：

（一）安排劳动者延长工作时间的，支付不低于工资的百分之一百五十的工资报酬；

（二）休息日安排劳动者工作又不能安排补休的，支付不低于工资的百分之二百的工资报酬；

（三）法定休假日安排劳动者工作的，支付不低于工资的百分之三百的工资报酬。

职工月加班工资基数不得低于职工本人上年度月平均基本工资。

第八条企业职工患病或者非因公负伤医疗期间，当月实发工资在扣除个人应缴纳的各项社会保险后，不得低于本合同规定行业最低工资标准的80%。

试用期职工工资不得低于同岗位最低档工资或者劳动合同约定工资的80%，并不得低于本合同规定行业最低工资标准。

企业依据规章制度对违纪职工实行经济处罚时，其每月工资在扣除个人应缴纳的各项社会保险后的剩余部分不得低于本合同规定行业最低工资标准的70%。

第九条工作时间和休息休假

实行劳动者每日工作时间不超过八小时、平均每周工作时间不超过四十小时的工时制度。

企业由于经营需要，经与工会和劳动者协商后，可以延长工作时间，一般每日不得超过一小时；因特殊原因需要延长工作时间的，在保障劳动者身体健康的条件下，延长工作时间每日不得超过三小时，但是每月不得超过三十六小时。企业保证职工每周至少休息一日。经人力资源和社会保障部门批准实行综合计算工时制的企业除外。

职工休假按有关法律规定执行。

第十条在工资、奖金和福利待遇方面，实行男女同工同酬，企业不得因女职工结婚、怀孕、生育、哺乳等情形，降低女职工的工资；怀孕28周以上的女职工，经用人单位批准，可请假休息，休息期间的工资按有关法律规定执行。

第十一条职工保险

企业按照国家和武汉市的有关规定为职工缴纳养老、医疗、失业、工伤、生育各项社会保险费。

第十二条职工福利

1、企业为职工免费提供工作餐；

2、服装补贴；

3、住房补贴；

4、其他福利补贴；

5、体检：企业定期安排职工进行身体健康检查，通常每年一次，并承担全部费用。企业应采取措施为职工安排传染病、流行病、职业病、工伤等的预防和治疗。

第十三条  本合同履行过程中，因为情况的变化和发展，需要对合同进行修改变更的，经双方协商一致，可以进行部分修改变更。

第十四条  企业违反本合同规定，损害职工合法权益的，应依法承担相关责任。职工违反了企业的有关制度也应承担相应的责任。

第十五条  本合同自双方代表签字之日起7日内由武汉餐饮业协会负责报送武汉市人力资源和社会保障局，经武汉市人力资源和社会保障局依法审查通过后生效。

市人力资源和社会保障局收到合同文本之日起满十五日未提出异议的，本合同自行生效。

本合同有效期为2011年 月 日至2012年 月 日。

本合同期满，双方按规定协商重新签订。

武汉餐饮业协会                    武汉市商贸金融烟草工会联合会

首席代表（签字）                  首席代表（签字）

协会盖章                            工会盖章

2011年  月  日                    2011年   月    日

SECTION IV        SOCIAL ASSISTANCE

 

An Economic and Labor TOR for an Integrating Asia

Rene E. Ofreneo*

Abstract

 

This paper argues that the twin labor demands for universal social protection and a just Asian floor wage must be linked to the demand for the full observance of core labor rights as well as the campaign for balanced and sustainable development for all in a post-GFC world.  Without binding governments and transnationals (TNCs) to these intertwining demands, global companies will simply go on with their merry-go-round program of hopping from one country to the other in search of cheap and union-free production oases.  The experiences of some unions to force full company compliance with the declared CSR programs of their TNC partners have led to closures and job losses instead of social and labor upgrading because the TNCs simply decide to look for new production sites.  On the other hand, one major weakness of the ILO’s Decent Work campaign and Global Jobs Pact program is their failure to articulate more forcefully the inter-linked issues of universal social protection, global/Asian floor wage and people-centered development framework. The point is that the Race to the Bottom can and should be transformed into a Race to the Top. 

 

Introduction:

Debating the rules for a post-GFC global economy

In 2009, the world was at the vortex of the worst global financial crisis (GFC) to hit the global economy since the Great Depression of the 1930s.   Exports, jobs and GDP in many developed and developing countries shrank ominously.  With the IMF-World Bank group unable to cope with the GFC and the WTO  stalled in its decade-long Doha Round talks, the Group of 20 (G-20), composed of the 20 biggest economies worldwide, virtually became the world’s economic  committee with a self-assigned mission of putting some order in a chaotic global economy.  The G-20’s mandate to address the GFC was questionable; however, this was hardly questioned by many public commentators because the reality was that the world was literally at the cliff of a financial and economic Armageddon.

And yet, something positive emerged out of the 2007-2009 GFC and the ensuing series of G-20 meetings: an almost universal recognition by policy makers — in Asia and in the world — that unregulated finance capitalism and unbridled economic globalization of society are unsustainable.  Some G-20 leaders like the former UK Prime Minister Gordon Brown openly proclaimed that economic neo-liberalism or free-market fundamentalism, which is at the roots of the GFC, is dead.  Overnight, almost all the G-20 leaders became Keynesian and engaged in what is now popularly called as “stimulus spending”, or deficit spending aimed at saving big banks and big industries in their respective countries.  Also, a key item in the G-20 agenda meetings was the formulation of the new rules to tame global financial speculation and the toxic hedging industry it has spawned.

Meantime, across the Pacific, at the US heartland, an ashen former Federal Reserve Chairman Alan Greenspan sheepishly admitted to the US Congress that he was wrong in pushing for and presiding over financial deregulation, which gave birth to disastrous toxic products such as CDOs, derivatives, swaps and varied hedging instruments.  The US Congress itself formally inquired into the GFC and debated what should be the new rules of financial and economic globalization.  Early this year, the US Congressional Financial Crisis Inquiry Commission released a voluminous report (National Commission on the Causes of the Financial and Economic Crisis in the United States, 2011) whose findings did not surprise anyone.   One of the Commission’s major conclusions (p. xvii) reads as follows:

 “We conclude this financial crisis was avoidable.  The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire.  The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public.  Theirs was a big miss, not a stumble.  While the business cycle cannot be repealed, a crisis of this magnitude need not have  occurred.  To paraphrase Shakespeare, the fault lies not in the stars, but in us.”

                                           

And yet mid-2011,

 post-GFC rules still being debated

and recovery burden being shifted to workers

 

And yet today, mid-2011, the world is still debating the rules for a post-GFC world.  In America, the regulatory reform known as the “Dodd-Frank rules” has become a “disappearing act” (Braithwaite and Duyn, 2011).   This is so because the financial team of Timothy Geithner and Lawrence Summers has been implementing the reforms in a gingerly fashion, meaning not forcing the big errant banks to abandon the old ways of speculating.  In fact, the trading of toxic hedging financial instruments has remained, subject only to some rules.  In the G-20 as a whole, the financial regulatory reforms are focused mainly on how to increase the reserve requirement of banks to minimize risks, not to abolish these toxic financial products.

 

Worse, some of the rules being debated and proposed today totally ignore or trifle with the truths about the root causes of the crisis.  The rules being advanced by “born-again” conservatives in many parts of the world seek not only to preserve the hegemonic and unhampered rule by the big TNCs but also, and terrifyingly, to shift the blame for the GFC on the so-called “entitlements” of the working peoples.  These “entitlements” happen to be the basic right of the working people to have a fair share of the fruits of their collective labor through the exercise of their basic rights to form unions and negotiate collectively for better terms and conditions of work.  These “entitlements” also include the basic right of workers to social security and decent life in old age.  Thus, we are witnessing in America how one Republican state after the other is dismantling the rights of public sector employees to conclude collective bargaining.  In Europe, we are witnessing how the European leaders are pushing for a so-called “austerity solution”, which meant downsizing of the social security system, in the PIIGS countries (Portugal, Ireland, Italy, Greece and  Spain) and even in the non-crisis countries like France.

In Asia, we are witnessing how governments have been enacting laws or adopting rules aimed at emaciating and further marginalizing the trade union movement. For examples, South Korea withdrew the right of full-time labor leaders to be in the payroll, obviously to isolate the leadership of the trade union movement from its members. In New Zealand, where labor law reforms reversing the deregulation policy of the 1990s are still being institutionalized, the government sought to please Warner Brothers by interpreting in a one-sided manner that actors and screen writers can not form unions because they are independent contractors.

Clearly, the challenge to push governments everywhere for the universal recognition and affirmation of the basic rights of workers everywhere has never been so urgent.  The present campaign of AROSS and other groups for Asian governments to accept the “Asian social minima” in the areas of social security and minimum wages are at the center of the broader campaign for the universal observance of the basic universal rights of the workers.

In this paper, the author argues the need to intensify the debate with the Asian policy makers that the primary lesson of the GFC is how to reverse the Race to the Bottom, not how to deepen it, as what the neo-cons seem to be doing in Europe and America.  Second, the Asian clamor for universal social protection and an Asian minimum wage floor are indeed the social minima needed to stop and reverse this Race to the Bottom.  And third, these minima require an accompanying campaign for respect for the right of Asian workers to enjoy fully freedom of association and collective bargaining.

Global race to the bottom is at the roots of the GFC 

No tortured documentation of the disastrous impact of the Great Recession of the New Millenium is needed. In 2009, Bloomberg (cited in Nand, 2010) summarized in figures the world’s 2008 losses from the GFC in the context of other indicators, e.g., US GDP and so on (see Figure 1).  It is indeed the biggest financial crisis of all times.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 1.

No tortured documentation of the GFC’s impact on employment is also needed.  When the GFC was officially admitted by the OECD in the second half of 2008, the ILO estimated the global job losses would reach over 20 million.  This number was quickly dumped as the number of the displaced workers in theUnited Statesand Europe rapidly rose by the millions and the total for the officially dislocated inChinaalone reached 20 million.  Thus, in January 2009, the ILO raised the projected total job losses to reach over 50 million worldwide. Today, the job crisis has deepened in Europe, particularly in the PIIGS countries, where unemployment is hovering between 10 to 20 per cent.

In Asia, the recent ILO Report (Building a sustainable future, 2011, p. 4) gave the following unemployment/underemployment and displacement data in the region:

“In many countries, the grim unemployment picture is aggravated by poor working conditions.  Many workers have low-paid jobs with intermittent and insecure work arrangements, often in informal employment:  in 2009, 60 per cent of workers were in vulnerable employment[100] – more than 1.1 billion.  Asia and the Pacific also accounts for almost 73 per cent of the world’s working poor. Some 868 million – around 46 per cent of the region’s workers – live with their families on less than US$2 per day, of whom 422 million live in extreme deprivation on less than US$1.25 per day.” 

The most affected countries in terms of GFC-related job displacement happen to be those most directly involved in economic globalization – China, India and the Asian NICs, especially Singapore.

Downgrading labor, social and

Environmental standards

 

But back to the root cause of the GFC – the Race to the Bottom (R2B), which is not mentioned in the minutes of the various G20 meetings on the GFC.   As discussed in past AROSS conferences, the  R2B means the efforts of the TNCs and big national firms to ignore global labor, social and environmental standards in their blind pursuit of global profit-making activities.  Such a race to the bottom explains the terrible weakening of the labor movement almost everywhere as global capital flies in and out of deregulated national markets in search for the cheapest production platforms, which include union-free export processing zones (EPZs).  This even pits host countries against each other in their frenzied drive to attract global capital by sacrificing global and national labor, social and environmental standards.

 

Speculation, overproduction, underconsumption

 

Eventually, the R2B evolved in the last two decades into excessive speculation-financialization of anything tradable, including the imagined future values of commodities and the bundles of so-called “collaterized debt obligations” of faltering borrowers. This phenomenon is facilitated by the neo-liberal SAP program of market deregulation or the worship of unregulated “free markets” dubbed in the 1990s as the “Washington Consensus”.   Super profits extracted by the few in their Factory Asia and global value chain operations are further invested, Ponzi-style, in leverage or hedging funds.

As the 1997-98 Asian financial crisis and the 2007-09 GFC show, the financial bubbles are bound to burst and hit, domino-like, everyone involved in these intricate and intertwining processes of financialization, speculation and production based on R2B.  At the same time, these processes have caused a huge imbalance in the global supply and global demand.  The global “overproduction” of goods, especially those produced by the TNCs under their Factory Asia in China and other countries, finds the market narrowing because of the global “underconsumption” of the same goods because the workers and farmers producing these goods have declining wages and incomes under an unequal and unjust R2B.

As discussed in previous AROSS conferences, this global overproduction-underconsumption pattern engendered by the R2B is easily validated by the widening gap in many countries between rising labor productivity and labor compensation.  Major global reports by the UNDP (1999, 2006), the  World Commission on Social Dimension of Globalization (2004) and the ILO’s global wage reports all show rising global productivity and GDP, accompanied by deepening inequality, declining share of wages in global productivity, rising joblessness in some countries, and weakening unions everywhere.

Putting people at the center of development

Clearly, the post-GFC global economy requires deeper and bolder changes in the global economic architecture and the way it is governed.

A guiding reform principle should be how to put people at the center of development.   This means abandoning the neo-liberal framework of economic programming that literally worships on the abstract altar of free trade, on the so-called free interplay of global market forces unmindful of the impact of such interplay on people’s lives and jobs and environment.  The neo-liberal narrow economic framework is at the roots of the devastating global race to the bottom, which, in turn, is at the roots of the GFC.  Hence, overhauling or setting aside this framework is necessary if one has to reverse this race.

Uncertain and anti-labor global solutions from the G-20

 

At this point, however, it should be pointed out that despite a series of meetings from 2008 to the present, the G20 has not come up with any major reform measures. Thus far, the boldest measures undertaken by the major economies are huge fiscal stimulus packages amounting to several trillion dollars.  And yet today, governments like that in theUnited Statesare debating on whether they should continue with the stimulus package or not.  In the meantime, there is no progress on the imposition of tighter financial regulations except for a recommendation by the Basel Committee on Banking Supervision to increase the reserve requirements banks must maintain without making any stand on the toxic financial instruments that were traded widely by the speculators.  As mentioned earlier, the Dodd-Frank regulatory reform for the financial sector in theUnited Stateshas been stalled, with the legislative backers of the big banks proposing a scuttling of the new regulations.

In the meantime, the solution being advanced in some countries comes in the form of the so-called “labor reforms”,  meaning further liberalization of the labor market and downgrading of protective labor rights such as social security coverage.  This is race to the bottom once again!  This is the reason why the American and European trade unions are up in arms — against the decimation of public sector collective bargaining rights in theUnited Statesand the subversion of the pension and social security system inEurope.

These “labor reforms” are non-reforms and run counter to the Keynesian and institutional prescription of more rights for workers to counter the cyclical downturns in the economy and stabilize society[101].  Instead of imbibing the Keynesian and institutional lessons and applying them to the GFC, some politicians want the stimulus spending to be directed to the bailouts of the big banks and the dismantling of the  social safety nets.

Hence, the urgency of developing a broader global consensus on sustainable reforms for sustainable global economy and environment.

ILO’s vision of sustainable globalization

One package of proposals comes from the ILO’s “Global Jobs Pact”, which was adopted by the International Labor Conference in June 2009.  The pact calls for

1)      “building a stronger, more globally consistent, supervisory and regulatory framework for the financial sector, so that it serves the real economy, promotes sustainable enterprises and decent work and better protects savings and pensions of people”;

2)      “promoting efficient and well-regulated trade and markets that benefit all and  avoiding protectionism by countries. Varying development levels of countries must be taken into account in lifting barriers to domestic and foreign markets; and”

3)      “shifting to a low-carbon, environment-friendly economy that helps accelerate the jobs recovery, reduce social gaps and support development goals and realize decent work in the process.”

The above ILO declaration is undeniably a good prescription for both the GFC and the global warming threat.   The problem is that these general proposals are still ignored by the G20.

On item one, a strong supervisory and regulatory framework for the financial sector is indeed not yet in place.  The IMF and the World Bank have not made any clearcut position on this, and has virtually remained silent in the midst of the emerging “currency wars” today.  They have also not intervened in the emerging right-wing offensive in Europe against the pension system of the working people.

On item two, there has been a proliferation of free trade agreements (FTAs) at the bilateral, regional and multilateral levels.  Both the United States and Europe are keen in pursuing their own bilateral or regional FTAs with the different Asian countries.  The latest American FTA initiative is the “Trans-Pacific Partnership” (TPP), which has strong anti-China geo-political overtones as the TPP seeks to involve Asian countries encircling China, e.g., Japan, Taiwan, Vietnam, Philippines and Singapore. Anyway, the problem with these FTAs is that they are generally formulated in a one-size-one-fits-all liberalization framework, with little regards to the flexibility requirements of developing economies and their special and differential needs (as envisioned in the WTO’s Preamble).

And on item three, there is virtually no progress as reflected in the failure of the Conference of Parties (COP) in Copenhagen in 2009 and Cancun  in 2010 to come up with measurable targets on climate change mitigation and adaptation.

The ILO’s Global Jobs Pact has also received limited attention in the international forums.  The Jobs Pact itself has been weakened by the diplomatic and vague generalities on decent work, social protection and labor standards.  The point is that there is a need for a radical break from the past, which should have happened in 2009, at the height of the global disillusionment with the neo-liberal framework, and yet, this did not happen.

Towards a new TOR for sustainable future

There is a need to have a stronger TOR for the global economy and.  It should contain the following minima:

 

Formal renunciation of neo-liberalism

The neo-liberal economic thinking should be formally debunked and renounced so that it can give way to the adoption of new economic approaches in global and national economic planning, project design and evaluation, environmental accounting and monitoring and so on.  What is happening in many places is that there is widespread implicit recognition of the failure of neo-liberalism and yet economic bureaucrats and technicians still continue the methodologies they have imbibed from the neo-liberals, for example, measuring or assessing the viability of economic projects by focusing on their ability to attract private foreign and domestic investment while ignoring the social dimension of the projects and the possibility of people’s informed participation in such projects.  In short, there should really be political, economic and environmental policy coherence.

 

Extending social protection to all

 

AROSS put it well:  Putting people at the center means extending lifelines to all, in particular social safety nets to the unemployed, displaced and the vulnerables and informals, all of whom are the leading victims of the GFC.  The primary contents of any economic stimulus package or post-GFC recovery should not only be economic revival measures (which can be jobless) but also the formal recognition and extension of minimum social protection for all. A system of universal social protection means a system which recognizes that no citizen should be allowed to fall in society because of deficiency in income, food, shelter, education and health, especially in times of adversity like accidents and job dislocations (ILO, 2001).   As pointed out, the European and global experience in the mid-20^th century shows that comprehensive social protection schemes serve as stabilizing as well as sustaining factors in the growth process, for they serve as natural counter-cyclical economic programs in crisis times by arresting the fall in the aggregate demand.

But can developing economies afford universal social protection?  CanAsiaafford it?  An ILO study (Social Security Department, 2008) shows that six percent of a country’s GDP is needed to meet the basic nets – essential health care, basic child benefits, universal old-age and disability pensions and at least 100-day employment a year – for all citizens of a society. The whole point is that no country is too poor not to be able to provide social security for all.  In fact, history shows thatEuropeembraced the concept of universal social security right after World War II, when most of them were in shambles. Of course, a social security floor, monetary-wise, has to be determined nationally.   But the general principles have to be universal.

The comprehensive social security proposal of AROSS (2009) – universal social assistance for the poor, a universal flat rate pension at 20 per cent replacement value, and workmen’s compensation,  minimum wage and unemployment insurance for all –  should enjoy the support of all in Asia.  This is the right step in reversing the Asian and global race to the bottom.

 

Enforcing universal standards of corporate behavior

 

The foregoing campaign for social protection and renunciation of neo-liberalism in policy making and project development should be accompanied by the global enforcement of ethical standards governing the behavior of TNCs and big national corporations.  The logic behind the Asian floor wage campaign and the Asian social minima campaign underscores the importance of  binding governments and corporations with global cross-border reach to these social and wage minima Asia-wide.  For what will prevent one corporation to avoid social and labor obligations if it has the freedom to fly in and out of different production sites in the region as amply demonstrated by the workers’ sad experiences in the garments industry?

The well-publicized CSR programs adopted by some big producers and buyers also appear to be selective in application.  First, there is a tendency to focus the CSR audit on the physical facilities of a cooperating contractor company, not on the social side, particularly on the employer relations with the workers and the treatment of their right to form union and bargain freely.  Second, there is a tendency to focus on the positive-looking segments of global or Asian production, hiding from public scrutiny the bad-looking segments of the whole value chain[102].  InCambodia, for example, there are factories with no names and no formal registrations that try to be invisible to the public and yet are supplying some of the requirements of companies registered under the ILO’s “Better Factory” program.  On the other hand, suppliers which fail to pass the CSR audits are simply abandoned by the TNC buyers, which relocate their buying operations in other countries instead of assisting the failing suppliers upgrade their operations.

The point is that there should be one universal code of corporate behavior that should be observed by all corporations.  This is a critical element in stopping and reversing the Asian and global race to the bottom.  The ILO’s Decent Work Agenda (DWA) promoting “productive work” obtained “in conditions of freedom, equity, security and human dignity” is laudable.   But this DWA is unattainable if the conditions that fuel the R2B persist and if corporations, especially the big ones, are not bound to a universal observance of universal or basic labor rights wherever they invest or conduct business.  There should be no ifs and buts on this.

At the same time, the promotion of the DWA and the universal observance of basic labor rights should not be seen as punitive.  Instead, they should be seen as the platform for a new global race, the Global Race to the Top. This  Race to the Top should, ideally, be based on the virtuous circle of stronger labor-management cooperation and partnership leading to higher productivity and competitiveness, which, in turn provides greater spaces for higher growth, employment and development for society.   In the informal labor markets, the Race to the Top entails assistance by governments, big corporations and civil societies in upgrading the business operations of informal enterprises side-by-side with the upgrading of the working conditions of informal sector employees.

The point is that there is a need to raise the bar of decency everwhere.  As Guy Standing (2010) argued correctly, all forms of work, including labor mobility and migration, should be the subject of universal rules of decency. This is so because the race to the bottom is deeply rooted in the ability of corporations under globalization to do away with national labor rules in favor of global, regional, national and industry flexibility, which often leads to downgrading of labor standards.

Four, fair and balanced trade

The narrow free-trade one-size-fits-all liberalization formula is no development formula and should be abandoned.  Asia and the world should cast aside the neo-liberal ideology of unregulated markets in favor of a more flexible, balanced and calibrated program of liberalization and protection in the economy on a sector-by-sector basis as needed, as propounded earlier by Khor (2000) and Rodrik (1997). This, in essence, is the meaning of the “special and differential treatment” (SDT), a proviso in the WTO repeated nearly a hundred times in the founding document.  SDT means not all countries are created equally and each has the right to pursue and plan development based on one’s level of development.  This means trading arrangements should be concluded based on the principle of  mutually beneficial exchanges, not an abstract free-trade system or an inflexible zero-for-zero tariff system which benefits mainly the big and powerful.  This also means investment programming and campaign for FDI should be based on a country’s real development needs for technology, market, value addition, etc.

Conclusion

 

The challenge of post-GFC recovery and economic sustainability raise the primal issue of social and labor sustainability.  These intertwining sustainability issues can not be addressed in a piecemeal manner without confronting the issues that fuel the Race to the Bottom.  In this context, the AROSS social minima campaign is a good initiative to arrest this Race to the Bottom.  But this campaign should be linked with the need to enforce basic labor standards in a universal manner and cast aside the neo-liberal dogmatism that persists in the world despite the silence of the neo-liberal prophets today.   Clearly, we need a new TOR on global integration, a  TOR for a Race to the Top, a TOR to reaffirm our collective humanity.

 

REFERENCES

 

AROSS, 2009.  “Position Paper on Asian Social Security System”, paper prepared for the Asian Regional Roundtable on Social Security 2009, Hong Kong.

Braithwaite, Tom and van Duyn, Aline, 2011.  “A disappearing act?”, in Financial Times,London: Financial Times Publishing, p. 7 (July 21).

International Labour Conference, 2009.  “Recovering from the crisis: a Global Jobs Pact”, Statement adopted by the ILC at its 98^th Session,Geneva.

International Labour Office, 2009. Global Wage Report, Geneva: ILO.

International Labour Office, 2001. Social Security: A new consensus,Geneva: ILO.

International Labour Office, 2011.  Building a sustainable future with decent work in Asia and the Pacific, Geneva: ILO.

ILO Social Security Department, 2008.  “Can low-income countries afford basic social security”, Paper 3,Geneva: ILO.

Kaufman, Bruce, 2004.  The global evolution of industrial relations: events, ideas and the IIRA, Geneva: ILO.

Khor, Martin, 2000. Globalization and the South: Some Critical Issues,Penang:Third World Network.

Nand, Dhameja, 2010. “Global financial crisis: impact, challenges & way-out”, in Indian Journal of Industrial Relations, New Delhi: Shri Ram Centre for Industrial Relations and Human Resources.

National Commission on the Causes of the Financial and Economic Crisis in the United States, 2011.  The Financial Crisis: Inquiry Report,New York: Public Affairs.

Rodkrik, Dani, 1997. Has Globalization Gone Too Far?, Washington: Institute for International Economics.

Standing, Guy, 2010.  “The International Labour Organization”, in New Political Economy, 15, 2,London: Routledge Taylor & Francis Group, June.

United Nations Development Programme, 2006.  Asia-Pacific Human Development Report 2006: Trade on Human Terms,Colombo: UNDP Regional Centre.

United Nations Development Programme, 1999. Human Development Report 1999.  New York: UNDP.

World Commission on Social Dimension  of Globalization, 2004.  A Fair Globalization: Creating Opportunities for All,Geneva: ILO.

 

Korea’s Workfare and Making Work Pay Policies:

the Way to Strengthen Income Security in a Less-developed Welfare State

     Deok Soon Hwang^*

Introduction

  The purpose of this study is to examine the recent development in Korea’s income security programs and find implications for developing Asian social security minima. Korea introduced two new income security measures since 2000: the National Basic Livelihood Security System (hereafter, NBLS) and the Work Promotion Tax (hereafter, WPT). The NBLS is a new social assistance system which replaced the old Livelihood Protection System in 2000, and the WPT is a new Korean style earned income tax credit (hereafter, EITC) which was introduced in 2008.

The introduction of the NBLS was a big step in the development of Korea’ s social security system since cash benefit for the able-bodied poor was first made with its implementation. The NBLS, however, integrates a strong workfare element in it. The able-bodied benefit recipients have to participate in self-support programs as a conditional recipient when he/she is not in a gainful employment. So, the NBLS can be called a workfare scheme which has spread in most developed welfare states in the name of welfare reform.

The WPT is a refundable tax credit for the working poor of which the purposes is to make work pay and then to promote the work incentive of the poor. The EITC in theUSis a most well-known program of this kind and many European countries also introduced one since mid-1990s. In most countries these programs were regarded as a part of comprehensive welfare reform initiative to reduce the welfare dependency of social assistance recipients by giving them positive incentive to escape from social assistance through getting a job.

The introduction of these two new income security programs inKoreamay be considered in a different context from that of developed welfare states since they can be regarded as extension of social security rather than reform or retrenchment of the existing social security programs. In this study the significance of the two programs will be discussed as well as the limitations and future policy directions to fully exert their role in enhancing income security for the poor. This study also deals with the statutory minimum wage which constitutes an indispensible part of Asian social security minima. Statutory minim wage might have played a great role in reducing income inequality resulted from polarization of market income and expansion of low-paid workers in 2000s.Korea’s minimum wage which was introduced in 1988, however, showed clear limitation in tackling this problem.

The organization of this study is as follows. In section 2, design and performance of the NBLS are spelt out and policy proposals from civil society and experts are suggested. Then section 2 deals with the WPT and its future directions. Section 3 is about the statutory minimum wage. The trends of its level and the challenges are set forth here. Finally, section 5 summarizes major suggestions and set forth implications for developing Asian social security minima.

The National Basic Livelihood Security System: combining social assistance extension with workfare principle[103]

 

  In 2000 social assistance changed from the Livelihood Protection System, which provided no cash benefits to people who were able to work, to the NBLS, which started to provide subsistence benefits to those able to work in 2000. This transition can be regarded as a paradigm shift inKorea’s welfare system. The transition was made with a sort of compromise of introducing a conditional benefit system for people able to work (Hwang, 2004a). Conditional benefits means that recipients of the NBLS who are able to work receive benefits if they participate in the Self-Support Program. Therefore, the NBLS is a typical form of a workfare policy.

 

Before the introduction of the NBLS, civil society demanded to guarantee a national minima for all people regardless of their ability to work. With the outbreak of the Asian economic crisis and subsequent massive unemployment it became clear that joblessness is not the fault of the unemployed. Before then, government insisted that joblessness comes from laziness or unwillingness of each individual to work. Rapid growth supported by the state-led economic development plan had been considered as a best social security in itself and had provided job opportunities actually for most people in the labor market except for disadvantaged groups such as the disabled or the elderly who need special public support. The bureaucrats in the economic department of the government as well as various groups with power in the society, however, resisted to reform the social assistance to guarantee minimum livelihood for able-bodied people.

Kim Dae-Jung government (hereafter, DJ government) that had taken power in 1998 proposed productive welfare policy as one of its national policy initiatives and decided to introduce the NBLS as a productive welfare program. This expression may make us recall the terminology of the ‘productivist welfare regime’ or the ‘productivist welfare capitalism’ which was used to describe less developed features the East Asia’s welfare regime (Holliday an Wilding, 2003; Gough, 2004), the real orientation of productive welfare was to extend social security, while minimizing the resistance of conservative groups. This is why the component of workfare such as conditional benefit system was integrated into the NBLS as a compromise. On the other hand, there are other groups that recognized the positive aspect of Self-Support Program in helping the poor stand on one’s own feet. With the introduction of the NBLS, it can be said thatKoreaemerged from a developmental welfare system (Gordon and Goodman, 1998) and set forth to a more developed welfare state.

Figure 1 shows the trends in the number of NBLS recipients. The introduction of the NBLS didn’t change the number of social assistance recipients seemingly since the number of total recipients was 1,420 thousands which is almost same as the number in 1997, 1,414 thousands. In 1997, however, the number of cash benefit recipients was just 374 thousands because the others were excluded from getting cash benefits as self-support recipients which means one of their household members are able to work. Therefore, the NBLS increased the number of cash benefit recipients about four times. The number of benefit recipients is 1,569 thousands and 3.2 % of the total population as of 2009.

Figure 1. Number of NBLS recipients and its proportion to the total population (2001~2009)

Note. In 1997 the number of Livelihood Protection System recipients was 1,414 thousands and the number of cash benefits recipients was 374 thousands. The proportion of cash benefits recipients to the total population was 0.8 percent (MOHW, 1998). Source. MOHW(2010a)

Although the NBLS changed the nature ofKorea’s welfare system, it is still far away from developed welfare states. The responsibility of the state to secure basic livelihood is still limited since the responsibility of family is large and the guaranteed level of livelihood is insufficient. The elderly household whose children can support his/her parents can not be protected by the NBLS and brothers and sisters who live together have support their siblings. This provision actually limited the number of benefit recipients to about one third of the needy households. So, civil society groups are demanding to remove or moderate the family support provision.

The level of guaranteed livelihood is also a hotly contested issue. Table 1 shows the minimum livelihood costs and compares them with average income of household by household size and average wage. The minimum livelihood cost which is the basis in determining the amount of benefits is around one third of average income of household of the same size. This is why civil society actively demands the readjustment of the minimum livelihood to a realistic level.

Table 1. Minimum Livelihood Cost and Average household Income (2010)

   (unit: KRW, US$, percent)

Household Size		One Person	Two Persons	Three Persons	Four Persons
Minimum Livelihood Cost	KRW(A)	504,344	858,747	1,110,919	1,363,091
	US$	436	742	960	1,178
Average Household Income (Total Household, KRW, B)		1,397,971	2,521,371	3,650,765	4,197,243
Average Earned Income (Employee Household, KRW, C)		1,588,954	2,478,432	3,291,446	3,901,470
Average Wage (D)		2,406(predicted value)
		36.1	34.1	30.4	32.5
		31.7	34.6	33.8	34.9
		21.0	35.7	46.2	56.6

Note: 1) Exchange rate:  1,157 KRW = 1US$ (2010 average)

2) The proportion of minimum livelihood cost of household with four persons to average wage is 61.8%

Sources. Minimum livelihood cost from MOHW(2010a). Average income from http://www.kosis.kr

Another important issue is the effectiveness of the Self-Support program since the NBLS is a kind of workfare program. As of the end of December 2009, among the 1.57 million NBLS recipients, only 2.3% or 35,708 were conditional recipients who fell under the scope of this form of workfare policy. Narrowing this group down, only 12.8% of the 279,022 people able to work were conditional recipients. The reason the percentage of conditional recipients is so low is that more than 80% of NBLS recipients were unable to work, whereas over half of the capable people were employed, or were exempted or deferred from the requirements because of household conditions and other reasons.

Conditional recipients are divided into employable recipients participating in the Self-Support Programs of the Ministry of Labor (MOL) or non-employable recipients participating in the Self-Support Programs of the Ministry of Health, Welfare and Family Affairs (MOHW). The majority of conditional recipients are non-employable recipients. The MOL’s programs are composed of typical labor market policy programs such as placement services and job training, whereas the MOHW’s programs are mostly self-support work. Most self-support work is conducted by private service contractors, the so-called Self-Support Centers, which are civic nonprofit organizations. The Self-Support work is a type of policy to enable job creation in the public sector, aiming to achieve self-support by starting a self-support community, which is a small joint business owned and managed by the recipients.

Figure 2. Status of the NBLS recipients (December, 2009)

Recipients of NBLS 1,482,719

882,925 Households

Quasi Poor group

People unable to work (1,203,697)

※ Institutionalized Recipients, etc. 85814 Total Recipients: 1,568,533

People able to work (279,022)

Participation Applicants (22,315)

Participation Applicants

Self-support Exemptions (5,158)

Conditional Recipients ※People with Provisions Applied (35,708)

Condition Deferred (37,023)

Exemptions from Conditions (199,272) Household Conditions: 58,893 Environment Adjustment: 12,870 Employed: 127,509

Non-employable Recipients (34,724)

Employable Recipients (984)

▼                                                                 ▼                     ▼                               ▼                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           ▼                                                                 ▼                                         ▼                                                                                                                                                                                                                                                                                                                                                                                                                  ▼

MOHW’s Self-support Program 76,780		MOL’s Self-support Program 2,327		Employed workers127,509
Participants: 75,675		Participants: 1,857		Workers: 127,509
·Self-support Work Programming: 62,404·Social Adaptation Program: 1,668·Self-Support Community, Self-employment Support: 9,603·Hope Project: 2,000		·Employment Success Package: 1,857·In Planning Process: 470		·Permanent Employment, Self-employment: 31,056·Temporary, Daily Work: 96,453

Note. ――― = Mandatory participation; ………… = Voluntary participation.

Source. MOHW (2010b).

On the other hand, in addition to a narrow range of workfare policy subjects, 22,315 participants from the quasi-poor group also voluntarily participate in the Self-Support Program. Because most of these people participate in self-support work, the program possesses the characteristics of a public job-creation program for the poor who have difficulty obtaining jobs in the private labor market. However, evaluations of the Self-Support Program are mostly negative in terms of whether it fulfills its goal of supporting recipients as they work toward self-reliance. Some recipients have tended to adapt to the NBLS. Table 2 shows that in recent years, the number of various forms of employed people among recipients participating in economic activities has declined, whereas the number of unemployed people has increased. Statistics based on working capabilities show that as of October 2001, 63.2% of people able to work were employed (Hwang, 2004), whereas Figure 2 shows that 45.7% were employed as of December 2009.

The fact that the Self-Support Program is ineffective in facilitating employment and lowering poverty stems not only from the problems of the program itself but also from systematic factors including the design of the NBLS. First, although beneficiaries of the NBLS receive subsistence, education, medical, residence, and other various benefits, such support is cut once they leave the NBLS. Without adequate supplemental systems to prevent people from staying in the final safety net, the NBLS, and to help them leave it, it is difficult to achieve the expected results.

Second, financial incentives to induce self-reliance through work are not provided. Since the total income from employment in the labor market is deducted from benefits when benefit amounts are calculated, the incentive to obtain employment in the labor market is reduced. This stems from budget constraints as well as the difficulty of identifying the actual amount of income earned in the labor market because many employed recipients work in the informal sector. In table 2, most employed recipients are working as daily workers or self-employed. Therefore, from another point of view, the key role of the Self-Support Program lies in controlling the illegal income of people able to work in order to maintain the fairness of the NBLS.

Third is the self-support program’s independence-strategy issue. The strategy focusing on maintaining and developing working capabilities through self-support work, which has the most weight, as well as developing self-support communities, which are based on self-support work to joint start businesses, cannot succeed without institutional foundations to support the development of the social economy.

Fourth is the fact that the operation of the Self-Support Program is not customized to its subjects. When looking at the composition of people able to work in Figure 2, we see that the majority of self-support subjects have physical and psychological limitations that make it difficult for them to find work in the labor market. To make these people self-supportive, self-support programs and strengthened case-management strategies are required. However, case management that regularly evaluates the demands of clients and leads them to appropriate programs doesn’t exist. The heavy workload of the local government public servants who are in charge of managing the NBLS makes it almost impossible. In addition, the Self-Support Centers in charge of case management do not possess the authority or the resources to do so. The role of the officials working in the Employment Support Centers is similarly limited.

Table 2. Working age Recipients’ Economic Activity

(unit: person, percent)

Year	Permanent Employment	Temporary Employment	Daily Employment	Self Employment	Farming/ Livestock Industry	Unemployed	Total
2001	21,133 (6.3)	33,730 (10.0)	145,471 (43.2)	52,089 (15.5)	4,818 (1.4)	77,816 (23.1)	337,058 (100.0)
2002	17,556 (5.8)	29,979 (9.9)	131,282 (43.3)	46,028 (15.2)	7,672 (2.5)	68,685 (22.7)	303,204 (100.0)
2003	15,769 (5.3)	29,571 (9.9)	127,712 (42.7)	41,428 (13.8)	10,281 (3.4)	72,640 (24.3)	299,404 (100.0)
2004	14,293 (4.7)	29,963 (9.9)	127,336 (41.9)	37,604 (12.4)	11,909 (3.9)	80,595 (26.5)	303,704 (100.0)
2005	13,965 (4.4)	31,640 (9.9)	131,102 (40.9)	34,943 (10.9)	12,972 (4.0)	94,015 (29.3)	320,642 (100.0)
2006	13,317 (4.1)	32,101 (10.0)	129,487 (40.2)	31,518 (9.8)	12,655 (3.9)	101,267 (31.4)	322,351 (100.0)
2007	12,795 (3.9)	32,283 (9.9)	127,670 (39.3)	28,936 (8.9)	12,479 (3.8)	108,774 (33.5)	324,944 (100.0)
2008	12,181 (3.8)	31,517 (9.9)	123,552 (38.8)	26,296 (8.3)	11,826 (3.7)	113,128 (35.5)	318,500 (100.0)
2009	12,644 (3.8)	31,966 (9.6)	124,545 (37.6)	25,441 (7.7)	11,036 (3.3)	125,852 (38.0)	331,484 (100.0)

Source. From MOHW (2010a).

The Work Promotion Tax: extending income security through a making work pay scheme^[104]

 

Koreaintroduced the WPT, its own EITC-type program in 2008 to provide more support for the working poor in response to the situation of the working poor, which had continuously worsened since the financial crisis of the late 1990s. Arguments for the introduction of an EITC-type program as a component of productive welfare that claimed to encourage welfare through work had existed since 2000 (Hwang, 2000), and finally enacted under the Roh Moo-Hyun government (hereafter, Roh government) in 2006. The Roh government succeeded to DJ government’s policy orientation in extending social security programs. Another important step toward a developed welfare state in Roh government was the introduction of the Long Term Care Insurance for the Elderly.

The significance of the WPT program is quite similar to that of the NBLS. Benefits for persons who are able to work, aside from recipients of the basic livelihood security scheme, were extremely limited inKorea, and the WPT program signified the expansion of cash benefits to persons who are able to work. Although the WPT program emphasizes the role of the market, it also lessens the formerly absolute reliance on the market and enables the government to play a greater role in protecting the livelihood of the poor.

In designing a program, the most important aspect is to determine its main purpose. The EITC programs can be designed to pursue a wide variety of goals. The EITC in theUnited Statesbegan as social-insurance subsidies for low-income groups, and was expanded by theClintonadministration to encourage the poor to work and to support low-income households with children. In theUK, the EITC was intended to provide work incentives and to protect children.

The Working Families Tax Credit was introduced in 1999 to provide work incentives to the poor while also providing support to children; and in 2003, the two goals were separately addressed by the two newly introduced simplified programs, the Child Tax Credit and the Working Tax Credit.

 

  Korea could also design the WPT program to address multiple goals, or to create specific effects in line with policy priorities and budget considerations. A simplified checklist of policy goals forKorea’s WPT would include work incentives for the poor and substantial income support, social insurance subsidies for the working poor, and support for children in households that are classified as working-poor households.

The policy goal of providing work incentives and substantial income support for the poor relates to encouraging social assistance recipients to leave social assistance and to addressing blind spots in the social assistance scheme, the NBLS. Providing social insurance subsidies to the working poor relates to the fact that a large number of the working poor are excluded from protection by primary social safety nets provided in the form of social insurance. Meanwhile, supporting children in working-poor households relates toKorea’s situation in which there are no universal child allowances and where incentives for childbirth and greater social support for child care are greatly needed.

Figure 3. Design of the WPT

1.2 million KRW 0	Phase-in	Plateau	Phase-out
	15%		-24%
	8 million KRW  12 million KRW  17 million KRW     Earned income

Note. KRW 1.2 million = US $ 1,037. KRW 17 million = US $ 14,693. 1,157 KRW = 1 US$ (2010 average)

Source. National Tax Service. 2008.

Policy priorities determine the design of the program and the detailed operation plans. In this sense, society needs to engage in in-depth discussions on policy priorities. As we have seen in section 2, dependency on welfare is not serious enough for concern, so it would be better to focus on providing substantial income support than on providing work incentives.Koreais still in the early stages of implementation of the WPT program, and the current design seems to be pointing in this direction, but various supplementary measures will be necessary for the WPT program inKoreaincluding increase in the benefit amount to carry out this function of providing income support in full. Figure 3 describes the basic structure of the WPT program.

Korea’s current WPT program has a very low level of benefits, with a maximum of only 1.2 million KRW per year and an extremely small group of beneficiaries. Table 3 shows the number of supported households and total benefit expenditure. Average benefit per household was only KRW 768 thousands and KRW 777 thousands in 2009 and 2010 respectively (about US$ 660). This is because the program was designed very cautiously, as it is the first welfare program to be supported by tax policies. In order to provide substantial income support to low-income households, however, the level of benefits will eventually have to be raised.

Table 3. Number of the WPT caseload and benefit expenditure

(unit: 1,000 households, KRW 1 billion)

Note: * estimates

Source: National Tax Service, internal materials

Recipient households are currently limited to those that meet extremely strict income, property, and child-support requirements. In terms of income, as shown in Figure 3, only those households with an annual combined gross income of less than 17 million KRW per couple can qualify, where gross income includes earned income, business income, and other types of income. Property requirements stipulate that either no one in the household possess a residence or that the household as a whole possess only one residence of 50 million KRW or less in market value. The total assets of the household, including real estate assets, must be less than 100 million KRW. In order to qualify for the WPT, households must also have at least one child under the age of 18. As the program matures, access should be provided to the self-employed, and steps should be taken to loosen the qualification requirements.

In relation to other welfare schemes, the WPT program stipulates that persons who received benefits from the NBLS for 3 or more months are excluded from the program. Considering that no work incentives exist for recipients of the NBLS who are employed in the regular labor market, it is rather difficult to understand why recipients of this support should be excluded from the WPT program. By including these recipients, we could utilize the WPT as a type of earning disregards program for those recipients of the NBLS who are able to work but who have no way to take earning disregards. This would serve to maintain consistency among the different schemes while also increasing work incentives for recipients of the NBLS.

Debates have also continued over how the program should be modeled. The WPT in its original form started in theUnited Stateswhere—unlike the early negative income tax—benefit levels were designed to change according to earned-income levels so as to prevent the loss of work incentives even as income levels increased. Benefit levels gradually increased with income growth in the phase-in range, remained the same in the plateau regardless of income, and decreased with income growth in the phase-out range. To ensure that work incentives were not negatively affected in the phase-out range, the phase-out should occurr very slowly. In contrast,Korea’s current WPT design has a very steep phase-out range that can therefore quite negatively affect work incentives. The low rate of women’s employment is particularly worrisome inKoreaas secondary earners are especially sensitive to the reduction of such work incentives. Efforts must therefore be made to remedy this problem in order to increase the effectiveness of the WPT program inKorea.

On the other hand, there are other significant issues on the effectiveness and efficiency of the EITC-type program other than the design issues. In the early 1990s when EITC-type programs were expanding worldwide, discussions focused mainly on the pros and cons of the EITC and the minimum wage and on whether one was better than the other. Both programs continued to be introduced more widely, and various studies were conducted on both, leading the OECD to acknowledge their mutually complementary nature. Research also led to the establishment of stylized facts on labor market conditions and the macro-level institutional environment required for the successful implementation of in-work benefits such as the EITC. Hwang (2011) compared these stylized facts toKorea’s current situation, and concluded that, in most respects,Korea’s labor market and institutional environment are conducive to the success of the WPT program. It was also noted that there is a considerable need forKoreato use such programs to improve income distribution.Korea’s minimum wage is still quite low when compared internationally, and thereforeKoreahas room for the WPT program to develop together with a minimum-wage scheme. Caution must be exerted in expanding the WPT program, as the current design of Korea’s WPT is based on household income and may further worsen the already-low women’s employment rate. To mitigate such negative effects, measures such as increased child-care and social services that promote the compatibility of work and family responsibilities must be expanded together with the WPT program.

 

Another hidden intention of introducing the WPT was to improve the capacity of National Tax

Service to identify the income in the informal sector. Most vulnerable workers such as non-regular workers and workers in small firms are actually excluded from social insurances. It is also very hard to know their employment status or precise income level, which lead to exclusion of this group from formal social protection. The implementation of the WPT implies the National Tax Service should identify the precise income level of these vulnerable groups to decide whether WPT claims are appropriate and the amount of benefits. In addition, we may expect to be able to expand actual coverage of the social insurances as the government collects more data about employment status and income of the vulnerable workers.

Statutory Minimum Wage: Development and Limitations[105]

 

  A statutory minimum wage was introduced in Korea in 1988. Although the 1953 Labor Standards Act had previously set the foundation for the minimum wage, enforcement was delayed because of immature conditions. The Minimum Wage Act was legislated in 1986, after which the law finally went into effect in 1988. The minimum wage was first applied to manufacturing companies with 10 or more full-time workers, but was gradually applied to a wider group. In 1989, the minimum wage was expanded to include manufacturing, mining, and construction companies with 10 or more full-time workers, and in 1990 it was further expanded to all companies with 10 or more full-time workers. Beginning in 1999, all companies with 5 or more full-time workers were required to implement a minimum wage, and from 2001 on, the minimum wage was expanded to all businesses in all industries. The minimum wage is determined by a minimum wage commission that consists of members representing the interests of labor, management, and the public. The level of the minimum wage has continuously changed according to economic conditions or government positions. Figure 4 represents monthly minimum- wage amounts as a proportion of monthly wages for regular workers and of total earnings.

 

  The level of the minimum wage has continued to change, subject to economic conditions or the government’s political orientation. From a comparative perspective (ILO 2010), minimum wages remained relatively low. In the early stages of the system, the share of the minimum wage compared to the median hourly wage which is called Kaitz index was as high as 36.6% in 1989, if regular wages are considered (Panel 4B). However, this started to fall from the start of 1990 and continued its downward trend to 28.5% in 2000. Increasingly, questions were raised on the effectiveness of the minimum wage system, and the demand for policies to reduce income inequality was growing, resulting in the rise of the minimum wage to 35.9% of the median regular hourly wage in 2008. It should be noted that the surprising increase in the relative level of minimum wages in 2009 (38.7%) had little to do with the strength of minimum wage policies in Korea, as it was due to the sizable reduction in average wage levels during the global economic crisis which pushed up Kaitz index temporarily.

 

However, it is more appropriate to compare the minimum wage to the total actual hourly wage, which is the regular wage plus bonus, in order to accurately assess the effects of the minimum wage on the labor market. This is because bonuses inKoreaare not bonuses in the true sense of the word, but are given rather more regularly. The level of the minimum wage is actually 31.6% of the median of the total actual hourly wage in 2009(Panel 4A).

The minimum wage inKoreais still much lower than the international norm. According to data comparing the statutory minimum wage in 21 OECD countries with minimum-wage schemes,Korearanked lowest in terms of the minimum-wage amount (OECD, 2007). These data, however, underestimate the relative level of the minimum wage compared with total earnings, and when this discrepancy is taken into consideration,Korea’s minimum-wage level is slightly higher than that ofJapan. Still,Korea’s minimum wage is one of the lowest among OECD members, which implies that the minimum wage inKoreais most likely less effective in rectifying inequalities in overall wage income. Compared with the Western welfare states, the minimum wage inKoreais relatively low, but if the upward trend that has existed since 2000 continues,Korea’s standing might improve. Unfortunately, minimum-wage adjustments made since 2008 tell us that this upward trend will probably weaken or reverse after the current Lee Myung-Bak government took power. The minimum wage was raised by 6.1% in 2009 and by only 2.8% in 2010, already reversing the trend of high upward adjustments that had been in place since 2000

Figure 4.  Trends in statutory minimum wage (% of hourly mean/median wages)

1. Total wages

1. Regular wages

Note: Regular wages and total wages in establishments with 10 or more workers. Statutory minimum wage is KRW 4,320 (US$ 3.7) per hour in 2011. Exchange rate: 1157 KRW = 1US$ (2010 average)
Source: Ministry of Labor, Wage Structure Survey, each year

Another important factor to constrain the role of the minimum wage in protecting the low-paid workers is its weak enforcement in the labor market. Figure 5 shows the non-compliance rates, the proportion of workers who were earning less than minimum wages between 2000 and 2010 for which Kaitz index has increased significantly. The trend is obvious. The non-compliance rates have been rising continuously from 4.2% in 2000 to above 12% in 2009. Therefore, the potentials of higher minimum wages in reducing low-pay incidence in recent years inKoreahave been moderated by the increases in non-compliance rate.

Figure 5.  Workers earning less than statutory minimum wages (2000-2010: % of total wage employment)

Source: National Statistical Office of Korea, Economically Active Population Survey – Supplementary Survey by Employment Type, each year.

 

As we have seen through this study, givenKorea’s low minimum wage, its increasingly unequal income distribution, and a taxation and social-security benefit system that plays a rather small role, conditions inKoreaare well-suited for the WPT program to be quite effective. But as socioeconomic disparities widen, WPT programs that focus mainly on the poor need to be implemented together with a minimum-wage scheme that helps to resolve overall wage-income inequalities. Kang (2010) noted that within the current institutional environment, the minimum-wage scheme could actually be more effective than the WPT program in improving income distribution. This is mostly likely due to the low level of support currently provided through the WPT program.

When considering the minimum-wage scheme in the context of the policy mix with the WPT program, we also need to remember that the WPT program aims more to provide income support than to provide work incentives to persons who are not working. With a minimum wage that is very low, attempts to raise the level of benefits to increase the income-support effect of the WPT program can lead to extremely heavy burdens for the government, so it could be more desirable to use the minimum-wage scheme complementarily so that the fiscal burden is spread more evenly throughout society.

In terms of consistency among social security programs, on the other hand, the relationship between social assistance and statutory minimum wage should be examined. In this study we already found both the level of minimum income guaranteed by the NBLS and that of the minimum wage is relatively low considering socio-economic context ofKorea. When we consider the suggested Asian minima of minimum wage and social assistance that two person family can get 30% average wage and minimum wage should be 40% of average wage, the need to increase minimum wage can be a priority. However, the need to increase the minimum livelihood cost is also an important agenda as already suggested. That’s why civil society and trade unions inKoreademand to increase both statutory minimum wage and minimum livelihood cost of social assistance.

Table 4. Comparison of Minimum Wage with Minimum Livelihood Cost (2010)

(unit: KRW 1,000, percent)

Source. Calculated using MOHW (2010)

Conclusion: Policy Implications for Asian Countries

 

  Korea successfully developed a comprehensive social assistance in 2000 and introduced statutory minimum wage in 1988. Moreover, Korea introduced a new income security scheme under the situation of worsening income inequality and increase of working poor, the WPT, a Korean style EITC in 2008. However, Korea is still away from a comprehensive welfare state. Increase in the benefit level and the coverage of social assistance and the WPT as well as a greater role of minimum wage in the labor market are necessary to guarantee an effective social minima for the poor in Korea.[106]

 

  Policy implications for Asian countries from Korea’s experiences can be summarized as follows. First, the role of civil society is important to extend social security in a developing country. To establish a wider alliance of civil society and trade unions for a specific and critical demand, such as introducing a national minima, would be effective to accomplish the demand. InKorea, it was to extend the coverage of social assistance to the able-bodied poor who were the victim of the Asian economic crisis of the late 1990s.

 

Second, economic crisis can also be an opportunity to extend social security. During the economic crisis the old social norm that the poor of the unemployed are responsible for their own plight would lose its ground, which may lead to more favorable circumstances to introduce or extend social security programs for the poor and for the unemployed.Koreacould effectively introduce new social assistance system and extend the coverage of social insurances under the background of economic crisis in the late 1990s.

Third, democracy matters.Koreadeveloped its own social security systems over a long period even long before the democratization in 1987. Regular election had opened a space to extend social security to enhance political legitimacy of the autocratic political elites. The space has been widened even more through political competition and the strengthened influence of civil society and labor movements after the democratization. Another important effect of democratization is that it makes the change of power possible, which leads to the extension of social security by more welfare-friendly government. DJ government and Roh government are the cases inKorea.

Finally, the welfare reform agenda which contributed to the retrenchment welfare state in developed countries may play a different role in developing countries. InKoreathe agenda help different social forces make a compromise in the form of following current trends in developed countries which resulted in the extension of social security since the starting points were different betweenKoreaand other developed countries. In this case, however, the long term effects of a specific program design which follows current vogue trends should be considered, too.

References

Publications in Korean

Hwang, D. S. (2000). “Policy suggestions for reshaping of social security system according to the introduction of the National Basic Livelihood Security System”. In D. S. Hwang (Ed.), Labor policy programs for productive welfare. Korea Labor Institute. pp. 35–71.

Hwang, D.S. (2004). Review of overseas workfare policies and plans for development ofKorea’s workfare policies. In G.-J. Yoo & S.-D. Sim (Eds.), Direction and challenges of policies for protecting the vulnerable classes. Korea Development Institute. pp. 119–189.

Hwang, D.S., Loedemel,I.& Trickey, H.(2002), Comparative Study on Workfare Policy. Korea Labor Institute.

Kang, B. (2010). “The earned income tax credit (EITC) and the minimum wage scheme for the working poor: Impact on employment and income distribution”. In B. Lee, G. Hong, S. Lee, B. Kang, & J. Yoon, Working poor inKorea: Analysis and policy. Korea Labor Institute. pp. 126–170.

Ministry of Health and Welfare (MOHW). (1998) White Paper of Ministry of Health and Welfare. MOHW

Ministry of Health, Welfare and Family Affairs (MOHW). (2010a). National Basic Livelihood Security System Recipient Statistics. MOHW.

Ministry for Health, Welfare and Family Affairs (MOHW). (2010b). Work reference material 2010. MOHW.

National Tax Service. (2008). Introduction to the work promotion tax. National Tax Service.

Publications in English

Bark, S., Kim, M., and Hwang, D.S.(2001). “Social Safety Nets in theRepublicofKorea: Analysis and Prospects”, Strengthening Policies and Programs on Social Safety Nets: Issues, Recommendations and Selected Studies, (UN ESCAP, Social Policy Paper No. 8), United Nations. pp. 109-154

Gordon, W. and Goodman, R.(1998), “Welfare Orientalism and the Search for and East Asian Welfare Model”, Goodman, R., Gordon, W., and Kwon, H., eds., The East Asian Welfare Model: Welfare Orientalism and the State, Routledge. pp. 3-24.

Gough,I.(2004), “East Asia: the limits of productivist regimes”, Gough, Ian et al. Insecurity and Welfare Regimes in Aisa,AfricaandLatin America: Social Policy in Development Context, Cambridge University Press. pp. 169-201.

Holliday, I and Wilding, P.(2003) “Welfare Capitalism in the Tiger Economies of East and South East Asia”, Holliday, Ian and Paul Wilding eds, Welfare Capitalism in East Asia: Social Policy in the Tiger Economies, Palgrave Macmillan. pp. 1-17.

Hort, S.E.O. and Kuhnle, S.(2000), “The coming of East and South-East Asian welfare state”, Journal of European Social Policy, Vol. 10, No. 2, pp. 162-184.

Hwang, D.S. (2010). “Evaluation ofKorea’s Activation Policy and Direction for Development”, e-Labor News No. 97. (Issue Paper) Korea Labor Institute.

Hwang, D.S.(2011). “Evaluation and Policy Implications of Making Work Pay Schemes inKorea”, Bai, K. ed. Labor Issues in Korea 2010, Korea Labor Institute, pp. 1-36.

Hwang, D.S. and Lee, B.(2011), “Low wages and policy options inKorea: Are policies working?” paper presented at the second conference of Regulating for Decent Work, 6-8 July 2011,Geneva.

ILO (2010), Global Wage Report 2010/11 – Wage Policies in times of crisis,Geneva: International Labour Office.

International Social Security Association (2009), Social Security Programs Throughout the Worlds: Asia and the Pacific, 2008, Social Security Administration (US)․ISSA.

OECD. (2007). Benefits and wages 2007. OECD.

OECD. (2008). In-work benefits and making work pay in OECD countries: An update (Report No. DELSA/ELSA/WP1[2008]8). OECD.

OECD. (2009). Employment outlook 2009. OECD.

 

 

 

 

China’s pro-poor land policy and social security for rural land-expropriated peasants: a case of minima in practice #

 

 

Yi-fan Yang *

Abstract

The purpose of this study is to provide advices on relevant policies and decision making regarding compensation and social security measures for the peasants involved in land expropriation. The paper briefly analyses this issue, and indicates that there is a lack of distinct guide in the concept of policy design after researching mountains of materials. This article argues that the peasants’ social security combining with peasants’ rights of use land and patterns of incomes in order to find out limitary conditions the social security institution is facing to. In conclusion, the paper discusses the link between global policy discourses and planning and land management on the national, regional, or municipal level, to conclude that land security could be contained into the minimum social assistance policy. The goal of future is to build up some kind of compound social security institution on a basis of collectively-owned land tenure system, which might approach the goal of social security minima.

Key words: compensation for land expropriation; peasants involved in land expropriation; compound social security system

Note: This paper is supported by the China Scholarship Council, “Establishing the Institutional Structure of the Social Insurance System Covering Both Urban and Rural Areas and Research on Difficulties in Application,” (Grant No. 07&ZD047), a Major Project of the National Social Science Foundation in 2007.

1. Introduction

Agricultural land conversion in the process of urbanization and industrialization is a common phenomenon worldwide. The notion that the State has the power to acquire agricultural land (private or public) in the public interest, and subject to the payment of compensation, is almost universally accepted, not only in theory but also in practice (Larbi et al., 2004). Unlike the marketed way in developed countries, where the compensation for land expropriation is mainly based on the real estate market value standard and where livelihood security is easy to implement, there is no market price inChina that well reflects the changes in land value after expropriation.

According to the 1982 Constitution of the People’s Republic ofChinaand its amendment of the year 2004, as well as to the Land Management Law revised in 2004, all land belongs to the public; of this, urban land and natural resources are state-owned and rural land is collectively owned. Expropriation by Government is the sole “legitimate” method for transforming land for agricultural purposes into land for construction purposes. In the course of the reform and open policy, the household contract responsibility system was established in 1982 as an improved system for the rural collective economy, which granted each household in rural areas a long-term, stable and permanent right to use the contracted land for at least 30 years. The present practical compensation standard in China is a model only based on the value of the average annual output of land valid for a period of 3 years prior to expropriation, and the state has not established a nation-wide social security system yet, thus merely allocating the responsibility to the provinces and even to local level governments. Because of these land tenure and compensation arrangements, the land-expropriated peasants are awarded very little compensation and are not provided with adequate social security. A large proportion holds a “four-no” status: no land, no job, no security, and no capital for establishing business. All these factors arising from the land expropriation and compensation policy have led to inequity problems and serious social risks.

At present, China has a little more than 1.8 billion Chinese mu (121.8 million hectares[107], approaching a “bottom line” of 120 million hectares for food security), or 0.09 hectares per person, of arable land, less than 40 percent of the average level worldwide, according to the Ministry of Land and Resources survey of 2007. That’s a decrease of 8.3 million and 0.11 hectares from 1996, while the amount of land-expropriated peasants has seen an increase of 40 to 50 million (Li and Han, 2004; Han, 2004). According to the Outline of the National Overall Planning on Land Use (2006-2020) issued by the State Council, there is an estimated 29.25 million Chinese mu (1.95 million hectares) available for the period of 2006-2010, 90% of which is collectively owned land that needs to be expropriated. Based on the current per capita area of 1 hectare, this will make out more than 25 million land-expropriated peasants in the next decades approaching 80 million in total. It indicates that the issues of land expropriation, compensation and of the establishment of a social security system are crucially important and essential to the stability of the whole society. For the time being, the improvement of compensation payouts and of the social security level will help protect the rights and interests of peasants and restrain local government.

The remainder of the paper is organized as follows: In section II, a brief but intensive literature review is provided. Section III illustrates the current situation concerning land expropriation, compensation and resettlement polices inChina. Section IV explores a theoretical framework of equitable compensation and implementation of social security, and its theoretical application toChina. Finally, section V provides some concluding remarks.

1. Literature Review

The protection of rights in the process of enforced conversion of agricultural land has been described in a large number of literatures as a compulsory purchase, an expropriation or acquisition, in the context of which the issue of a social security system for land-expropriated peasants is the bone of contention.

Scholars mostly think highly of the land policy which includes state and local interventions, however, the importance of land ownership for social policy, especially the social security policy, that vary depending on whether un-industrialized or post-industrialized countries. As for the former, just like in non-OECD countries, many current studies focus on specific measures: to investigate formal and informal land use and to make access to land as basic social security (Ikejiofor, 2006; Mooya and Cloete, 2007), increasing the legal security of land (Deininger and Jin, 2006; Payne, 2004, 2002; Khemro, Socheat and Payne, 2004; Porio and Crisol, 2004), housing (Leckie, 2003), land issues (Ho and Spoor, 2006, Miceli et al., 2002; Sikor, 2006), land allocation and consolidation (Gould, 2006; Lin, 2005; Niroula and Thapa, 2005). With Hernandode Soto’s trace (de Soto, 2000), there is still a debate on formal property rights on land and capital formation. The content may be market-oriented approach to build theories of property (Alchian and Demsetz, 1973; Coase, 1990; Cooter and Ulen, 2004). The World Bank also stresses the property security as a land policy aspect of the poverty reduction (Deininger and Jin, 2003). Meanwhile, privatization and the strengthening of private property rights may not the whole story but also subject to criticism (Platteau, 1996; Unruh, 2002; Gould et al., 2006; Sjaastad and Cousins, 2008; Bromley, 2008). As for the latter, just like in OECD countries, the poverty and social security issue is usually taking a minor role in land policy, and vice versa. Therefore, most of the people at and below the poverty line are excluded from the land property. The focus here is on the acquisition of assets (Behring and Helbrecht, 2002), as well as the planned interventions with utilitarian objectives for the bourgeois (Buitelaar, 2007, 2004; Evans, 2004;Needham, 2006; Lai, 2005; Webster & Lai 2003). In their words, a land policy problem here arises only under the condition that the state intervenes the property rights of private.

In China, due to the public-owned land system and the household contract responsibility system, peasants get a piece of land and receive steady earnings from it as members of a village collective economic organization. Instead of favoring the property perspective, i.e. how to make up for policy loopholes in the revised Land Management Law and to improve compensation, resettlement and social security policies and regulations are major concerns of existing Chinese studies. Chinese scholars are gradually reaching consensus on the fact that the current standard of land expropriation compensation is too low. Since the present practical compensation standard in China is a model based on the value of the average annual output of land for a period of 3 years prior to expropriation, not considering the land value increments after the conversion, the land value increment has not yet been taken into account as regards the compensation payouts (Tian and Wang, 2002; Liu, 2002; Lu, 2003a; Xu, 2003; Gao, 2004; Liao, 2005 et.). The compensation for expropriation consists of three parts: compensation for the loss of land, resettlement subsidies and compensation for young crops and fixtures. The collective has the powerful right to decide how to distribute compensation for land loss, and resettlement subsidies go to whoever is responsible for the resettlement. Therefore, the peasants usually receive only very little direct compensation in the form of compensation for young crops and fixtures. This situation has increasingly led to complaints by peasants and in some areas serious unrest has risen (Li, 2003; Gao, 2004; Li, 2004). More importantly, the present land expropriation policy is still far from clearly formulating the financial resources for the provision of employment and social security to peasants (Lu, 2003a). Therefore, scholars have universally agreed on raising the level of compensation and on setting a new compensation standard from the perspective of efficiency and equity, combining quasi-market price standard, social cost standard (the expense for the basic standard of livelihood, employment, occupational training), and social security cost standard into a mixture in order to establish an adequate social security system for land-expropriated peasants (Liu, 2002; Wan, 2003; Lu, 2003; Xu, 2003; Chen, 2000; Lou and Wu, 2002; Gao, 2004 et.). The minimum social security, old-age insurance and medical insurance are of paramount importance (Lu, 2003b; Xu, 2003). The mode of payment structure should combine the defined benefit with the defined contribution, and match the fully funded finance system (Fu Jian, 2004; Chang, 2004). The social security system should be financed through multiple channels: through fiscal support from the local governments, through remise income returns[108], through compensation and resettlement costs, as well as through cash earnings after sales of collective assets or state-owned assets (Jiang, 2002; Lou and Wu, 2002; Lu, 2003b; Qu, 2004; Xie, 2005).

Starting from a marginal status, the dilemma of land-expropriated peasants is increasingly becoming the central issue; inChina, social security systems have just started to be set up in cities and do not effectively cover the rural areas. This fact reflects the increasing dependency between urbanization and the social security system. The significance of land ownership and social participation of peasants in this interaction should be politically or legally investigated; however, it is very little at present. Whether the establishment ofChina’s social security system should be based on the “urban-rural dual” system, or on the “urban and rural integrated” system, or whether the “third way” is to be taken in addition to the existing system, is a major theoretical issue which must be clarified first. The purpose of this paper is to develop a new way of compounded security system for land-expropriated peasants inChinafrom the perspective of capability building and livelihood security, which is to combine the land expropriation and compensation policy with the social security policy under the current collective-owned land property rights structure.

1. ContemporaryLandExpropriation Compensation and Resettlement Policy inChina

At present, the whole policy regime for land-expropriated peasants is composed of two parts: land expropriation compensation policy and resettlement policy.

1.  Land Expropriation Compensation: Legal Basis and Policy

(1) Legal basis for the state to expropriate land. Article 10 of the Constitution of the PRC (1982, as amended in 2004) states that: Land in the cities is owned by the state; land in the rural and suburban areas is owned by collectives, except for those portions that belong to the state in accordance with the law; house sites and private plots of cropland and hilly land are also owned by collectives. The state may, in the public interest, lawfully expropriate or requisition land by paying compensation to collectives. Article 43 of the Land Management Law (1998, revised in 2004) states that: all units and individuals that need land for construction purposes shall, in accordance with the law, apply for the use of state-owned land, which includes land owned by the state and land originally owned by peasant collectives but expropriated by the state. Article 42 of the Real Right Law (2007) also makes similar statements. Therefore, the conversion of the land proceeds in two steps: land expropriation through nationalization by the state from peasant collectives, and state-owned land use right transaction between the Government and the developer.

(2) Land Expropriation Compensation Policy: Matters, Standards and Objects

a) Compensation matters. Article 47 of the Land Administration Law states: land expropriation shall be compensated based on its original purpose of use, which is several times the comprehensive annual output value of land and thus called the “output value multiple method”. It includes compensation for land, resettlement subsidies as well as compensation for attachments and young crops on the expropriated land.

b) Compensation standards. For the expropriation of cultivated land, compensation shall be 6 to 10 times the average annual output value of the expropriated land based on the 3 years preceding such expropriation. Resettlement subsidies to be divided among members of the agricultural population of a collective requiring resettlement shall be 4 to 6 times the average annual output value of the expropriated cultivated land based on the 3 years preceding such expropriation. However, the maximum resettlement subsidies for each hectare of the expropriated cultivated land shall not exceed 15 times its average annual output value based on the 3 years preceding such expropriation. Furthermore, compensation for attachments and young crops on the expropriated land shall be prescribed by provinces, autonomous regions, and municipalities directly under the central Government.

Taking into account the relatively low level of compensation, subject to the Decision of the State Council on Deepening the Reform of Strict Land Administration issued in October 2004, it has been stated that land expropriation compensation measures shall be improved. If land compensation and resettlement subsidies paid in accordance with the provisions of the current law are still insufficient to help the land-losing peasants to maintain their original living standards, the resettlement subsidies may be increased upon approval by the people’s Governments of provinces, autonomous regions, and municipalities directly under the central Government. If the total of land compensation and resettlement subsidies is still insufficient to help the land-losing peasants to maintain their original living standards when reaching the legal upper limit, the local people’s Governments may pay subsidies with income received from the compensated use of state-owned land.

c) Objects of land expropriation compensation. If the land is owned by the rural collective economic organization, compensation for land shall be paid to the rural collective economic organization whose land is expropriated; subsidies for resettlement are exclusively for arranging production and living for the land-expropriated peasants; and a compensation fee for ground attachments and young crops shall be paid to the owners of attachments and young crops on the expropriated land.

Table 1: Current Compensation for Land Expropriation: Matters, Standards and Objects

Compensation matters	Standards*	Objects	Distribution
Compensation for land	6 to 10 times	the rural collective economic organization	Most of the compensation paid to land-expropriated peasants accounted for 50–80% of the total land expropriation costs. **
Resettlement subsidies	4 to 6 times (to be divided among members of the agricultural population of a collective requiring resettlement; the maximum is 15 times.)	those who are responsible for the resettlement
Compensation for attachments and young crops on the expropriated land	To be prescribed by provinces, autonomous regions, and municipalities directly under the central Government	the owners of attachments and young crops

* Calculated by the times of the average annual output value of the expropriated land based on the 3 years preceding such expropriation and on its original purpose of use.

** Based on the typical survey data. Besides, some provinces likeShanxi,Liaoning, clearly prescribe the proportion of compensation for land to be paid to land-expropriated peasants to account for no less than 80%, leaving the rest to the peasant collective economic organizations.

Source: Author’s account (based on an analysis of the literature)

2. Resettlement Policy: Modes and Comparison

(1) Overall principle. Subject to Article 47 of the Land Administration Law, it is an overall requirement for the resettlement of land-expropriated peasants to enable the peasants requiring resettlement to maintain their original living standards. The Decision in the preceding paragraph requires that land-expropriated peasants shall be resettled properly. Land expropriation compensation and resettlement subsidies shall not only enable the land-expropriated peasants to maintain their original living standards but shall also guarantee their long-term livelihood.

(2) Mode of resettlement and comparison. Subject to Article 47 and Article 50 of the Land Administration Law, the main mode of resettlement now is to use a part of the charges (resettlement subsidies) from the land expropriation compensation especially for the secured livelihood of land-expropriated peasants including production activities on their part; this is called cash resettlement. Article 50 of the Law states: the local people’s Governments at all levels shall support the rural collective economic organizations—the land of which is expropriated—and the peasants in their efforts to engage in the development of other business operations or to start enterprises. Furthermore, the Decision of the State Council on Deepening the Reform of Strict Land Administration and its companion document Guiding Opinions, issued in October 2004, clarifies the ways of resettlement for land-expropriated peasants, including resettlements through land reserve and agricultural production, new jobs, shareholding and dividend distribution, relocation in other places, housing, social security (mainly social insurance). The details and comparison are as follows:

Table 2: Details and Comparison of Different Resettlement Modes

Resettlement mode

Details

Effects

 (positive and negative)

 Targeted groups and regionsTypical casesCashResettlement subsidies (sometimes including all or part of a land compensation fee) are paid to those responsible for the resettlement of land-expropriated peasants in a lump sum.-Easy to operate, direct and transparent

-Not enough in the long run, easy to be used up irrationally in a short timeYoung people, migrant workers and people living at the borders of towns and countries in coastal areasMain modeLand reserve and agricultural productionLand shall be utilized and adjusted first to provide land-losing peasants with arable land in order for them to continue with their agricultural production.-More acceptable as they can continue to retain some fields

-Land area is limited and contradicts the Rural Land Contracting Law (land adjustment is quasi-forbidden)Areas where per-capita land is adequateUnderdeveloped areas, probably inWest Chinaor inner areasEmploymentLand-expropriated peasants are employed by new land developers.-Fixed income and guaranteed job

– Unemployment risks and hard to operate in market-oriented institutionsSkilled and young people,

areas that lack laborRarely  usedShareholding and dividend distributionThe peasant collective economic organizations buy shares with the land expropriation compensation and resettlement subsidies, or with the land use rights of the approved land used for construction, to receive proceeds with preferential shares through contract agreements.-Reduction of the short-term financial pressure of the Government and provision of long-term revenues

-High risks of bankruptcyAreas where land is used for projects that yield long-term steady returns, like a few profitable town and township enterprises in the coastal areaCases where the projects can yield stable and long-term returns, e.g. the construction project of “Beijing-Shanghai High-speed Railway”RelocationThe Government relocates the peasants in other places, if no basic production and living conditions can be provided in local areas.-Direct

-High costs on operation and managementColossal basic constructionOverall planning by the state, as was the case with “The Three Gorges project” inChongqingMunicipalityandHubeiProvinceHousingMultistory buildings are constructed in cities or at the border of towns and countries, for peasants or allow them to rent to increase revenue.-Obvious increase in revenues

-Uncertain legitimacy and high dependency on  rentals; lazinessSuitable in the suburbsFrequently usedSocial security (social insurance and minimum living security)Resettlement subsidies (sometimes including all or part of a land compensation fee) shall be used for social insurance contributions, like old-age insurance, unemployment insurance and medical insurance.-Purchasing benefits the same with urban citizen; widely  accepted by peasants

-Financial sources are unstable and it is hard to balance the relationship between short- and long-term livelihoodsPeople who are approaching retirement, areas where the local Government can provide strong financial supportApplicable in relatively developed regions; distinguish the area within the planned area of

a city and outside

Source: Author’s account (based on an analysis of the literature)

3. Evidences: Impoverishment Risks Resulting from the Current Policy

In the PRC, land serves as reliable support guaranteeing most of the peasants’ employment, a livelihood, as well a providing for injury, sickness, and retirement insurance. When land is expropriated, peasants lose their basic resource for agricultural production and lose the basic conditions for social security. A majority of peasants affected by land expropriation will run an increased individual risk of becoming impoverished, i.e. once they have lost all, or a large proportion, of their land while the remaining part is not enough to provide a livelihood. They will need a longer period to adapt to changes such as new ideas, a different life style or production style, and an altered behavior as citizens in the process of converting into a nonagricultural population. According to the respective extent that the region of land has been expropriated, peasants in different categories are burdened with different risks. Their impoverishment risks can be divided into the following aspects[109]:

(1) Decline in total income and increase in total expense due to land expropriation. Generally speaking, land expropriation leads to a direct loss in income, because people’s land has been acquired, and the income of land-expropriated peasants declines with time. This is unfortunate because not everybody has other income sources. Though the proportion of agricultural income has shown a decreasing trend in recent years, it still accounts for more than half in the state-wide aspect (see table 3). At the initial stage, land expropriation will not affect peasants too much; on the contrary, most of them may live a better life since they receive a lump sum compensation. However, with time, their living conditions may change due to the economic development of the collective, the varied individual health status, and the respective ability to seek employment and development. Peasants, especially those whose cultural level is generally low, or those who lack the capability to adapt to the social transition, or have no planned consumption, or lack the capability to seek employment opportunities or to establish their own business, tend to gradually fall into poverty.

Moreover, region is also a very important factor. In developed areas, the loss of income from farming has no significant impact on the gross income in these circumstances, because farming output has already declined and the income from farming only accounts for a small proportion of the gross income. There are plenty of employment opportunities in the second and the third industries. Besides, income received from trading or from industry is higher than that received from farming; therefore, the affected peasants reach a higher income level on the whole. However, in most underdeveloped areas, the overall income level of peasants affected by land expropriation declines and the income gap becomes wider and shows a polarization trend (see table 4). Peasants whose land is totally or partly acquired may fall into absolute poverty. Even peasants in the same region may have differences in income.

On the expense side, the most significant phenomenon is the increase in total personal expenses after resettlement (see table 4). According to the result of the typical survey (Guo, 2006), basic expenses with an increase of 70% are not only spent on water, electricity and coal, but also on farm products (such as foodstuff and vegetables) with an increase of more than 40%, which were originally self-supplied and even remained in a surplus. Moreover, due to the movement to suburbs and increased prices after land expropriation, living expenses in most regions generally increased by 60% on average, compared to those prior to land expropriation. Even if factors of non-agricultural income are excluded, the extent of the increase is believed to be well beyond 30%.

Table 3: Percentages of Increased Volume from Different Channels in Farmer’s Income Per Capita (Yuan, %)

Basic Situation of Average Pure Income Per Capita in Rural Households
Year	Pure Income (Yuan)	Percentage of Wages Income

(%)Percentage of Household Operation

(%)Percentage of Property Income or Transfer Income

(%)1990686.320.2075.604.201991708.621.4073.904.70199278423.5071.604.901993921.621.1073.605.301994122121.5072.206.2019951577.722.4071.406.2019961926.123.4070.705.9019972090.124.6070.504.901998216226.5067.805.7019992210.328.5065.506.0020002253.431.2063.305.5020012366.432.6061.705.7020022475.633.9060.006.0020032622.235.0058.806.2020042936.434.0059.506.5020053254.936.1056.707.202006358738.3053.807.80

Sources:ChinaStatistical Yearbooks of the Previous Years (1991-2007)

Table 4: Comparison of Situation of Average Income and Expenditure Affected by Land Expropriation in Representative Provinces (Yuan, %)

(Yuan)After

(Yuan)Net rates

(%)Before

(Yuan)After

(Yuan)Net rates

(%)Before

(Yuan)After

(Yuan)Net rates

(%)Guangdong (c, d)3402.533622.896.52662.202745.04 3.1740.33877.8518.60Shanghai  (c, d)4753.004904.003.23863.004327.0012.0890.00577.00-35.20Fujian (c, m)41663735-10.4332433651.3842370-56.1Tianjin (c, m)4326.004731.009.43022.003858.0027.61304.00873.00-33.05Hunan (cr, m)2269.002514.0010.81808.002075.0014.8461.00439.00 -4.77Jiangxi (cr, l)2549.502409.00-5.5–– 0.3–––Anhui (cr, m)1697.902207.2030.01152.101495.1029.7545.80712.1030.46Gansu (w, l)2139.302128.60-0.51296.201356.304.64843.10772.30 -8.40Guangxi (w, l)1918.831717.42-10.51447.751410.30-2.59471.08269.67-42.75Yunnan  (w, l)1528.901131.00-26.0––––––

	Guangdong (c, d)	Zhejiang (c, d)	Jiangxi (cr, l)	Anhui(cr, m)	Gansu  (w, l)	Yunnan  (w, l)
Expropriation resettlement	1.6	10.1	0.4	1.4	1.5	2.5
Finding jobs in cities	42.9	12.7	13.6	24.1	17.8	10.9
Agricultural	32.5	6.3	40	22.8	55.2	30.2
The second and the third local industries	14.6	39.9	34.5	34.5	24.8	31.8
Unemployment	8.4	31	11.5	17.2	0.7	24.6
Total	100	100	100	100	100	100

SECTION VI        GENERAL SOCIAL SECURITY ISSUE

 

The Minimum Insurance for the Work-related Injury

in Asia: A Study Based on the Prior Payment of Compensation for Work-related Injury

Xin Hua YU; Qing Feng ZHENG*

Due to the low labor costs, unsound legal system, defective law enforcement, and widespread “incidents dumping” fromEuropeand other developed countries toAsia, most of the Asian countries must face more severe work-related injury accidents. Thus establishing minimum standards of protection inAsiawork-related injury has a great significance to the promotion of Asian countries’ labor rights protection.

However, with the differences of economic development, legal system and social culture, it is difficult to set a unified, specific lowest standard in work-related injury insurance system designing. Even if a standard is given, it is hard to be implemented. But if the standard is too principled, it will also tend to be invalid. The appropriate way is to start from the principle of operability, establish minimum standards of for the work-related injuries inAsia. This article advocates the Prior Payment of Compensation as one of the lowest standards of work-related injury security inAsia. This article is the attempt to establish the lowest work-related injury protection standards inAsia.

In this article, the Prior Payment of Compensation of work-related injury is an institution in the following cases: when the work-related injury occurs, the employer hasn’t paid the premium of the work-related injury insurance and the worker can’t get compensation, while the employer doesn’t comply with the law and regulation for the payment. The work-related injury insurance fund or other funds instead pay for the medical fee in advance in this situation.

I. The Historical Analysis to the Prior Payment of Compensation of Work-related Injury

The industrial revolution highlights one of social issues — work-related injury. Each country has worked out the related relief measures for the victims of work-related injury accident. Among them, there are two main ways including Employer Responsibility System and Work-related Injury Insurance System. Employer responsibility was originally based on civil tort laws, in which Employer shall bear compensation responsibility for work-related injury directly. Among them, imputation principles of the employer’s liability have undergone the fault liability, fault-presuming and no-fault liability principle. The application of No-fault liability principle relieves work-related injury’s worry for no evidence of employers fault and also needn’t wander in stalemate for the fear of colleagues reluctant to testify. However, the Employer Responsibility System does not consider the maximum capacity of individual employers, in which a relatively serious work-related injury accident may cause the bankrupt of the employers who’s not financially strong enough. When the employer doesn’t have the ability to pay, the accident victim will lose the guarantee. For the sake of employer responsibility, the commercial insurance is introduced into the employer’s liability, and the employer liability insurance is formed so that the employer’s risk of facing the work-related injury accident is lessened. However, due to the profitability of the commercial insurance, the operational risk of the insurance company, the employer liability insurance covers very little and plays a minor role. In the end, on the basis of employer and employee compromises to each other,Germanyfirst launched the work-related injury insurance system and was copied by other countries soon.

Employer liability and injury insurance provide relief to the injured. To a certain extent, it can ease the hardship situation of “no cure, no money to survive” between the injured and their families after the accident. However, this relief system is not perfect. The biggest barrier that the implementation of employer liability would face is when the employer is incapable to undertake the compensation of responsibility, who could be the direct responsible party, assuming the obligation to pay compensation. Employer liability system itself has inadequacy or vacancy of compensation and other issues which gives birth to the work-related injury insurance; however, it also can run the issues as the former. Although the existence of work-related injury insurance funds generally do not pay can not be the case, yet the work-related injury insurance transform employer liability to responsibility of the employer payment. Based on the relative rights and obligations of the principle, the prerequisite of getting compensation for injured workers is that employers should fulfill the payment obligation. If they haven’t fulfilled it, the injury on job laborer can only transfer to ask their employer for compensation. At this time, it changes into the matter that relates to the duty and system of the employer. In most cases, an employer unwilling to pay work-related injury insurance for employees is also unlike to or has the capacity to pay compensation. If the employer is unable to pay off the compensation, the wounded employees gets into the trouble without insurance, which dose not comply with the principle and development tendency that each country promotes social insurance undertaking and protects employees’ life and healthy. In that case, most countries have established a system of compensation payment in advance in the respect of different work-related injury insurance modes. The Prior Payment of Compensation is an important supporting measure for work-related insurance system and also has great significance for work-related injury employees.

II. Probing into the Model of Prior Payment of Compensation of Work-related Injury in Asia

InAsia, the mainland and theTaiwanarea inChinahave both taken the system Prior Payment of Compensation of Work-related injury Compensation. Although their pattern, operation scheme and capital source differs a lot, the functions and values of the work-related injury compensation being paid in advance are the same. I would like to briefly tell talks about the practices of the mainland and theTaiwanarea inChinabelow.

1. The Model of Prior Payment of Compensation of Work-related Injury in Mainland China

Article 41, 42 of Social Insurance Law of the People’s Republic ofChinapassed on20 October 2010has established the Prior Payment of Compensation for Work-related Injury. As Article 41 in this law regulates: “Provided that the employer where the employee works fails to pay the work-related injury insurance fee according to the law, and once work-related injury accident occurs, the employer shall be responsible for the payment of work-related injury insurance treatment. In case that the employer refuses to pay for it, it will be deducted from the fund of work-related injury insurance fee for advanced payment. The treatment of work-related injury compensation insurance deducted from the fund of work-related injury compensation insurance shall be paid by the employee. In case the employer refuses to pay for it, the organization dealing with social insurance shall recover it according to Article 63 of the law.” According to the regulation of Article 42: “In case work-related injury is made due to the cause of the third party who refuses to pay for the medical treatment costs of work-related injury or the third party cannot be determined, the work-related injury insurance fund shall be paid in advance. After it, rights will be given to recover from the third party”.

Advantages of this model: (1) Simple. The work-related injury compensation insurance fund are used as a source of funds paid in advance , making the compensation system first in a short time ,are not troubled by issues such as sources of funds , operating agencies, operation mode. (2) High compensation standards. The contents of the mainland under the first payment of compensation subject to a distinction between the types of accident. Compensation for the general accidents should be by the work-related injury insurance fund according to Regulations on Work-related injury Insurance；Accidents caused by third party infringement , work-related injury insurance fund shall be paid only the third person to pay for medical expenses. Therefore, according to the insurance Law, participation of the treatment of content and the treatment of work-related injury insurance payment are no difference.

The disadvantages of the model are as follows: (1) it needs to face the challenge of basic jurisprudence. According to the principle of equality of rights and obligations, should the employer fail to fulfill the obligation of paying the premiums, the employees will have no right to receive the compensation from the insurance fund of work-related injury, while he can only apply to the employing unit for the compensation not lower than the compensation standard of work-related injury insurance. The compensation made by work-related insurance fund in advance is tantamount to letting the law-abiding employing units, participating work-related injury insurance, pay the bill for the law-breaking employing units who don’t participate the work-related injury insurance. (2) Risk of investment fund. The sufficient reserved fund constitutes the precondition of the Prior Payment of Compensation by insurance fund. Without sufficient reserved fund, the Prior Payment of Compensation of compensation will not be able to be made. After the Prior Payment of Compensation, there is still a link of recovery to be dealt with. Should any problem arise during the process of recovery, the fund expenditure might not be reimbursed successfully, which will give rise to the risk of investment fund. (3) The orientation of Government responsibility remains indistinct. The direct obligation subjects are Employers, who are responsible for work accident risks. In fact, the government should have been the final obligation subject. To be paid on account by the fund may probably make the government succeed in evading responsibility. (4) Administrative cost increased. In order to ensure that the compensation of work accident insurance to be paid on account, Social Insurance Law states that after the compensation being paid on account by the fund, the right of subrogation will be got by social insurance agencies who will claim compensation from the employer or the third party. The right of subrogation will certainly ensures that the compensation can be paid on time. At the same time, pressing for the compensation prepaid only can increase the administrative expenses.

2. The Model of Prior Payment of Compensation of Work-related Injury in Taiwan

There’s no Prior Payment of Compensation of Work-related Injury in Taiwan. The labor who does not take part in the work-related injury insurance can not enjoy a prior payment of compensation, however, according to Regulation on the Labor Insurance and Labor Standards Act, they can ask for injury, medical disability and death compensation. If the employer does not comply with the laws, Occupational Accident Labor Protection Act regulates the government for a budget. A special fund for the compensation is established as the guarantee. As it regulates in article 1, item 6 of Occupational Accident Labor Protection Act: “When the labor who does not take part in the labor insurance suffers from the occupational accident, and the employer does not compensate in line with the Labor Standards Act, an occupational accident disability and death subsidiary should be applied according to the standard of labor insurance regulations for the minimum insurance application.” Thus the Prior Payment of Compensation of Work-related Injury inTaiwan is established outside the work-related injury insurance. A separated fund is established for the payment.

Advantages of this mode: (1) Security of fund. Fund paid in advance in the region ofTaiwanis a fund of independence which is independent from work injury insurance fund. There are two sources of compensation fund: first, the government finances, the Council of Labor Affairs applies special fund, and the financial sector budgets; second, Fines from employers due to violation of “Occupational Accident Labor Protection Act”. (2) Clear responsibility of the government. The government undertakes the security obligations to realize basic human rights such as the rights of life and health of workers. (3) “Earmarked fund for its specified purposes only, and support from fines” The mechanism that replenish the fund with fines may not only solves the problem of insufficiency of fund paid in advance but also meets the right and obligation equivalence principle, and presents the legal and realistic significance of fines.

Disadvantages of this mode: Benefits paid in advance in the region ofTaiwanis relatively low compared with workers who attend work injury insurance, because the region ofTaiwanpositioned the interim payment of work injury insurance system as a kind of relief system.

III. The Legislation Progress of the Prior Payment of Compensation of Work-related Injury Compensation in Asian Countries

Based on the protection of laborers, Asian countries should establish the system of payment in advance for work-related injury compensation. During the establishment, no matter which model to be used, the following bases should be carried out:

1. The government must take their responsibility. With the financial support from Work injury insurance to the payment in advance, while no fund difficulties will appear in short time, but considered form long-range, only by Work injury insurance’s financial support does not fit the fairness principle, the fund safety will also in risk, so the government should take responsibility for social security. The government should offer some financial support for compensation’s payment in advance from the yearly financial budget. Besides, fines from the employer punished for absentation in Employment injury insurance should be brought into Special Account of compensation’s payment in advance, earmarking a fund for its specified purposes only makes the benefit of fines can been seen directly.

2. Timeliness principle. The compensation should be offered promptly at the time when the work-related injury happens, which makes this system reasonable.

3. Relief principle. Payment in advance should be relief in legislation rather than fully protection, so this measure cannot be positioned as the employment injury insurance, thus when paid for employment injury insurance, the wounded worker’s medical expense and other necessary living cost should be paid to solve their burning issues.

Workplace Injury and Social Security Aspects:    Bangladesh Experience

S.M. MORSHED*

Social security inBangladeshis very much complex, complicated and cross cutting issue. Traditionally old aged poor people and physically challenged persons were considered for social security facilities. But now social security is addressed as Social Safety-nets and area of coverage is increasing day by day.

The Government of Bangladesh is managing 84 schemes under social safety-net programmes by allocating 6.2% of total national budget in current fiscal year. The victims of OHS are not targeted directly under any of the GoB Social Safety-nets Programmes.

OHS Scenario

Documentation Center of Bangladesh Occupational Safety, Health and Environment Foundation record shows that 2453 workers were killed and 1841 others injured in various work related incidents across the country  during 1 January to 31 December, 2010.

Of the total, highest number of causalities took place in the transport sector (1217) followed by garments sector (743) day labour (356), agriculture and fishery sector (300) and construction sector (248).

 

Low enforcement of existing labour law (BLA-2006) at workplaces, weak labour inspections, lack of awareness, sensitization and health and safety training among workers, absence of OSH committee at workplaces level, lack of decent wage and defective industrial relations were some of the key causes for growing occupational accidents, workers rights violations and labour unrests  in the country.

TheBangladeshLabour Act -2006 covers the health and safety issues and have few specific provision for compensation. This Act sets out the circumstances in which employer and others should pay compensation to an injured worker or when a worker has died-to that worker’s dependents.

The Labour Act gives theLabour Courtthe power to determine any question relating to whether an employer should pay compensation and if so, how much compensation should be provided. However in relation to any non fatal injury, no application can be made by the injured worker to the court unless he or she has first tried to come to an “out of court” agreement with the employers.

In contrast, in relation to deaths, the court is the body responsible for the distribution of the compensation to the worker’s dependents and the employer should deposit the fixed amount of compensation with the court.

Informal sectors are not covered by the labour act, so the major part of workplace and workforces are out of legal coverage. On the other hand due to week inspection and monitoring system by the GoB Department for Inspection of Factories, implementation of Labour Act is not up to the mark and getting compensation due to work place accidents is not happened properly.

Mostly the employers are not aware of health and safety issues and international labour standard. Women working at different sectors mainly in informal sector have to face hazardous work environment resulting musculoskeletal disorder, cardiovascular disease, mental health disorders and sexual harassment.

Employers role in ensuring the compensation in Ready Made Garments have been appreciated. The court has clear direction several times in ensuring the social safety-nets of the victims and their families in response to several cases.

Civil society groups especially the human rights protection groups and trdae unions are also active for better work environment and implication of labour laws related to work place injury.

The Government of Bangladesh is updating the Labour Act -2006 and initiatives has been taken for formulating a National Policy for Occupation Health and Safety. OSHE is playing its advocacy role for policy reforms and mainstreaming of best practices in the area of occupational safety.

The role of the labor court

 

The Bangladesh Labour Act 2006 (BLA) sets out the circumstances in which ’employers’ and others should pay compensation to an injured worker or – when a worker has died – to that worker’s dependents.

In contrast, in relation to deaths, the Court is the body responsible for the distribution of the compensation to the worker’s dependents – and the employer should deposit the fixed amount of compensation with the court.

 

When does an employer have to pay compensation?

 

The BLA sets out the following rules:

1. The injury or death must be as a result of an “accident arising out of or in the course of his employment” Therefore the injury or death must take place in the course of work. However, it is not necessary for there to be a written contract of employment; an implied oral contract is sufficient.

2. The worker must be employed in certain kinds of work activities – which are set out in schedule 4 of the BLA

• in order to be able to claim compensation. The categories are wide and include:
• workers involved in manufacturing (where more than 5 workers are employed
• workers involved in repairing/adaptation/transport etc of any article (where more than five workers are employed);
• construction workers;
• ship workers
• ferry workers (where the boat is capable of carrying more than 10 people
• workers involved in setting up and maintenance of electric or other cable/telephone lines;
• fire-brigade workers;

 

Who should pay compensation?

 

The BLA refers to the ’employer’ being responsible for paying compensation. However, this term ’employer’ is defined in the BLA to include not only the person or organisation that directly employs the injured or deceased person but also, in certain circumstances, the person or organization who contracts out the work to another organization.

Compensation following a death

 

The BLA sets out the following procedure for an employer to pay compensation.

1. The employer of a worker who has died should inform the labour court about the circumstances of the death within seven days of the death taking place.. A failure to do so is an offence.

1. The employer should deposit in the labour court, tk 1 lakh (tk 100,000). (An employer can only pay directly to the dependents when a worker has nominated particular dependents who should be given money if he were to die at work
2. If, however, the employer has given money directly to the worker’s dependents as an ‘advance’ on the compensation, then the labour court, onreceiving the deposit from the employer, shall return to the employer the sum of money already paid to the dependent.
3. After the money has been deposited, the labour court should summon the dependents (see box) to court to determine how the money should be distributed. 30 It is entirely at the court’s discretion to determine how the money should be allocated between the dependents.
4. If the court considers that tk 1 lakh is ‘insufficient’, it can request the employer to make a further deposit of money to the court within a particular time period, providing reasons for such a request. The employer is provided an opportunity to respond to this request, and the court can make a final decision on what further deposit is required.
5. Where the court is satisfied that no dependents exist, it can, after at least two years has passed, transfer the money for the benefit of the workers as the Government specifies.33
6. Where the court has not been informed by the employer that a worker has died but the court has been informed by some other source, the court “may send by registered post a notice to the worker’s employer requiring him to submit, within 30 days of the service of the notice a statement, in the prescribed form, giving the circumstances relating to the death of the worker, and indicating whether in the employer’s opinion he is or is not liable to deposit compensation.
7. If the employer considers himself to be liable he should deposit the compensation within 30 days of receiving the notice.
8. If the employer considers himself not to be liable to deposit compensation, he should in his statement to the court set out the reasons;
9. The court should then consider the reasons, and, if appropriate, inform any of the dependents of the deceased worker that it is open to them to make a claim for compensation and provide the family any further necessary information.

It should be noted that although the BLA does not allow compensation to be given directly to dependents -and in fact makes any agreement between the employer and dependents unlawful35 – it is practice in Bangladesh for compensation (if it is given at all) to be given directly to the dependents.

 

Compensation following injury

 

Providing notice to the employer

The BLA sets out circumstances when the injured worker should give ‘notice’ to the employer about the injury.

Notice does not need to be given if the accident resulting in the injury occurred:

• on the employer’s premises; or
• at a place where the worker was under the control of the employer; or
• at a place that belonged to the employer;
• or if the injury came to the knowledge of the employer, or any manager of the part of the business where the worker was employed, from any source at or about the time that the accident occurred.

In all other situations – and in order to be able to subsequently make a claim before the labour court – ‘notice’ to the employer needs to be given. BLA sets out the following rules relating to giving notice: notice of the accident must be given to either the “employer” or “upon any person responsible to the employer for the management of any branch of the trade or business in which the injured worker was employed.”

Amount of compensation that should be provided

 

Injuries that can result in compensation are divided into four kinds– permanent total disability, – temporary total disability,- permanent partial disability, – temporary partial disability.Following a ‘permanent total disability’, the employer must pay Tk 1.25 lakh to the worker ,unless the injury is suffered by a person under 18 years of age, in which case he must payTk 10,000.

Following, a ‘permanent partial disablement’ – where the injury is one which is mentioned in schedule 1 to the Act compensation is determined by multiplying Tk 1.25 lakh with the percentage linked to the particular injury in the schedule that represents the likely loss of earning capacity of that worker.45 Where the injury is not mentioned in the schedule, the level of compensation is a figure representing the percentage of loss of earnings to the worker which is then multipled with Tk 1.25 lakh.

Where temporary disablement, whether total or partial, takes place the employer should pay wages for the period of disablement, though this period should be no longer than a year:(a) for the first two onths, the employer should pay full wages;(b) for the next two months, the employer should pay two-thirds of the monthlywages, (c) for the remaining months, the employer should pay half of the monthly wages.

Where more than one injury is caused by an accident causing permanent partial disablement, the amount of compensation for each injury should be aggregated, but it should not exceed the total amount allowed for permanent total disability. In the case of a ‘chronic occupational disease, the worker will receive half of his monthly wages during the period of his or her disablement for a maximum of two years.

 

Compensation by agreement

 

The BLA requires that the worker and the employer should attempt to agree a level of compensation – and can only file a case in court when settlement has failed. 50 All agreements involving a lump sum payment (i.e. those involving total or partial permanent injury) must be registered by the court.

The employer should first send a memorandum to the court setting out the terms of settlement. The court should then communicate to both parties that it intends to register the agreement (based on the figures that were sent by the employer), and after waiting for at least seven days, should then register the agreement.If the employer fails to send a memorandum of the agreement to the court, the employer is liable to pay the full amount of compensation as required by law. However, if the employer has in fact paid the worker more than twice what the law requires (i.e. over tk 250,000 if the worker suffered a permanent disability), the employer cannot deduct more than half of the money paid (unless the court authorizes this).

 

Way forward

 

Human Rights bodies including the trade unions are active in many cases in supporting the victims for getting compensation. The enactment of proposed Act for Occupation Health and Safety will be supportive for establishing the rights of injured persons in workplaces. The Government of Bangladesh is also running a full pledged hospital for workers. Apart from this Bangladesh Police and three wings of defense- Army, Navy and Airforce have well equipped hospital for their treatment. Bangladesh Occupational Safety Health and Environment Foundation is running a medical clinic for treatment to injured workers in ship breaking industry. In future the issues can be considers from social security aspects

 

* Asia Monitor Resource Center

[1] National Sample Survey (NSSO India) data various rounds

[2] RUPE (2008): ‘India’s Runaway Growth: Distortion, Disarticulation and Exclusion, Aspects of Indian Economy’, Nos 44-46, Research Unit for Political Economy, Mumbai.

[3] Patnaik, Utsa 2006:Poverty and Neo-Liberalism in India; Based on Rao Bahadur Kale Memorial Lecture delivered at Gokhale Insitute of Politics and Economics, Pune, February 03, 2006. December 2006. (The government survey of poverty line was challenged by many researchers including the Utsa Patnaik. Utsa Patnaik adjusted the figures for 2400 calorie norm in 1973-74 and on the basis of it calculated the poverty at 39 percent in 1999-2000 and 41.5 percent in 2004-05(based on fixed consumption basket).

[4]  NCEUS (2009): Challenges for Employment in India, An Informal Economy Perspective (Vol II); National Commission for Enterprises in Unorganised Sector;  Government of India; http://nceuis.nic.in/The_Challenge_of_Employment_in_India_%28Vol.%20II%29.pdf

[5] Surendra Pratap 2009, ‘SEZ Rush in India’, Working Paper, CEC, New Delhi

[6] Sainath, 2005, ‘As you sow, so shall you weep’, http://www.hindu.com/2005/06/30/stories/2005063004691100.htm

P. Sainath, ‘Spice of life carries whiff of death’, http://www.hindu.com/2005/02/13/stories/2005021308391000.htm

[7] Sainath, 2005, ‘‘Spice of life carries whiff of death’, http://www.hindu.com/2005/02/13/stories/2005021308391000.htm’; and  Jaideep Hardikar 2006, The rising import of ‘suicides’; http://www.indiatogether.org/2006/jun/opi-cotton.htm

[8] Seeds of ruin, 2005 ; http://www.indiaagronet.com/indiaagronet/domestic_news/2005/jan2005.htm#ruin

[9] Seeds of Suicide, InfoChange News and Features, August 2004; http://infochangeindia.org/other/features/seeds-of-suicide-i-i.html

[10] Agricultural Statistics at a Glance, 2006, Ministry of Agriculture, Government of India

[11] P. Sainath, ‘Neo-Liberal Terrorism in India: The Largest Wave of Suicides in History’, Counterpunch, February 12, 2009; http://www.counterpunch.org/sainath02122009.html

[12] NCEUS (2009): Challenges for Employment in India, An Informal Economy Perspective (Vol II); National Commission for Enterprises in Unorganised Sector;  Government of India; http://nceuis.nic.in/The_Challenge_of_Employment_in_India_%28Vol.%20II%29.pdf

[13] Total workforce: 456 million; informal sector workforce: 393.2 million (86 percent); Out of 393.2 million unorganized sector workers, agriculture accounted for about 251.7 million and the rest 141.5 million are employed in the non-agriculture sector). The total employment in the Indian economy increased from 396 million to 456 million between the twoNSS rounds in 1999-00 and 2004-05. In the formal sector the employment increased from 54.9 to 62.6 million. However, there was no significant increase in formal employment (33.6 million to 35.0 million). It means that the entire increase in the employment in the formal sector also has largely been of informal in nature i.e. without any job or social security. (NCEUS (2009): Challenges for Employment in India, An Informal Economy Perspective (Vol II); National Commission for Enterprises in Unorganised Sector;  Government of India; http://nceuis.nic.in/The_Challenge_of_Employment_in_India_%28Vol.%20II%29.pdf)

[14] NCEUS (2009): Challenges for Employment in India, An Informal Economy Perspective (Vol II); National Commission for Enterprises in Unorganised Sector;  Government of India; http://nceuis.nic.in/The_Challenge_of_Employment_in_India_%28Vol.%20II%29.pdf

[15] Sanjiv Pandita 2009, ‘Status of occupational safety and health in India’, InfoChange News & Features, April 2009; http://infochangeindia.org/agenda/occupational-safety-and-health/status-of-occupational-safety-and-health-in-india.html

[16] NCEUS (2009): Challenges for Employment in India, An Informal Economy Perspective (Vol II); National Commission for Enterprises in Unorganised Sector;  Government of India; http://nceuis.nic.in/The_Challenge_of_Employment_in_India_%28Vol.%20II%29.pdf

[17] Minimum wage is fixed by the government and it is different in different regions and sectors of the economy. Presently it is around Rs 100 (USD 2) per day.

[18] http://www.ilo.org/public/portugue/region/eurpro/lisbon/pdf/worldwork_2010.pdf

[19] M. Kailasam and K. Sundaram 2010, ‘Wave of Garment-Worker Suicides in Indian ‘Boom’ Town’, 31 Dec 2010, WSWS; http://www.wsws.org/articles/2010/dec2010/indi-d31.shtml

[20] The information on this aspect is largely based on : V. Dhulasi Birundha, ‘Globalisation of Indian Economy and it’s Impact on Environment’, Globalization, Energy and Environment, Warsaw School of Economics, 29-30 May, 2008; http://akson.sgh.waw.pl/~trusek/gee/papers/paper-Birundha.pdf

[21] One million=10 lakh

[22] Roy, P.Ch., ‘Union Budget 2011–A Critique’; http://munibor.wordpress.com/2011/02/28/union-budget-2011a-critique/

[23] Social security for social justice and a fair globalization, Report VI , , International Labour Office Geneva, ILO 2011; http://www.ilo.org/ilc/ILCSessions/100thSession/reports/reports-submitted/WCMS_152819/lang–en/index.htm

[24] Social Protection Floor Initiative; http://www.ilo.org/public/english/protection/spfag/download/background/spfframework.pdf

[25] Michael Cichon, Christina Behrendt, And Veronika Wodsak 2011, ‘The UN Social Protection Floor Initiative: Moving forward with the Extension of Social Security’, http://library.fes.de/pdf-files/ipg/2011-2/05_a_cichon.pdf

[26] Minimum wage is fixed by the government and it is different in different regions and sectors of the economy. Presently it is around Rs 100 (USD 2) per day.

[27] Social security for social justice and a fair globalization, Report VI , , International Labour Office Geneva, ILO 2011;http://www.ilo.org/ilc/ILCSessions/100thSession/reports/reports-submitted/WCMS_152819/lang-en/index.htm

[28] Michael Cichon, Christina Behrendt, And Veronika Wodsak 2011, ‘The UN Social Protection Floor Initiative: Moving forward with the Extension of Social Security’, http://library.fes.de/pdf-files/ipg/2011-2/05_a_cichon.pdf

[29] Surendra Pratap 2010, ‘Successes and Failures of NREGA towards Empowerment of Rural Poor with Particular Reference to Women’, SRUTI,New Delhi

[30] |Smil, Vaclav] (2005). Creating the Twentieth Century: Technical Innovations of 1867-1914 and Their Lasting Impact. Oxford, New York: Oxford University Press.

[31] It is very well reflected in the 2011-12 budget of Government of India: “The Budget (2011-12) comes at a time when people are suffering due to high inflation and relentless rise of food and fuel prices. In this backdrop, the massive Rs. 20000 crore cut in major subsidies for 2011-12 on fuel, fertiliser and food, from what was spent in 2010-11 (Revised Estimates), come as a rude shock. The cut in food subsidy by Rs. 27 crore clearly exposes the Government’s lack of willingness to enact meaningful food security legislation. The Finance Minister’s stubborn refusal to reduce excise and customs duties on petro products and obduracy in moving away from the ad-valorem duty structure, coupled with the cut on fuel subsidy by Rs. 15000 crore, indicates massive increase in fuel prices in the days to come. …The direct cash transfer programme announced for implementation from next year is a smokescreen for this subsidy cut. The current BPL (below poverty line) lists exclude large sections of the country’s poor. Direct cash transfers to a small section of beneficiaries cannot substitute for the subsidized provision of essential commodities like food and fuel. The rise in kerosene prices will immediately affect the poor. The Budget has provided relief of Rs. 11500 crore in direct taxes, while proposing to mobilize an additional Rs. 11300 crore through indirect taxes, which will inevitably be passed on to the consumers. This is a regressive taxation regime, which enriches the rich while burdening the ordinary citizens. As per the Statement of Revenue Foregone, total tax concessions reached over Rs. 5 lakh crore in 2010-11, with corporate tax exemptions totalling over Rs. 88000 crore. The tax-GDP ratio, which had reached almost 12% in 2007-08, has declined since then to around 10% in the current Budget. At a time when income inequalities are rising fast, a decline in tax GDP ratio shows the waning commitment towards redistributive policies and a throwback to trickle down economics. No concrete steps to unearth the huge sums of black money stashed in offshore tax havens were announced. The DTAA (Double Taxation Avoidance Agreement) withMauritius, through which 42% of FDI inflows intoIndia is routed, is the biggest conduit of tax evasion by MNCs and Indian corporates. Rather than plugging such channels, the Finance Minister is signing more tax avoidance treaties with other countries. With resource mobilisation taking a back seat, Plan Expenditure as % of GDP in 2011-12 will decrease from what was spent last year. The Budget Support for the Central Plan in 2011-12 has increased by only 12% over 2010-11, while nominal GDP has increased by 14%. Such squeeze in real expenditure marks all the major developmental heads. The flagship schemes of the social sector have been neglected in the budget and social sector spending is slated to fall in real per capita terms.  The allocation for NREGS has fallen by Rs. 100 crore, despite a claimed increase in the wages. The provisions for ICDS (Integrated Child Development Services Scheme) are far below the estimates for full universalization as directed by the Supreme Court. Agricultural growth has been below 3% on average in the first four years of the Eleventh Five Year Plan, despite a target of 4%. It is shocking in this backdrop that the budget provision for the Agriculture Department has been cut from last year. The allocations for the welfare of women, minorities, dalits and tribals are thoroughly inadequate. Capital expenditure is projected to fall from 1.7 per cent of GDP to only 1.2 per cent, which will affect basic infrastructure for the people.”

[32] Global Labour Trends 2011, International Labour Organisation; and  United Nations UN Department of Economic and Social Affairs, The Millennium Development Goals Report 2010

[33] AFW talks only about Asian floor wage for a sector-garment. What will be its impact on the economies where the garment is the only major industry? What will be its impact in general? If high minimum wages are only in garment sector, it will certainly lead to flooding of labour supply to garment sector, providing immense opportunities to employers to violate laws and devise ways and means to use cheap labour easily available. How the compliance will be insured?

[34] Report of the Expert Group to Review the Methodology for Estimation of Poverty; (Tendulkar Committee Report), Government of India, Planning Commission, November, 2009

[35] Dr. Aykroyd’s “Adequate Diet”

[36] Tendulkar Committee of Planning Commission projected poverty line figures on the basis of these calories intake figures

[37] Sachin Kumar Jain, Reading between the poverty lines, Infochange News & Features, May 2010; http://infochangeindia.org/poverty/analysis/reading-between-the-poverty-lines.html

* Li Kungang, Ph.D., Law Professor in Law School of Anhui University, email: likungang@hotmail.com.

[38] Zhai Yujuan, The Minimum Wage Systems Should not be neglected, the Journal of Modern Communication, 2002, No. 4.

[39]林原、袁伦渠：经济转型期我国最低工资制度实施的必要性分析，《生产力研究》2007年第5期。

[40]邓聿文：最低工资标准在中国是一道屏障，《农村.农业.农民》2009年第4期。

[41]张立伟：《专家称独立社会保障体系比最低工资制度更重要》，http://finance.sina.com.cn/g/20060624/02412677647.shtml。

[42] 《最低工资规定》第2条。

[43] 《最低工资规定》第8条。

[44] 《湖南省最低工资规定》第11条。

[45] 《企业最低工资规定》第2条。

[46] 《劳动部关于实施最低工资保障制度的通知》第3条第（4）项。

[47] 《最低工资规定》第13条。

[48] 《劳动保障监察条例》第11条（6）。

[49] 慎海雄：“最低工资”怎能变成“标准工资”，

http：//news.xinhuanet.com/employment/2006-08/24/content_5001977.htm.

[50] 彭北异：最低工资标准何以成了标准工资，《中华工商时报》，2010年2月22日。

[51] 王娇萍：乔传秀：尽快完善最低工资制度 促进低收入职工工资增长，《工人日报》2010年3月12日。http://acftu.people.com.cn/GB/67560/11125167.html

[52] 侯玲玲、王全兴：中国最低工资法政策研究，《中国劳动关系学院学报》2008年第1期。

[53] Hansjorg Herr and Milka Kazandziska, Principles of Minimum Wage Policy – Economics, Institutions and Recommendations, http://www.google.com.hk/url?sa=t&source=web&cd=1&ved=0CCAQFjAA&url=http%3A%2F%2Fwww.global-labour-university.org%2Ffileadmin%2FGLU_Working_Papers%2FGLU_WP_No.11.pdf&rct=j&q=Principles%20of%20Minimum%20Wage%20Policy%20-%20Economics%2C%20Institutions%20and%20Recommendations%20%20pdf.&ei=hGcaTtiFC6P2mAX93pUn&usg=AFQjCNGF0VHcjZBuX41behnhryF4UwFfeQ&cad=rjt

[54] 石娟：我国最低工资标准与就业关系的实证研究，《现代经济》2009年第3期。

[55] Ibid. 16.

[56] Ibid. 16.

[57] Ibid. 16.

[58] Ibid. 16.

[59] Ibid. 16.

[60] 郑杭生：社会结构与社会和谐，《中国人民人学学报》，2005年第2期。

[61] 侯玲玲、王全兴：中国最低工资法政策研究，《中国劳动关系学院学报》2008年第1期。

[62] 王晓玲：我国最低工资保障制度实施的个案研究，《经济纵横》2009年第10期。

[63] 肖守中：最低工资制度在中国的发展及其影响，《财经论坛》2005年第11期。

[64] 同上。

* Khalid Mahmood currently serves as the director of Labour Education Foundation

* Written by Ms. Van Thu Ha from from Viet Nam and reflected her personal point of view

[65]  Although the wage policies reform in 1985 already set the minimum wage based on labour norms and production cost units, this went together with a market oriented price reform. However these reforms have not been absolutely implemented because they were influenced by the old way of thinking. In addition, the voluntarism based monetary reform took place at the same time with the other two reforms on wage and prices had a serious impact on the economy, causing a sky rocket inflation of three figures in 1986 and reduced to double figures (34.7%) only in 1989)

[66]  Decision 114/2002/N Đ-CP dated on 31/12/2002 and decision 203/2004/N Đ-CP dated on 14/12/2004

[67]  proposal on wage reform policies 2004

[68]  General minimum wages are minimum wages initially applied to the State sector then applied to both State sector and domestic private enterprises (up to 2008 when the regional minimum wages for the later was determined)

[69]  ILO-C131 Minimum Wage Fixing Convention 1970, Article 3: The elements to be taken into consideration in determining the level of minimum wages shall, so far as possible and appropriate in relation to national practice and conditions, which include:

(a) the needs of workers and their families, taking into account the general level of wages in the country, the cost of living, social security benefits, and the relative living standards of other social groups;

(b) economic factors, including the requirements of economic development, levels of productivity and the desirability of attaining and maintaining a high level of employment.

[70]  The method to figure out minimum living needs applied during 1993-2005 is the structure of 51% for food covering a goods basket of 44 items that provides 2.300Kcal per day per person calculated based on 1993 CPI, 49% for non-food items, and 70% for feeding children. The option to estimate minimum living needs for the period 2006-2012 is the structure of 45% for food covering a goods basket of 54 items that provides 2.300Kcal per day per person, 55% for non-food items, and 70% for feeding children based on the population living standards survey in 2004, plus inflation with an estimation of CPI increase 7.5% yearly. The adjustment of minimum living needs in this table was based on real year CPI. The market average minimum wages from 1993 to 2008 were based on real prices, from 2009 they are estimated figures with an estimated increase of 10% per year by MOLISA in the proposal for wage policies during 2006-2012. CPI compared to 2000 (GSO 2006, 2010, inflation 2010, http://www.thanhnien.com.vn/pages/20110629/thu-nhap-thuc-te-cua-nguoi-dan-thap-hon-truoc.aspx)

GDP per capita per month using actual price (GSO 2010)

Setting the minimum wage and CPI in 2000 at 100%; comparing the GDP per capita per month with the minimum wage (=263%) and the market average minimum wage with the minimum wage (=177%)

[71]  It might be less than that because the figures on the market average minimum wages in 2009 and 2010 were only estimated. An estimated increase by 10% per year in the MOLISA proposal for wage policies during the period 2006-2012.

[72]  Workshop on the proposal of Viet Nam labour market promotion (2011-2020) dated in 17/3/2011.http://www.coalimex.com.vn/index.php/227/6124/Nam-2020-tien-luong-toi-thieu-dat-85-muc-trung-binh-ASEAN

[73]  Minimum wages in Campuchia was 45USD per month, in Thailand was 75USD, in Indonesia 35USD, in the Philipines 71USD, in China 65USD, in India 70USD – ILO and WB figures, Theorical and practical foundations for building options of minimum wages and solutions for implementation, MOLISA, 2007 (p. 20)

[74] Update on minimum wage developments, ILO, 2009

[75]http://www.coalimex.com.vn/index.php/227/6124/Nam-2020-tien-luong-toi-thieu-dat-85-muc-trung-binh-ASEAN

[76] Regional minimum wages are minimum wages applied to a specific region. In Viet Nam, the region identification is based on several indicators including living standards, people consumption habit, etc.

[77] In 1992: equivalent in VND of the FDI regional minimum wages (35$-30$): decreased to attract FDI

In 1996: equivalent in VND of the FDI regional minimum wages (45$-40$-35$)

In 1999: wage in VND (the same wage level as in 1996 following exchange rate of 13,910VND/1USD

In 2003: the same levels as in 1999 but the level 4 was removed

[78]  This minimum wage was based on a structure of 36.8% for food, 3% for clothes and individual effects, 36%    for housing, electricity, water supply and other expenditures, 2.4% for family belongings, 4.6% for travel, 3.4% for education, 10% for social insurance, and 3.8% for social relations

[79]  Estimated inflation in 2011 is 15% (lower than the reality)

[80] The table 3 compares the general minimum wage, the average minimum wages in FDI, and in domestic private enterprises with the minimum living needs following the MOLISA calculation method and considering real inflation.

[81]  http://chaobuoisang.net/khoi-doanh-nghiep-tang-luong-toi-thieu-som-3-thang-327319.htm

Minimum wages in region 1, 2, 3 and 4 will be 1,9 mil VND, 1,73 mil; 1,55 mil and 1,44 mil VND respectively.   It means, in the coming adjustment, the minimum wages for the first, second, third, and fourth regions will be increased on average 28% and 50% in FDI and domestic private sectors accordingly, of which the lowest increase is 23% (FDI, region 1) and the highest increase is 69% (domestic private enterprises, region 4)

[82]  Sectoral minimum wages are minimum wages applied to a specific industrial sector.

[83]        Decision 28/CP dated in 28/3/1997, circular 13/L ĐTBXH-TT dated in 10/4/1998, circular 5/2001/TT-L ĐTBXH dated 29/1/2001

[84]

http://www.xaluan.com/modules.php?name=News&file=article&sid=181736    http://www.tapchicongnghiep.vn/News/channel/1/News/310/15458/Chitiet.html

The garment sector’s collective bargaining agreement (CBA) was signed by 69 enterprises (the majority are Vietnamese) in 2010. Wage related policies included a framework for development of wage scales and tables (wage in hazardous conditions is 7% higher than that in normal conditions; not more than 15 wage ladders), first wage level of trained workers is at least 10%  higher than the minimum wage, wage scaling up after 1-2 years, monthly average income of workers except shift meal and insurances should be equal to 1.7mil – 1.6mil – 1.5mil-1.3mil VND in regions 1, 2, 3, 4 accordingly). The CBA, re-signed in 6/2011, added and adjusted some contents related to shift meals (by region), increasing minimum wage, etc.

[85]  A study on policies and solutions to ensure social justice in wage and income distribution in enterprise of different sectors, MOLISA, Labour and Social publishing house, 2010, p. 10

[86]  Calculations based on the figures of Tran Van Hoan, ILSSA, 14/2007.

[87] The 2010 survey of 1,581 enterprises in 15 provinces and cities shows that the gap between managerial employees and simple skilled workers in FDI was from 9 – 10 times greater in 2006 but it was 20-21 times greater in 2010, meanwhile it was only from 7-8 times greater in the domestic private enterprises. http://cafef.vn/20110311123417294CA36/nam-2010-nganh-mo-luyen-kim-co-muc-luong-cao-nhat.chn

[88]  http://nld.com.vn/2009101409512582P0C1010/kho-vi-luong-co-ban.htm 15/10/2009 00:12

[89] Data from http://www.molisa.gov.vn/news/detail2/tabid/371/newsid/52030/seo/VI-SAO-TIEN-LUONG-CUA-CONG-NHAN-TRONG-CAC-DOANH-NGHIEP-TU-NHAN-THAP-/language/vi-VN/Default.aspx;

http://www.thanhnien.com.vn/Pages/20110310/Cong-bo-muc-luong-binh-quan-mot-so-nganh-nghe.aspx; and

 

http://www.thesaigontimes.vn/Home/thoisu/doisong/28268/

[90]        According to the Japanese foreign trade organization (Jetro), The theorical and practical bases to build options for minimum wages and implementation solutions, MOLISA, 2007 (p. 42)

[91]        GSO, surveys on enterprises

[92]        Brief statistics 2010; Inhabitants’ average expenditures in 2010 was increased 52.8% compared to 2008 according to the survey on living standards 2010   (http://www.thanhnien.com.vn/pages/20110629/thu-nhap-thuc-te-cua-nguoi-dan-thap-hon-truoc.aspx);

The line standing for living expenditures of the lowest income quintile is based on a calculation for two persons in order to compared it with a minimum wage supposed to cover minimum living expenditures for an adult and a child

[93]        The 2010 survey in 1,700 enterprises shows that more than 90% of the enterprises have paid workers at a higher level than the minimum wages that were planned to be applied in 2011 (http://daidoanket.vn/index.aspx?Menu=1368&Chitiet=17610&Style=1 )

[94]        The coming tendency in wage policies is still gradually applying the indicator of workers minimum living needs as the main method to fix minimum wages considering the market wages –  A study on policies and solutions to ensure social justice in wage and income distribution in enterprise of different sectors, MOLISA, Labour and Social publishing house, 2010, p. 254

[95] Global wage report 2010/2011, ILO p.56

[96]        Asume that workers’ pensions in the FDI and domestic private sectors have been canculated based on their basic salaries, which are 10% higher than the minimum wages.

[97]http://www.baomoi.com/Home/LaoDong/sggp.org.vn/Tang-muc-dong-bao-hiem-xa-hoi–Dam-bao-luong-huu-du-song/5260920.epi

[98]        Viet Nam social protection report 2008

[99]        http://nld.com.vn/2009101409512582P0C1010/kho-vi-luong-co-ban.htm 15/10/2009 00:12

*Dr. Han guijun（1970－）, Female, Associate Professor of Zhongnan University of Economics and Law.

* P.h.D. , Professor of University of the Philippines

[100] Vulnerable employment is defined by ILO as the total of the self-employed (minus the employers) and the contributing unpaid family workers.  This statistical concept, a laudable initiative, has one major drawback: it tends to ignore the fact that many wage jobs are also facing varying levels of vulnerability due to endless flexibilization or casualization measures employed by employers and placement/dispatching agencies.

[101] In response to the Great Depression of 1929, Franklin Roosevelt of the United States and other countries instituted a whole set of  reforms giving labor more rights in line with the Keynesian and institutional economic thinking at that time (Kaufman, 2004).  This paved the way for the “New Deal” American economic recovery of the 1930s and the establishment in the 1940s and 1950s of a stable system of tripartism, welfarism and economic growth in Europe and America after the end of World War II.

[102] Some producers-buyers can be present in dozens of countries and can have value-chain production involving scores of cooperating companies located in different countries.

** Senior Research Fellow, Korea Labor Institute.

[103] This section is extracted and revised from Hwang (2010)

[104] This section is extracted and revised from Hwang (2011)

[105] This section is extracted and revised from Hwang and Lee (2011).

[106] Another important feature of Korea’s welfare regime is that it developed a social insurance based system, which is different from some Asian countries that developed more individualized income security schemes like the Employee Provident Fund. This is not the issue of this meeting. To understand Asian social security regimes in detail, however, more comprehensive approach would be necessary.

# Acknowledgements shall go to Max-Planck Institute for Foreign and International Social Law of Germany for its support.

* Author bio: 1982-, Associate Professor,  a joint economics Ph.D. of Southwestern University of Finance and Economics and the Max-Planck Institute for foreign and international social law of Germany, is now working in Southwest Jiaotong University, Chengdu, P.R. China Research interests: land property and social security for peasants in developing areas. Email: yangswjtu@126.com. Mail address:School ofPublic Administration,SouthwestJiaotongUniversity,Chengdu, P.R. China

[107] 1 hectare = 15 Chinese mu

[108] After a piece of collective ownership land has been expropriated into state ownership land by the Government, it can be used for the purposes of economic construction when the users have paid an amount of money called land transfer price to obtain the land-use rights (to the Government it means remise income). The remise income can be regarded as income from land rent obtained by the Government.

[109] Data in this section are mainly sourced from the typical survey conducted by the Rural Investigation Team of the State Statistics Bureau in 2003. The survey objects are rural households which occupied less than 0.3 Chinese mu per capita. See: “Shi Di Nong Min De Kun Nan, Xin Tai He Xu Yao Jie Jue De Wen Ti”, http://www.sannong.gov.cn,2003-10-22, [online; cited 20 April 2009].

[110] 1 acre = 6.07028433 Chinese mu

* The two authors are fromNorthwestUniversityLawSchool,Xi’an,China

* The author now serves as the vice chairperson of Bangladesh Occupational Safety, Health and Environment Foundation

* Diana is from Public Research Insitute of the Hong Kong Polytechnic University, Hong Kong, China.

**Mike is from Shenzhen Research Insitute of Tsing Hua University, Beijing, China.

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Introduction

 

ASEAN countries are facing the financial crisis and pressures of globalization.  Social protection is more essential to face the challenges of globalization and the impact of ASEAN economic integration. International Labour Organization (1994) recommended the implementation of a three pillar framework for social protection comprising a first pillar of general, social assistance including income protection provided by the government, a second social insurance pillar comprising mandatory contributions and a third, voluntary, private insurance pillar supplements the other two. For some reasons, these 1994 ILO recommendations were not implemented.

 

ASEAN governments have adopted the millennium development goals and are implementing poverty reduction programs.  ASEAN accepted the commitment to social development from the World Social Forum in Copenhagenin 1995 which issued the declaration: “Governments must develop and implement policies to ensure that all people have adequate economic and social protection during unemployment, ill health, maternity, child rearing, widowhood, disability and old age”