International Labour Organization 1919-2019 Establishing a aldi age ILO Country Office for Sri Lanka and the Maldives submission to the Government of the Maldives The Maldives minimum wage report Assessment of the needs of workers and their families, and economic factors December 2019 ILO Country Office for Sri Lankan and the Maldives Copyright © International Labour Organization 2019 First published (2019) Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Licensing), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email: [email protected]. The International Labour Office welcomes such applications. Libraries, institutions and other users registered with a reproduction rights organization may make copies in accordance with the licences issued to them for this purpose. Visit www.ifrro.org to find the reproduction rights organization in your country. Xavier Estupiñan, Anup K. Karan, Ali Nafees, Niushad Saeed English edition: The Maldives minimum wage report: Assessment of the needs of workers and their families, and economic factors ILO Decent Work Technical Support Team and ILO Country Office for Sri Lanka and the Maldives, 2019 ISBN : 9789220315903 (print); 9789220315910 (web pdf) The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. Information on ILO publications and digital products can be found at: www.ilo.org/publns. Printed in (Male, The Maldives) Preface The year 2019 marks 100 years of the International Labour Organization’s existence as the premier world of work agency. Born out of the ashes of the First World War, ILO was created in 1919 as part of the Treaty of Versailles that ended the War. It was founded on the belief that social justice is essential to universal and lasting peace. The driving forces behind ILO's creation arose from security, humanitarian, political and economic considerations. ILO is the first specialized agency of the United Nations, and the only agency to have tripartite (government, workers and employers) representation in its Governing Body. At 100 years, ILO has renewed its commitment through the ILO Centenary Declaration for the Future of Work, 2019. The Declaration reaffirms ILO’s century-old social justice mandate, and the critical role of international labour standards and social dialogue. The precepts of social dialogue, collective bargaining and tripartite cooperation are more relevant than ever in the new changing dynamics of the world of work. These powerful tools can ensure that enterprises grow productively, dividends are widely shared, workers are protected and their work fairly remunerated. The Declaration is in close alignment with the targets set forth under the global Sustainable Development Goals. The Declaration highlights the need to shape macroeconomic, investment, trade, industrial and sectoral policies so that they promote sustainable, inclusive growth and decent work for all. Significantly, it calls for a “human- centred approach” to the future of work. That means investing in jobs, skills and social protection. It means supporting gender equality. It means adopting policies that promote an enabling environment for sustainable enterprises, economic growth and decent work for all. The Republic of Maldives took an historic decision this centenary year to establish its first ever minimum wage threshold and system. This decision is in alignment with the ideals enshrined in ILO’s Declaration and pursuant to the Employment Act, 2008 (Act No. 2/2008) on 26 May 2008 where the need for the introduction and implementation of a minimum wage system and the right for collective bargaining for all workers in the Maldives is outlined. The Ministry of Economic Development subsequently sought technical expertise of the ILO towards this end. A technical team of ILO experts together with the active participation of a tripartite Salary and Wage Advisory Board (SAWAB) of the Maldives finalized this technical report in November 2019 for submission to the ministry. The report draws on ILO’s extensive technical expertise in evidence-based analysis to inform the deliberations of SAWAB and to buttress its recommendations on solid ground. The report is as much a reflection of evidentiary analysis as it is a reflection of the centrality of evidence-based social dialogue, as demonstrated in the work of SAWAB. iii As the cost of living and other economic conditions are to no doubt change over time, the report’s recommendations include ways in which this newly born minimum wage system could be further strengthened to adapt to changes, while maintaining the essential pillars of sound evidentiary analysis coupled with improved conditions for tripartite consultation. Simrin C. Singh Director, ILO Country Office for Sri Lanka and the Maldives iv v Table of contents Acknowledgements …………………………………………………………………………………………………………………….x Executive summary ……………………………………………………………………………………………………………….…xiii Abbreviations…...………………………………………………………………………………..…………………………………..xxiv 1. Background …………………………………………………………………………………………………………………………….1 1.1 The Salary and Wage Advisory Board and the consultative process …………………………………..2 2. Maldives: Landscape and socio-economic context ………………………………………………….………………..8 2.1 Landscape: Tourism and the economy ……………………………………………………………………….…….9 2.2 Poverty and inequality ………………………………………………………………………………………………….…15 2.3 Employment and wages ………………………………………………………………………………..………………..17 2.4 Social protection schemes ……………………………………………………………………………………………...29 3. ILO minimum wage policy guidelines and international labour standards …………………..…………..31 3.1 ILOs Conventions on minimum wages ………………………………………………………………….………..31 3.2 Effective minimum wage policies ……………………………………………………………………………..……..36 3.3 Evidence-based setting and adjustment of the minimum wage ……………………………..……….37 4. International experiences with minimum wage systems ………………………………………………….…….43 4.1 Minimum wages in Asia ………………………………………………………………………………………………….43 4.2 Vietnam’s minimum wage system …………………………………………………………………………………..46 4.3 Malaysia’s minimum wage system ………………………………………………………………………………….49 5. Determining the methodology for fixing the national minimum wage in ……………….……………..54 the Maldives 5.1 Methodologies ………………………………………………………………………………………………………….……54 5.2 Results ……………………………………………………………………………………………………………………………70 5.3 Regional or sectoral minimum wages …………………………………………………………….………………107 5.4 Mechanism for adjustment ……………………………………………………………………………………………110 6. Recommendations …………………………………………………………………………………………………….………….112 Appendix ………………………………………………………………………………………………………………………….…….148 Bibliography …………………………………………………………………………………………………………………..……...174 vi Tables Table 1 Labour force participation rate (LFPR) from South Aisan and …………………………….…18 and the Maldives, 2016 Table 2 Average per day per person calorie requirement (K/cal) and adult ………………..……..58 equivalence coefficients in different age groups and sex Table 3 A normative food basket for adequate nutrition requirement per day per ….………..63 per adult person consumption Table 4 Population share and weighted calories (K/cal) requirement per person per day …71 Table 5 Per person and per consumption unit per day consumption of calorie ……………..….73 Table 6 Per consumption unit per day calorie intake (K/cal) and monthly food …………...……76 expenditure (MVR) by fractile group Table 7 Alternative estimates on food consumption expenditure required to …………………..77 meet the minimum calorie norm Table 8 Monthly per consumption unit of non-food expenditure (MVR), classified by ……….78 essential, other and excluded total by fractile groups Table 9 Percentage of households reporting rent payment and average value of ……………79 rent (MVR) per paying household Table 10 Summary of different estimates of monthly cost of living and estimation ……………81 of need-based monthly minimum wage per worker Table 11 Characteristics of the labour market, 2016 ……………………………………………………………82 Table 12 Prevailing mean and median monthly wage (MVR) payments by heads ……………….83 of payment for primary occupation, 2016 Table 13 Estimated values of the parameters for estimating equation 6 ……………..……………..94 Table 14 Estimates of total wage bill needed to meet the wage gap if minimum wages …....97 are implemented at different thresholds Table 15 Percentage of workers below different thresholds and the related …..………………….99 wage gap (MVR) per worker at the sectoral level Table 16 Monthly wage gap bill (‘000 MVR) below different thresholds at