Friday, June 3, 2016

ASEAN Minimum Wage May Raise Compensation and Institutional Issues

This week Indonesian Vice President Jusuf Kalla proposed an ASEAN minimum wage for workers.  According to the Jakarta Post, Kalla made the proposal during a World Economic Forum meeting on ASEAN in KL:
Vice President Jusuf Kalla introduced the idea amid concerns over a lack of protection for nationals of ASEAN member states.   "Vietnam very much supports what I have said about the need for ASEAN countries to protect their citizens from exploitation," Kalla said on Thursday as quoted by Antara news agency.
He said other ASEAN member countries had expressed interest in pushing for a minimum wage for workers in the region. Kalla said manpower ministers from ASEAN member countries would meet shortly to discuss the issue. "We are in agreement. Cambodia has also agreed," he asserted. 
Kalla added that the government did not want large multinational companies in ASEAN countries to compete for the lowest wages. "Competition is good, and so far we have not lost out due to low wages because the raw material is the same, the factories too," Kalla said. 
I am not going to debate here whether government-mandated minimum wages are economically beneficial to workers, consumers or employers.  However, the Indonesian proposal does raise some ASEAN-specific issues which I’d like to discuss.
First, would we have an ASEAN region-wide minimum wage, or would there be allowances for the less-developed countries of Cambodia, Laos, Myanmar and Vietnam (CLMV)?  Kalla’s comments indicate support from Cambodia and Vietnam, who presumably would want such allowances.
Second, would the scope of the minimum wage only cover wages, or would benefits such as retirement, severance, medical, leave, etc., also be covered?  In other words, is the term “minimum wage” to be taken literally or will it cover all aspects of worker compensation?  Will there be different wage scales for different sectors?
Third, who would be covered?  All workers in an ASEAN country, including guest workers?  Or only ASEAN nationals?  What about ASEAN nationals who are in another ASEAN country but on an undocumented basis?  Or who are working in a special economic zone?
Fourth, how the workers ensure that their rights to a minimum wage are protected?  Would they go to an ASEAN institution (not likely) or an ASEAN member state’s government (much more likely)? Could they go to dispute resolution or to administrative means?    Who would investigate?  What sanctions would be imposed on the employer? Would the workers be entitled to receive back wages? 
Fifth, even if the enforcement process will be necessarily nation-based instead of region-based, how will the ASEAN national agencies or courts interpret and apply the ASEAN minimum wage documentation? Will they look at the negotiating history, statements by government officials and the like? 
All of this leads to my final question, what legal form will the ASEAN minimum wage take?  Will it be the usual ASEAN declaration of an aspirational nature, which might mean that the minimum wage would be fully or partially unenforceable?  Or will it have more legal weight, which would make it more effective but will require more legal and institutional infrastructure?
In previous posts, I have called labor mobility the “third rail of ASEAN” which politicians will touch only at their peril. The ASEAN minimum wage proposal does not touch this third rail, but it raises similar issues with similar potential controversies: it’s not touching the third rail, but it is close enough to hear the electricity humming down the line.