The implementation of minimum wage: Challenges and creative solutions

Abstract

While minimum wage is widely debated at both academic and political levels, little attention has been dedicated to documenting and assessing the implementation of and compliance with minimum wage policies. This paper begins to fill this research gap by identifying and qualitatively assessing a variety of minimum wage implementation mechanisms. The theoretical framework delineates various frameworks that explain what implementation strategies might be effective in achieving compliance with minimum wage. The empirical part offers examples of how these elements have been implemented in practice. First, it provides an overview of existing implementation mechanisms drawn from across the globe. Then, the British minimum wage implementation system is illustrated in detail. Finally, additional implementation strategies from the broader field of labour regulation are presented with a view to diversifying and strengthening minimum wage implementation. Based on the documentation of these strategies, five types of measures should be included in setting up an effective implementation system: First, persuasion strategies should be used to build public support for the minimum wage and encourage employers to comply voluntarily. Second, capacity building measures such as information sessions and training seminars should be undertaken so that employers and workers are informed about the minimum wage and so that employers know how to implement it in their firms. Third, the monitoring system should allow the detection of non-compliance. Labour inspections should be reinforced and carried out, especially in the sectors at risk; complaint procedures should be made more accessible and safer to workers and their representatives. Fourth, workers should be empowered to enforce their wage rights not just through individual complaints, but also through collective action, as workers fear retaliation when they are required to undertake individual action. For instance, unions should be given access to information on workers' wages, the opportunity to organize workers and the power to act on workers' behalf. Finally, sanctions should be structured such that they constitute an actual deterrent to non-compliance. This means that the cost of sanctions should be higher than the benefit of workers' underpayment. Moreover, the application of sanctions should be sure and incremental.