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Since the Arab Spring, most Arab states have increased minimum wages in the private sector, while others introduced them—as Egypt did in 2012—or ratified the Minimum Wage International Convention (C131)—as Morocco did in 2013. While other countries, such as Comoros, Jordan, Kuwait, Lebanon, the Maldives, Oman, Sudan, and Tunisia, have not ratified the convention, they have, nevertheless, various forms of mandated minimum wages. The Republic of Yemen has ratified the convention since 1971, but as yet, has not introduced a minimum wage.

Political considerations aside, there is an increasing global trend to set minimum wages. It is not surprising then that developing countries are introducing a minimum wage, albeit with a significant lag and great variation. The latest example comes from the dynamic region of East Asia, where more than 20 countries have either raised minimum wages or introduced them last year.

Minimum Wages in the Making

Minimum wage refers to the minimum sum payable to a worker for work performed or services rendered during a given period and, according to the International Labour Organization “...may be fixed in such a way as to cover the minimum needs of the worker and his or her family, in the light of national economic and social conditions.” Moreover, there is a distinction between mandated national minimum wages that apply to all workers and those that apply to certain groups—such as adults versus young workers and those in urban or rural areas. And if not nationally mandated, the minimum wage can be established by industry or occupation. Minimum wages can be set unilaterally by the government, with or without prior consultation with employers and workers, or freely agreed to by workers and employers.

Minimum wage enforcement can be weak especially in the presence of sizable informality and excess labor supply, such as a large number surplus workers in agriculture or undocumented migrant workers. This process can be aggravated by weak labor administration (for example, labor inspectors), restricted civil society (for example, workers organizations) and, of course, corruption.

Looking Ahead

There is no a priori “right level” of minimum wage or “right minimum wage.” Even some high-income economies, such as those in Scandinavia, do not have a mandated nationwide minimum wage. However, these countries are characterized by freedom of association for employers and workers, and have established collective bargaining procedures that set wages in many areas of the labor market.

While some recent developments regarding minimum wages in the Arab region relate to political considerations following the post-2010 uprisings, minimum wage determination should take into consideration production conditions and competitiveness as well as the level of informality and unemployment. For example, given the high youth unemployment, minimum wages should follow the example of many countries that have different minimum wage rates for apprentices compared to fully qualified workers, or youth and adult workers.

The minimum wage is a labor market intervention that is one of many economic and social policies. Setting its level wage should take into consideration taxes and other deductions including social security contributions, the existence of other available employment benefits, and the availability of public services and social safety nets. Ideally, the wages should be based on empirical evidence of its likely effects, be the outcome of a dialogue between workers and employers, and be devoid of political interference.

Zafiris Tzannatos is a senior international consultant for strategy and policy based in Lebanon. He was previously Chair and Professor of the Economics Department at the American University of Beirut. He is a former ILO advisor and has served as Advisor to Managing Director of the World Bank, where he was also Manager for Social Protection in the MENA, as well as, Leader of the Global Child Labor Program that he initiated. His publications include 14 books and monographs, and more than 200 reports and papers in the areas of labor economics, education, gender, child labor and, more broadly, social policy and development strategy. He holds a Ph.D. in Economics.