Wages, Benefits, Poverty Line,

and Meeting Workers’ Needs

in the Apparel and Footwear

Industries of Selected Countries

U.S. Department of Labor

Bureau of International Labor Affairs

February 2000
Material contained in this publication is in the

public domain and may be reproduced, fully or

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Wages, Benefits, Poverty Line,

and Meeting Workers’ Needs

in the Apparel and Footwear

Industries of Selected Countries

U.S. Department of Labor

Alexis M. Herman, Secretary

Bureau of International Labor Affairs

Andrew J. Samet, Deputy Under Secretary

February 2000
WAGES, BENEFITS, POVERTY LINE, AND

MEETING WORKERS’ NEEDS

IN THE APPAREL AND FOOTWEAR INDUSTRIES

OF SELECTED COUNTRIES

Prepared by the

U.S. Department of Labor

Bureau of International Labor Affairs

February 2000
Acknowledgments

This report was prepared under the direction of Andrew J. Samet, Deputy Under Secretary for

International Labor Affairs. The writing, editing, research, and coordination of the report was done by

Gregory K. Schoepfle, Director, Foreign Economic Research Division, Office of International Economic

Affairs (OIEA), Bureau of International Labor Affairs (ILAB) together with OIEA staff Ana GustaveSchmidt, Maureen Pettis, and Robert Shelburne. Essential guidance and input was provided by Jorge

Perez-Lopez, Director, OIEA. The research for this study was completed in December 1999 and was

current as of that date.

Other staff from ILAB, the Bureau of Labor Statistics, the Employment Standards Administration, the

Department of Labor Library, the Office of the Solicitor, and the Office of the Secretary who made

contributions or provided materials include: Kenneth Swinnerton, Charles Spring, Joan Barrett, Julie

Misner, Patricia Capdevielle, Chris Kask, Nathaniel Halsey, Paul Handakas, Constance Sorrentino, John

Fraser, Alan Moss, Daniel Sweeney, Maureen Morrill, David Konieczko, Herman Narcho, Earl Gohl, and

Stephanie Swirsky. In addition, significant contributions were made by labor reporting officers, labor

attaches, and other officials in U.S. embassies, consulates, and institutes abroad with assistance from Jake

Aller and Alden Irons in the U.S. Department of State’s Bureau of Human Rights, Democracy and Labor.

Useful comments and suggestions on an earlier draft of this study were provided by Gordon Fisher at the

U.S. Department of Health and Human Services. 

This report was published by the U.S. Department of Labor, Bureau of International Labor Affairs. Copies

of the report may be obtained by contacting the Office of International Economic Affairs, Bureau of

International Labor Affairs, U.S. Department of Labor, Room S-5325, Constitution Avenue, N.W.,

Washington, DC 20210. Telephone: (202) 219-7610, extension 138; Fax: (202) 219-5071. E-mail:

<schoepfle-gregory@dol.gov>. The report is available on the Internet at:

<http://www.dol.gov/ilab/public/media/reports/oiea/main.htm>. 
Table of Contents

Page

EXECUTIVE SUMMARY ....................................................... i

INTRODUCTION ............................................................. 1

Data Elements and Sources of Information ......................................................... 2

Organization of the Study ....................................................................... 3

PART I WAGES, BENEFITS, POVERTY LINE, AND MEETING WORKERS’ NEEDS:

DEFINITIONS AND MEASURES

Introduction ................................................................................ I-1 

Minimum Wage ............................................................................. I-2 

Prevailing or Average Wage .................................................................. I-12

Non-Wage Benefits ......................................................................... I-14

Assessing Basic Needs: The Poverty Line ...................................................... I-17

Meeting Workers’ Needs ..................................................................... I-27

Summary of Available Information on Wages, Benefits, Poverty Line, and Meeting Workers’ Needs

for Selected Countries ............................................................... I-38

PART II COMPENDIUM OF COUNTRY INFORMATION ON WAGES, BENEFITS,

POVERTY LINE, AND MEETING WORKERS’ NEEDS

Bangladesh ................................................................................ II-1 

Brazil ..................................................................................... II-8 

Cambodia ................................................................................. II-13 

Canada ................................................................................... II-15 

China ..................................................................................... II-19 

Colombia .................................................................................. II-24 

Costa Rica ................................................................................. II-30 

Dominican Republic ........................................................................ II-35 

Egypt ..................................................................................... II-41 

El Salvador ................................................................................ II-44 

Guatemala ................................................................................. II-50 

Honduras ................................................................................. II-56 

Hong Kong ................................................................................ II-61 

India ...................................................................................... II-65 

Indonesia ................................................................................. II-72 

Israel ..................................................................................... II-79 

Italy ...................................................................................... II-86 

Jamaica ................................................................................... II-92 

Macau .................................................................................... II-96 

Malaysia .................................................................................. II-98 

Mauritius ................................................................................. II-102

Mexico .................................................................................... II-107

Nicaragua ................................................................................. II-115

Pakistan ................................................................................... II-118
Page

Peru ...................................................................................... II-124

Philippines ................................................................................ II-128

Singapore ................................................................................. II-134

South Korea ............................................................................... II-138

Spain ..................................................................................... II-142

Sri Lanka .................................................................................. II-146

Taiwan .................................................................................... II-150

Thailand .................................................................................. II-153

Turkey .................................................................................... II-158

United Arab Emirates ....................................................................... II-163

United Kingdom ........................................................................... II-165

United States .............................................................................. II-169

APPENDIXES

A SELECTED INTERNATIONAL LABOR ORGANIZATION (ILO) DOCUMENTS

RELEVANT TO MINIMUM WAGE SETTING

Preamble to the ILO Constitution ............................................................. A-1 

ILO Conventions and Recommendations

Convention No. 26: Minimum Wage-Fixing Machinery (1928) ............................ A-2 

Recommendation No. 30: Minimum Wage-Fixing Machinery (1928) ....................... A-5 

Convention No. 99: Minimum Wage Fixing Machinery (Agriculture) (1951) ................ A-8 

Recommendation No. 89: Minimum Wage Fixing Machinery (Agriculture) (1951) ............ A-12

Convention No. 131: Minimum Wage Fixing Convention (1970) ........................... A-14

Recommendation No. 135: Minimum Wage Fixing (1970) ................................. A-18

B SURVEY OF THE LITERATURE AND OTHER SOURCES OF INFORMATION ON THE

EXTENT TO WHICH WORKERS’ WAGES MEET THEIR BASIC NEEDS

Early History ................................................................................ B-1

Recent Studies and Other Sources of Information: An Annotated Bibliography ....................... B-7

C RESPONDENTS TO FEDERAL REGISTER NOTICE OF JUNE 30, 1999 FOR PUBLIC

SUBMISSIONS OF INFORAMTION FOR THE U.S. DEPARTMENT OF LABOR’S WAGE

STUDY .............................................................. C-1

D BASIC REFERENCES FOR WAGES, BENEFITS, AND POVERTY

Minimum Wage ............................................................................. D-1

Average Hourly Earnings and Compensation ................................................... D-2

Consumer Price Index and Exchange Rates ...................................................... D-3

Non-Wage Benefits ......................................................................... D-3

Income, Consumption, and Poverty ............................................................ D-4
List of Tables in Introduction and Part I

Page

Table 1. Principal Sources of U.S. Imports of Apparel ................................... 4

Table 2. Principal Sources of U.S. Imports of Footwear ................................. 5

Table I-1. Minimum Wage Setting and the Number of Hours in a Standard Workweek

in Selected Countries ............................................. I-43

Table I-2. Prevailing or Average Wages in the Manufacturing Sector and in the Footwear

and Apparel Industries in Selected Countries, Latest Available Year .......... I-44

Table I-3. The National Poverty Line in Selected Countries, Official Thresholds and

Other Estimates, Most Recent Year .................................. I-46

Table I-4. Percent of Population Below the National and International Poverty Line

in Selected Countries ............................................. I-48

Table I-5. Percentage of National Population Below International Poverty Lines

in Selected Countries ............................................. I-49

Table I-6. National Poverty Lines and Minimum and Prevailing Wages in the Footwear

and Apparel Industries in Selected Countries, Latest Available Year .......... I-50

iii

EXECUTIVE SUMMARY

The footwear and apparel industries are some of the low-wage manufacturing industries that have been

dramatically affected by the changing patterns of global sourcing and production. This study focuses on

these industries in 35 major apparel and/or footwear exporting countries and the United States, and

addresses issues related to the minimum wage, the prevailing or average wage, non-wage benefits,

measures of workers’ basic needs (the poverty line), and the extent to which wages meet such needs. Part

I examines definitions and measures related to these subjects, and Part II provides available information

on these items for each of the countries examined. The study was conducted to gather available information

on these subjects and inform public discussions of these issues.

In a wage economy, workers provide their services to an employer for a remuneration. The issue of a

“fair” wage for one’s labor, which is sufficient for a worker to provide for the needs of his/her family, has

been debated for some time. Concerns about protecting workers in low-pay occupations and other

vulnerable groups (e.g., women, children, immigrants, and those without workplace representation) have

led to the establishment of a floor (or minimum) on wage levels in many countries. Declarations and

covenants of several United Nations and regional bodies have made reference to the right of workers to

expect that the compensation from their labor will provide an adequate standard of living. The constitutions

of several countries have expressed goals which recognize the right of workers to a wage which provides

a “decent” standard of living for their families.

Since its creation in 1919, the International Labor Organization (ILO) has been concerned about the

provision of a wage that would give a worker a “reasonable standard of life as this is understood in their

time and country.” The Preamble of the ILO’s Constitution recognizes the need to improve conditions of

work, inter alia, by the “provision of an adequate living wage.” Historically, the ILO has provided guidance

on the establishment of minimum wage fixing mechanisms. In 1928, the ILO adopted its first convention

and recommendation regarding minimum wages for trades in manufacturing and commerce. Subsequently,

conventions and recommendations were adopted concerning minimum wage-fixing machinery in agriculture

(1951) and in developing countries (1970).

Most countries around the world have set minimum wages. Minimum wage fixing systems adopted by

countries differ according to their objectives and criteria; wage fixing machinery and procedures; coverage;

and operation and enforcement. The minimum wage is usually set by striking a balance between the needs

of a worker and his/her family and what employers can afford or what economic conditions will permit.

The term “prevailing wage” has been interpreted in a variety of ways, such as the “going rate” or the

average level of wages paid by employers for specific occupations in a community or area. In some cases,

it may refer more broadly to the rate paid to most workers or the rate established by trade union contracts.

In most cases, the prevailing or average wage is greater than, or equal to, the minimum wage (if one has

been set). However, local labor market and economic conditions, the wage setting mechanism, location,
iv

job tenure, size of firm, a firm’s level of capitalization and technology, and the mix of skills necessary for

particular occupations, among other things, may affect the prevailing wage in a particular area or country.

By construction, an average wage rate represents a center or middle rate around which actual wages lie;

the quality of this measure as being representative of the earnings of a worker in a group will depend on

the dispersion or spread of actual wage rates around the average rate, which is likely to be larger the

greater the skill/tenure spread or the production/supervisory worker mix of the representative worker

group. Information on prevailing or average wages in the apparel and footwear industries is often limited

and not timely.

Non-wage benefits provided to employees in many cases represent a substantial portion of their total

compensation. These benefits augment income and may include: pay for time not worked (e.g., vacations,

public holidays, and sick leave); supplementary pay (e.g., profit sharing, year-end, attendance, and other

nonproduction bonuses); deferred retirement income (e.g., defined benefit or defined contribution plans);

insurance (e.g., life, health, and disability insurance); and social insurance benefits (e.g., social security,

health care, severance pay or unemployment insurance, and workers’ compensation); training and

education courses; and plant facilities and services (e.g., cafeteria, medical clinic, day care, or housing).

Some non-wage benefits, such as social insurance and retirement benefits, are usually governmentmandated. However, other non-wage benefits may not be required by law, such as those negotiated by

labor unions in collective bargaining agreements, or those that may be the practice of the company or

industry itself, such as providing health or dental insurance or maternity leave (which may or may not be

a “mandated benefit” in some countries), life insurance, transportation, subsidized meals, child care and

recreational facilities, or worker training programs. In addition, there may be privately financed (employeremployee) benefits arrangements, which are available as alternatives to statutory programs, that may or may

not be mandatory in some countries. In addition to employer-provided benefits, the government in some

countries provides low-income families assistance through direct tax credits, subsidies, and other income

transfers.

Measures of poverty are usually developed by national statistical agencies for use in development planning

or as a basis for providing social assistance to the needy. In most cases, an absolute measure is adopted

to set the national poverty line. The poverty rate is the percentage of the population living below the

poverty line. The national poverty rate is often disaggregated into urban and rural poverty rates. The usual

starting point for setting an absolute country-specific poverty line is the calculation of the cost of a minimum

set of basic needs for a family unit (or individual), composed of per capita food needs and other essential

non-food needs (such as shelter, clothing, education, transportation). The composition of the food basket

is usually determined by considering the prevailing dietary habits within the country, while the composition

of the non-food essentials may vary within and across countries and may depend on a variety of social,

cultural, institutional, political, economic, climatic, or development factors.

Some countries have not adopted an official poverty measure due to a lack of national consensus.

Disagreements arise with regard to how the poverty measure is defined and how the normative threshold
v

is set since it is usually based on the cost of either a subsistence food basket or an expanded market basket

of essential goods and services that reflects some arbitrarily selected set of “basic needs.” Most poverty

thresholds are set in terms of some income level required to purchase goods and services related to basic

needs, raising the question as to how income is defined and measured.

The establishment of a minimum wage system is often portrayed as a means for ensuring that workers will

receive an income (or “living wage”) which enables them to meet their basic needs (and, in some cases,

those of their families). Determination of such a wage raises questions similar to those that arise in the

measurement of poverty (e.g., in terms of definition, content, and composition of households and income

or consumption measures used; and the number of wage earners in a household and other sources of

income). While the concept of a minimum wage which is a “living wage” may be consonant with some

international covenants and declarations and the goal of reducing poverty, economic and labor market

conditions (i.e., the ability to pay such a wage) may restrain the setting of a “living wage.”

The term “living wage” is often used as a synonym for a “fair and decent” level of income that would enable

workers to meet their “basic needs.” However, there is little agreement on the definition of what exactly

constitute “basic needs” or on a methodology to determine the income necessary to meet such needs.

While there have been a number of declarations and conventions by regional and international bodies

concerning the right of workers to receive an adequate wage, most do not provide a precise definition of

how it should be determined. For some, “basic needs” mean mere physical subsistence. For others, “basic

needs” include a nutritious diet, safe drinking water, suitable housing, energy, transportation, clothing, health

care, child care, education, savings for long term purchases and emergencies, and some discretionary

income. Even among those who agree with this more expansive definition, significant differences of opinion

remain as to what level of income is required in order to meet these objectives. In addition, some have

argued that a living wage is not just about the wage level, but also about other conditions of work such as

limitations on the number of hours of work.

For the 36 countries or entities examined, this study finds:

Minimum Wage

! Only five countries or entities (Hong Kong, Macau, Malaysia, Singapore, and the United Arab Emirates) do not

have a minimum wage. Cambodia is the only country which has established a minimum wage solely for workers

in the apparel industry.

! For countries which have a minimum wage, the minimum wage fixing system differs according to objectives and

criteria, machinery and procedures, coverage, and subsequent adjustment as well as the operation and

enforcement of rules established. In many of the countries examined, minimum wages are set by a tripartite

committee or commission comprised of representatives from workers, employers, and the government, while

in others they set by executive decree or legislative actions.

! The scope of application of minimum wage laws may be general and applicable nationwide (e.g., in the United

States, Spain, Brazil, and the United Kingdom), or vary by region or jurisdiction of the country (e.g., in Mexico,

Canada, Philippines, and Indonesia), by industry (e.g., in Bangladesh and Cambodia), by skill level or
vi

occupation (e.g., in Bangladesh and Costa Rica), or a combination of these factors. In some cases, minimum

wages are set through industry-wide collective bargaining agreements (e.g., in Italy).

! While the intent of most minimum wage legislation is to protect low wage workers and to provide a general

wage floor for employment of workers, there may be groups of workers, professions, occupations, or certain

activities which are excluded. Exclusions are often based on the type and size of the enterprise (e.g., in the

Dominican Republic, Bangladesh, and India), while reduced minimum wage rates may apply to certain workers

such as youth (e.g., youth 18-21 in the United Kingdom) or trainees (e.g., in Bangladesh, El Salvador, and

Thailand).

! Frequent or substantial increases in the price level tend to be the primary reason for countries making upward

adjustments in the minimum wage (e.g., Mexico).

! All of the countries or entities examined—except Hong Kong—have established limitations on the number of

hours in a standard workweek, which range from 40 to 58 hours per week. Provisions in national legislation

usually provide for higher rates of pay (overtime rates of pay) for the hours worked above the number in a

standard workweek. In at least one case (United Kingdom), there is an absolute limitation (including overtime)

placed on the number of hours of work permitted in a workweek; some countries place certain limitations on the

amount of overtime permitted over a specified time period, while others have no legal limitations on overtime

(e.g., Philippines).

Prevailing or Average Wage

! The extent and quality of available information on prevailing or average wages in the manufacturing sector and

in the footwear and apparel industries varies widely across the 36 countries considered. Prevailing or average

wage information was not available in all manufacturing for 4 countries (Cambodia, Honduras, Indonesia, and

the United Arab Emirates), in the apparel industry for 4 countries (the Dominican Republic, Nicaragua, Sri

Lanka, and the United Arab Emirates), and in the footwear industry for 12 countries (Brazil, Cambodia, the

Dominican Republic, El Salvador, Guatemala, Honduras, Jamaica, Nicaragua, Pakistan, Singapore, Sri Lanka, and

the United Arab Emirates). When prevailing or average wage or earnings data were available, coverage varied

by area (e.g., only a limited geographical area) or by industrial classification (e.g., included additional products

such as other leather products with footwear or textile products with apparel). Some earnings measures reflect

a rate of pay, only pay for time worked (straight-time), or may include (or exclude) some payments for time not

worked, bonuses, or other in-kind payments.

! For countries where prevailing or average wage data were available, average earnings in both the footwear and

apparel industries, for the most part, tended to be lower than in all manufacturing but higher than the minimum

wage level (except for Cambodia, Peru, and the Philippines were the minimum wage appears to be close to the

prevailing wage in the apparel industry); average earnings tended to be slightly higher in footwear than in

apparel. 

Non-Wage Benefits

! When certain employer-provided non-wage benefits are required by government, they generally apply to all

private sector workers in the manufacturing sector rather than just to workers in the footwear or apparel

industry.

! In most countries considered, employers’ payments to their employees for non-wage benefits account for a

substantial portion of average compensation costs (e.g., over 50 percent in Costa Rica and Guatemala).

! Most countries provide for a certain number of paid legal public holidays, while provisions for paid vacation
vii

or sick leave appear to be more discretionary. A common non-wage benefit is the contribution to a compulsory

(or in some instances, contractual or private) social security or insurance scheme (e.g., pension or savings plan,

casualty and life insurance, health and maternity care, and severance pay or unemployment insurance)

established for the employee in which the employer (and, in many cases, to a lesser extent, the employee and

the government) are required to contribute.

! Other non-wage benefits are usually discretionary and vary from country to country with the most common

examples being the provision of employee training and education programs and certain plant facilities and

services (e.g., cafeteria, medical clinic, day care center, recreational facilities, transportation, or housing).

Production and attendance bonuses are also common in the apparel industry. In some countries (especially

in Latin America), year-end Christmas bonuses (up to one-month’s pay) are common.

! Required employer contributions to social insurance schemes are usually clearly defined as a percentage of

payroll, but represent deferred payments to the worker. In contrast, vacation and holiday pay and bonus

payments directly augment a worker’s current income. For other benefits (such as provision of plant facilities

and services), it is more difficult to evaluate how these affect a worker’s income.

! In some countries examined, the government provides family allowances or other direct welfare payments or

subsidies to low income families. Income tax income thresholds are usually set high enough to exempt many

low-wage workers. The extent to which a government participates in social security or insurance schemes or

provides assistance laidoff workers varies widely from country to country.

Poverty Line

! Most poverty measures which are available for individual countries are either (1) official or other estimates of

absolute poverty thresholds, usually based on the cost of some specified set of basic needs and expressed as

an income, consumption, or expenditure threshold in national currency terms or as the percentage of the

population below the threshold; or (2) poverty measures for a country which are produced by the World Bank

or the United Nations Development Programme (UNDP) and estimate the percentage of the population with

income below US$1 or US$2 per person per day, in terms of 1985 purchasing power parity adjusted US$. Israel

and Italy are the only countries examined that have officially adopted a relative poverty measure (50 percent

of median net income).

! In general, since poverty estimates usually require collection of information on income, consumer expenditures,

and prices, estimates are often made less frequently (every three to five years) than for earnings estimates

(monthly or annually). Rapidly unfolding economic events with both national and international consequences

(such as the recent Asian financial crisis) may not be reflected in these less timely measures. 

! For various reasons, about 14 of the 36 countries examined have not established an official national poverty

line. Some type of poverty estimate—official or unofficial—is available for each of the countries considered

except for Macau, Singapore, and the United Arab Emirates. Estimates of a national poverty line (absolute

level) are not available for the Dominican Republic (though the percentage of the population below the line is)

or for Canada, Spain, or the United Kingdom (though international poverty measures are). International poverty

measures (in purchasing power parity adjusted US$) are not available for 8 countries (Cambodia, El Salvador,

Hong Kong, Israel, Mauritius, South Korea, Taiwan, and Turkey).

! Nation-specific poverty lines, often with separate urban and rural measures, are useful for individual country

analysis, but cannot be compared with those from other countries since the basis for establishing the poverty

line usually differs across countries. In some cases, it is not clear to what extent, if at all, government transfer

payments, employer provided non-wage benefits, and other sources of income have been taken into account

in establishing the national poverty line.
viii

! In general, countries with a higher the level of development (and price structure) will usually have higher

poverty thresholds that reflect a wider mix, choice, and availability of goods and services.

Meeting Workers’ Needs

! For the countries considered, there appears to be little conclusive evidence on the extent to which wages and

non-wage benefits in the footwear and apparel meet workers’ basic needs.

! Many countries take into consideration the poverty threshold (if one has been established), among other

things, in setting and adjusting the minimum wage. While in many cases the minimum wage is supposed in

theory to meet a worker’s basic needs, the level at which it is actually set usually represents a political

compromise or a balance between meeting those needs and economic conditions and the employer’s ability to

pay.

! In assessing the adequacy of wages, decisions must be made on whether one wage earner should be able to

support (meet the basic needs of) his/her family (support for how many dependents?); how much is enough

(poverty measures usually tell us how much is too little); whether income from other sources (investments,

savings, or in-kind or non-cash payments) should be included in determining disposable income; and whether

one’s position in the life-cycle should be considered. As with the construction of poverty measures, opinions

vary widely on these questions, especially with regard to the treatment and valuation of health care and

insurance, housing, and child care expenses.

! Only one country (the Philippines) considered here has established a commission to examine the issue of a

living wage. In the United States, the Census Bureau has published alternative poverty measures, and the

federal government is reexamining its official poverty definition which has been in use for over 30 years, with

annual adjustments only for inflation. Several private sector groups have constructed estimates of a living

wage for workers in a few countries (e.g., the United States and Indonesia), but such studies are not generally

available for most other countries. 

! For several countries where data are available, the minimum wage (and in a few more countries, the prevailing

wage in the footwear or apparel industries) may yield an income above the national poverty threshold for an

individual (and perhaps one dependent, but not for a family of 4 or 5 with one wage-earner). However, whether

this wage is a “living wage” is likely to lie in the eye of the beholder.
1

INTRODUCTION

As part of its on-going activities, the U.S. Department of Labor promotes the widespread recognition and

observance of core labor standards and the general improvement of working conditions around the globe.

At home, the Department seeks to assure quality workplaces that are safe, healthy, and fair. In particular,

the Department’s public education efforts seek to inform and improve understanding of and compliance

with basic labor standards such as minimum wage, overtime, and child labor laws, which seek to protect

the most vulnerable in the workplace, in particular, the low-wage and working poor.

The apparel and footwear industries—two very cost-competitive, low-paying, and labor-intensive industries

within the manufacturing sector—historically have been among the most dramatically affected by changing

patterns of global sourcing and restructuring. The U.S. Department of Labor, through its “Operation No

Sweat” initiative that targets investigations and enforcement in partnership with industry stakeholders, has

focused its efforts on the domestic garment industry to eradicate the highly mobile contract sewing shops

that violate the Fair Labor Standards Act.

With growing international sourcing of footwear and garments, U.S. consumers increasingly are expressing

concerns about transnational business practices and the working conditions under which imported goods

are made. Similarly, retailers and other importers of footwear and apparel, as well as domestic

manufacturers that subcontract fabrication and assembly outside of the United States, are also asking similar

questions about working conditions. In some cases, these retailers or producers have established codes

of conduct or terms of engagement that seek to assure that foreign contractors or suppliers meet at least

some minimal labor standards.

In August 1996, President Clinton and Vice President Gore met with leaders from the footwear and

apparel industry, labor, nongovernmental organizations, and consumer groups to discuss the problem of

sweatshops, consumer concerns, and the need to join together to address these issues. The private sector

group that ensued, the Apparel Industry Partnership (AIP), developed a workplace code of conduct and

independent monitoring system in April 1997 to assure Americans that the shoes and clothes they buy are

made under decent and humane working conditions. In November 1998, the AIP established an

independent association, the Fair Labor Association (FLA), to implement the workplace code and

monitoring principles, assure compliance, and inform consumers about the workplace code and which

companies comply.

This study was conducted to inform the public discussion on several important aspects of working

conditions in the footwear and apparel industries and, in part, to respond to the Fair Labor Association’s

request for publicly available wage information. It gathers and presents publicly available information on

the wages and benefits of workers in the apparel and footwear industries of the United States and countries

which are major suppliers of apparel and footwear to the U.S. market. The study also collects information

on measures of basic needs (poverty measures) and the extent to which workers’ wages meet such needs.
1

 Table 1 includes the top-33 supplier countries in 1998 since the differences between countries in the endrange of the ranking are so small. 

2

 Eight of the top-10 footwear supplier countries were also among the top-30 apparel supplier countries

(China, Indonesia, Italy, Mexico, South Korea, Taiwan, Thailand, and the United Kingdom). 

3

Federal Register, Vol. 64, No. 125 (June 30, 1999), pp. 35182-35183. 

2

The countries selected for this study are: (1) the top-30 country suppliers of apparel to the U.S. market in

1997 and 1998, which accounted for about 92-93 percent of all U.S. apparel imports (Table 1);1 and (2)

the top-10 country suppliers of footwear to the U.S. market in 1997 and 1998, which accounted for

approximately 92-93 percent of all U.S. footwear imports (Table 2). Since some countries appear in both

groups,2 there are 35 different countries that were either major suppliers of apparel or footwear, or both,

to the U.S. market in 1997 or 1998. These 35 countries and the United States constitute the apparel and

footwear producing countries considered in this study.

Data Elements and Sources of Information

For each of the 35 countries in Tables 1 and 2 and the United States, the study presents publicly available

information on the following data elements: (1) minimum wage; (2) prevailing or average wage in the

manufacturing sector and the footwear and the apparel industries (if available); (3) non-wage benefits for

workers in the footwear and apparel industries; (4) assessments of workers’ basic needs using poverty

measures; and (5) assessments of the extent to which wages meet such needs.

The main source of information for the 35 foreign countries is the responses received from American

Embassies, Consulates, and Institutes abroad to a cable prepared by the Bureau of International Labor

Affairs requesting for each country information on each of the five elements mentioned above.

This information has been supplemented, where appropriate, with information from reports of the U.S.

Department of State, the U.S. Bureau of Labor Statistics, the International Labor Organization, and the

World Bank as well as other sources of information.

Moreover, the Bureau of International Labor Affairs requested information for the study from the general

public through a notice published in the Federal Register.

3

 A listing of respondents to the Federal Register

notice is provided in Appendix C. The information provided was incorporated in the study as appropriate.

This study collects and discusses publicly available information on wages (paid employment) for workers

engaged in economic activities in the formal or “modern” sector of the countries examined (e.g., data

reported in official government statistics). Thus, activities in the informal sector or income from casual work

or self-employment are not examined. In many of the countries examined, the informal sector—that part

of economic activity outside the official regulated economy—comprises a significant part of overall

economic activity, but not necessarily a significant proportion of export-oriented economic activity. In most
3

cases, economic activities in the informal sector are outside national labor regulations and are either

unreported or unrecorded in official national economic statistics. Informal activities may fall outside the

scope of a nation’s legal and statistical system (e.g., due to exclusions for family enterprises or for small

scale enterprise) or may be clandestine operations which evade legal authorities by not complying with

certain fiscal, tax, labor, health and safety, fire, or other government regulations. As such, workers in the

informal sector have few labor protections and may be subject to exploitation by their employers.

Organization of the Study

The study is comprised of two parts and four appendixes. Part I defines the concepts being

studied—minimum wage, prevailing or average wage, assessments of basic needs (the poverty line), and

the extent to which wages meet such needs—and relevant measures. Part II is a compendium of countryspecific information for each of the 35 countries under consideration and the United States on the minimum

wage, prevailing or average wage, and non-wage benefits in the footwear and apparel industries; national

and international poverty estimates; and available in-country information on the extent to which wages meet

basic needs. Appendix A reproduces the key International Labor Organization (ILO) conventions and

recommendations related to fixing minimum wages. Appendix B provides a survey of the literature and

other sources of information on the extent to which workers’ wages meet their needs, including an

annotated bibliography of recent studies and information. Appendix C provides a listing of respondents

to the U.S. Department of Labor’s Federal Register notice of June 30, 1999 issued in connection with

this study. Appendix D provides a listing of key references and data sources for wages, benefits, and

poverty statistics used in the compendium of country-specific information in Part II.
4

Table 1. Principal Sources of U.S. Imports of Apparel

(U.S. general imports, millions of U.S. dollars; all countries and the top-33 supplier countries in 1998)

Country 1995 1996 1997 1998 

World 34,649 36,389 42,827 48,175

Mexico 2,566 3,560 5,050 6,494

Hong Kong 4,189 3,861 3,935 4,428

China 3,518 3,769 4,488 4,312

Dominican Republic 1,731 1,753 2,216 2,342

Taiwan 2,049 1,974 2,071 2,115

South Korea 1,622 1,381 1,518 1,891

Honduras 918 1,220 1,659 1,873

Philippines 1,540 1,503 1,597 1,745

Indonesia 1,183 1,326 1,596 1,659

Bangladesh 1,067 1,125 1,448 1,627

India 1,098 1,187 1,347 1,517

Thailand 1,037 1,049 1,257 1,452

Canada 770 948 1,204 1,421

Italy 967 1,149 1,226 1,348

Sri Lanka 928 1,007 1,204 1,308

El Salvador 582 721 1,052 1,171

Guatemala 682 796 962 1,136

Macau 757 760 930 1,018

Costa Rica 757 704 840 821

Turkey 630 579 672 781

Malaysia 675 648 650 717

Pakistan 550 561 618 674

Jamaica 531 505 472 422

Israel 306 298 286 361

Colombia 366 312 347 360

Cambodia <0.5 2 99 359

Egypt 234 255 307 356

Singapore 424 326 288 307

United Arab Emirates 190 202 239 261

Mauritius 191 165 185 233

Nicaragua 74 142 182 232

United Kingdom 162 184 216 230

Peru 125 147 193 223

______________________________________________________________________________

Note: Data represent the value of U.S. imports of apparel items subject to international

agreements from all countries, whether or not their products are covered by a quota. 

The top-33 country suppliers of apparel to the U.S. market accounted for 93.8 percent of all U.S. 

apparel imports in 1998 and 94.4 percent of all such imports in 1997. In 1997, France was the 

33rd leading supplier (with U.S. apparel imports from France totaling US$166 million) and 

Cambodia was the 36th leading supplier.

Source: U.S. Department of Commerce, Office of Textiles and Apparel, Major Shippers Report

 by Category (March 11, 1999).
5

Table 2. Principal Sources of U.S. Imports of Footwear

(U.S. imports for consumption, millions of U.S. dollars; all countries and the top-10 supplier countries in 1998)

Country and 

Footwear Type 1995 1996 1997 1998 

World 11,587 12,172 13,371 13,339

Nonrubber 9,957 10,450 11,480 11,412

Rubber 1,630 1,722 1,892 1,926

China 5,721 6,251 7,229 7,904

Nonrubber 4,888 5,314 6,137 6,584

Rubber 832 937 1,092 1,320

Italy 1,003 1,186 1,184 1,158

Nonrubber 994 1,175 1,167 1,129

Rubber 9 11 16 29

Brazil 1,115 1,191 1,139 1,020

Nonrubber 1,113 1,186 1,134 1,005

Rubber 2 4 5 15

Indonesia 955 1,054 1,079 745

Nonrubber 714 750 761 575

Rubber 241 304 318 170

Spain 371 393 416 390

Nonrubber 364 390 411 378

Rubber 6 3 5 12

Thailand 389 331 379 342

Nonrubber 311 257 277 254

Rubber 78 74 102 85

Mexico 169 225 285 261

Nonrubber 123 178 234 201

Rubber 46 47 51 60

United Kingdom 116 149 236 231

Nonrubber 115 148 235 230

Rubber (z) (z) (z) (z)

South Korea 501 330 226 174

Nonrubber 268 177 149 136

Rubber 233 153 76 38

Taiwan 328 235 170 133

Nonrubber 248 164 132 110

Rubber 80 71 38 23

______________________________________________________________________________________

Note: (z) = less than US$500,000. Parts may not sum exactly to country totals due to rounding. 

The top-10 country suppliers of footwear accounted for 92.3 percent of all U.S. footwear imports 

in 1997 and 92.6 percent of all such imports in 1998.

Source: Nonrubber Footwear Statistical Report, 1998, Investigation No. 332-191, Publication 3174

(Washington: U.S. International Trade Commission, March 1999).
1 Connecticut Bureau of Labor Statistics, First Annual Report (Hartford, CT: Lockwood & Brainard Co., 1885),

cited in J.L. Norwood and D.P. Klein, “Developing Statistics to Meet Society’s Needs,” Monthly Labor Review (October

1989), p. 17.

I-1

PART I

Wages, Benefits, Poverty Line, and Meeting Workers’ Needs: 

Definitions and Measures

Investigations about wages may have several distinct objects. One is, to find the

rate of money wages actually paid. Another is, to compare it with the necessary

expenses of living. A third is, to compare the laborer’s share of product with that

of the capitalist’s. A fourth question, perhaps most important of all, is to find in

what direction things are moving.

...Connecticut State Commissioner of Labor Statistics, 18851

Introduction

In a wage economy, workers provide their services to an employer for a remuneration. The issue of a

“fair” wage for one’s labor, which is sufficient for a worker to provide for the needs of his/her family, has

been debated for some time. Some countries have hortatory goals expressed in their constitutions which

recognize the right of workers to a wage which provides a “decent” standard of living for his/her family.

Concerns about protecting workers in low-pay occupations and other vulnerable groups (e.g., women,

children, immigrants, and those without workplace representation) have led to the establishment of a floor

(or minimum) on wage levels in many countries. This study focuses on the footwear and apparel industries

in the United States and 35 major apparel and/or footwear exporting countries, and addresses several

aspects related to these issues: the minimum wage; the prevailing or average wage; non-wage benefits;

measures of workers’ basic needs (the poverty line); and the extent to which wages meet such needs.

Minimum wages have been set and applied in most countries throughout the world. Minimum wage fixing

systems adopted by countries differ according to their objectives and criteria, wage fixing machinery and
2 Gerald Starr, Minimum Wage Fixing: An International Review of Practices and Problems (Geneva:

International Labour Office, 1981; second printing with corrections, 1993), p. 1.

3

 The United Kingdom, comprised of Great Britain (England, Scotland, and Wales) and Northern Ireland,

replaced sectoral wage councils with a national minimum wage in April 1999.

4

 That is, groups of workers with little or no protection through regulations or collective agreements or with jobs

with exceptionally low pay.

I-2

procedures, coverage, and subsequent adjustment as well as the operation and enforcement of a minimum

wage fixing system. Minimum wages are usually set by striking a balance between the needs of a worker

and his/her family and what employers can afford or what economic conditions will permit. Information

on prevailing (market or “going”) wages in the apparel and footwear industries is often limited and not

timely.

Assessments of the basic needs of a “standard” household in a country are often controversial and, if done,

usually involve prescribing arbitrary criteria either for a food basket based on recommended daily calorie

in-take requirements or for a broader market basket of goods and services, including food, which embodies

the basic consumption needs (“basic needs”) of a family, and evaluating the cost of such a market basket

(the poverty line). Such a normative poverty threshold, which represents some minimum level of

subsistence consumption or well-being for a person or household, normally reflects a shared societal

consensus. In assessing the extent to which workers’ wages meet their basic needs, there may be less of

a societal consensus on how much is enough, especially with regard to what constitutes a “decent” standard

of living.

Part I of this study examines in greater detail definitions and measures related to the minimum wage,

prevailing wage, non-wage benefits, assessments of basic needs, and the extent to which wages meet such

needs. Part II provides available information on these items for the 36 countries examined with special

reference to the footwear and apparel industries in each country.

Minimum Wage

“While precursors go back to the Hammurabi Code 2000 B.C., the practice of minimum wage regulation

is generally considered to have first developed in New Zealand [1896] and Australia [1904] around the

turn of the century. Initially, it was used in these two countries as part of the procedure for the prevention

and settlement of industrial disputes.”2 Subsequently, it began to be used to eliminate the payment of

exceptionally low wages (so called “sweatshop” conditions). Other countries, such as Great Britain,3 soon

followed the lead of New Zealand and Australia in adopting minimum wage regulations to protect against

unduly low wages, but in many cases these protections were limited to a few especially vulnerable groups

of workers.4

In the United States, Massachusetts was the first state to pass a minimum wage law in 1912; however, it
5

This law was a compromise in that it authorized a permanent minimum wage commission and subordinate

tripartite wage boards, consisting of representatives from labor, employers, and government, to recommend minimum

rates sufficient to cover the cost of living for women and children in various industries and occupations, but failed to

provide enforcement except by publishing in the newspapers the names of employers who did not meet the standard.

U.S. Department of Labor, Growth of Labor Laws in the United States (Washington: U.S. Government Printing Office,

1967), p. 72.

6

 The states and other entities, along with the dates of their first enactment of minimum wage legislation, were:

Massachusetts in 1912; California, Colorado, Minnesota, Nebraska, Oregon, Washington, Wisconsin, and Utah in 1913;

Arkansas and Kansas in 1915; Arizona in 1917; the District of Columbia in 1918; and North Dakota, Puerto Rico, and

Texas in 1919 (Nebraska repealed it law in this year). See U.S. Department of Labor, Growth of Labor Laws in the United

States (Washington: U.S. Government Printing Office, 1967), p. 93.

7

For further information on the historical developments of the minimum wage in the United States, see Willis

J. Nordlund, “A Brief History of the Fair Labor Standards Act,” Labor Law Journal (November 1988), pp. 715-728.

8

 English translation from Nestor de Buen Lozano and Carlos E. Buen Unna, A Primer on Mexican Labor Law

(Washington: U.S. Department of Labor, Bureau of International Labor Affairs, 1991), p. 41. For the original Spanish

language version, see Alberto Trueba Urbina and Jorge Trueba Barrera, Ley Federal del Trabajo: Comentarios,

Prontuario, Jurisprudencia y Bibliografía, 59a edicion actualizada (México, DF: Editorial Porrúa, SA, 1989), p. 5.

I-3

was not compulsory and only covered women and children.5 By 1919, fourteen other states, the District

of Columbia, and Puerto Rico had taken action to establish minimum wages, most of which were

compulsory but applied only to women and children working in especially vulnerable occupations.6 In

1938, the U.S. Congress passed the Fair Labor Standards Act, a main provision of which was the

establishment of a national minimum wage.7 

A significant development in the early history of minimum wage setting was the inclusion of a reference to

minimum wages in the Political Constitution of the United States of Mexico, of 1917. Article 123, VI, of

the Constitution states:8

The minimum wage to be received by a worker shall be general or according to occupation. The former

shall govern in the geographic areas that are determined; the latter shall be applicable to specified

branches of economic activities or to special occupations, trades, or labor.

The general minimum wage must be sufficient to satisfy the normal necessities of a head of the family

in the material, social, and cultural order and to provide for the mandatory education of his children.

The minimum occupational wage shall be fixed by also taking into consideration the conditions of

different economic activities.

The minimum wage is to be fixed by a national commission, composed of representatives of workers,

employers, and the government, which may be assisted by special committees of consulate character,

that may be considered indispensable in order to best carry out its functions.

This constitutional provision was the first of its kind anywhere explicitly to give responsibility to the state
9

 Gerald Starr, Minimum Wage Fixing: An International Review of Practices and Problems (Geneva:

International Labour Office, 1981; second printing with corrections, 1993), p. 3.

10 Cited in Shanta A. Vaidya, Minimum Wages in India: Concepts and Practices (Bombay: Maniben Kara

Institute/Nagindas Chambers, 1989), p. 5.

11 International Labour Organization, Minimum Wages: Wage fixing machinery, application and supervision

(Geneva: International Labour Organisation, 1992), para. 103.

12 International Labour Organization, Minimum Wages: Wage fixing machinery, application and supervision

(Geneva: International Labour Organisation, 1992), para. 4. See Appendix A for the complete text of the Preamble of the

ILO Constitution. For references to earlier usage of the term “living wage,” see Appendix B.

13 The normal implementation procedure for ILO conventions is that they are considered at a General

Conference meeting convened by the Governing Body, and, if adopted, go into effect (come into force) on a stated date

after ratification by at least two member states (usually 12 months after ratification by two countries), e.g., see Article

7 of Conventions No. 26 and No. 99, and Article 8 of Convention No. 131,which are reproduced in Appendix A on this

report. 

I-4

for ensuring minimum standards of living.9 Thirty years later, Article 43 of the Constitution of India,

adopted in November 1949, set the goal of a “living wage” for all workers in India:10

The state shall endeavour to secure, by suitable legislation or economic organisation or in any other

way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work

ensuring a decent standard of life, and full enjoyment of leisure and social and cultural opportunities

in particular.

In general, national constitutional provisions concerning the minimum wage are either limited to including

it among the rights of workers (e.g., Argentina, Bulgaria, Colombia, Guatemala, Panama, and Portugal) or

to providing, in addition, a way in which the minimum wage should be fixed (e.g., Brazil, Honduras,

Mexico, and Yugoslavia).11

The International Labor Organization (ILO), created in 1919 through the Treaty of Versailles, has been

concerned since its inception about the provision of a wage that would give a worker a “reasonable

standard of life as this is understood in their time and country,” and recognized in the Preamble of its

Constitution that there was an urgent need to improve conditions of work, inter alia by the “provision of

an adequate living wage.”12

In 1928, the ILO adopted its first convention and recommendation regarding minimum wages, Convention

No. 26: Minimum Wage-Fixing Machinery Convention, which concerns minimum wage-fixing for trades

in manufacturing and commerce, and Recommendation No. 30, which addresses issues raised by this

convention. Convention No. 26 came into force on June 14, 1930.13 Subsequently, Convention No. 99:

Minimum Wage Fixing Machinery (Agriculture) Convention, which concerns minimum wage-fixing in

agriculture, and its Recommendation No. 89 were adopted in 1951, and Convention No. 131: Minimum

Wage Fixing Convention, which addresses minimum wage-fixing with special reference to developing
14 Article 23, paragraph 3, of the Declaration states that “Everyone who works has the right to just and

favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented,

if necessary, by other means of social protection;” and Article 25, paragraph 1 states that “Everyone has the right to a

standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing

and medical care and necessary social services, and the right to security in the event of unemployment, sickness,

disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.” Universal Declaration

of Human Rights, adopted and proclaimed by General Assembly resolution 217 A (III) of 10 December 1948. See Centre

for Human Rights—Geneva, Human Rights: A Compilation of International Instruments (New York: United Nations,

1988), pp. 5-6.

15 Article 7 of the Covenant makes provision for the right to “remuneration which provides all workers, as a

minimum, with ... a decent living for themselves and their families in accordance with provisions of the present

Covenant.” See International Labour Organization, Minimum Wages: Wage fixing machinery, application and

supervision (Geneva: International Labour Organisation, 1992) , para. 13.

16 Article XIV of the Declaration provides that “Every person who works has the right to receive such

remuneration as will, in proportion to his capacity and skill, assure him a standard of living suitable for himself and for

his family.” Approved by the Ninth International Conference of American States in 1948. See International Labour

Organization, Minimum Wages: Wage fixing machinery, application and supervision (Geneva: International Labour

Organisation, 1992), para. 14.

17 Article 15 of the Charter establishes the right every individual to work under equitable and satisfactory

conditions and to receive equal pay for equal work. Adopted by the 18th Assembly of Heads of States and Government

in 1981. See International Labour Organization, Minimum Wages: Wage fixing machinery, application and supervision

(Geneva: International Labour Organisation, 1992), para. 14.

18 Part I, paragraph 4, and Article 4, paragraph 1, of the Charter states that the Contracting Parties accept as the

aim of their policy, to be pursued by all appropriate means, the attainment of conditions propitious to the effective

realization of a number rights and principles, including the right of all workers to a fair remuneration sufficient for a decent

standard of living for themselves and their families. Adopted in 1961 and in force since February 26, 1965. See

International Labour Organization, Minimum Wages: Wage fixing machinery, application and supervision (Geneva:

International Labour Organisation, 1992), para. 14.

I-5

countries, and its Recommendation No. 135 were adopted in 1970. The complete texts of each of the

above ILO conventions and recommendations are contained in Appendix A.

Other international and regional bodies also have been concerned about wages. The United Nations has

addressed them in its Universal Declaration of Human Rights14 and in its International Covenant on

Economic, Social and Cultural Rights,15 among others. The issue of a minimum wage was also addressed

in the American Declaration of the Rights and Duties of Man,16 the African Charter on Human and Peoples’

Rights,17 and the European Social Charter.18 Thus, a number of international bodies make reference to the

right of workers to expect that the compensation from their labor will provide an adequate standard of

living.

Definition
19 This discussion of wage definitions and concepts draws upon the technical notes included with the Bureau

of Labor Statistics, International Comparisons of Hourly Compensation Costs for Production Workers in

Manufacturing (Washington: U.S. Department of Labor, September 16, 1998) and the International Labour Organisation,

Yearbook of Labour Statistics, 1998, Sources and Methods Volume 2, Employment, Wages, Hours of Work and Labour

Costs (Geneva: International Labour Office, 1998), as well as the Bureau of Labor Statistics, Glossary of Compensation

Terms, Report 923 (Washington: U.S. Department of Labor, August 1998).

20 International Labour Organization, Minimum Wages: Wage fixing machinery, application and supervision

(Geneva: International Labour Organisation, 1992), para. 42.

I-6

A wage is the amount paid by an employer to a worker by virtue of an employment agreement for work

done (or to be done) or services provided (or to be provided).19 A worker’s wage or pay is for work

performed or services provided during some specified period of time (e.g., hour, day, month, or year), such

as straight-time hourly wage or an annual salary. A worker’s earnings usually reflect pay for time worked

as well as for time not worked (e.g., paid leave or holidays). Rates of pay may vary by region and

occupation or industry as well as by sex, age, race or ethnicity, experience, skill level, and union status.

Other factors affecting pay rates are the nature of the employment relationship and whether a worker is

permanent or temporary, full-time or part-time. 

Workers—especially in manufacturing—are often classified as either production or non-production

workers. Production workers (also known as manual or blue-collar workers) generally include those

employees who are engaged in fabricating, assembly, and related activities; material handling, warehousing,

and shipping; maintenance and repair; janitorial and guard services; auxiliary production (e.g., powerplants);

and other services closely related to the above activities. Working supervisors are generally included;

apprentices and trainees are generally excluded. Non-production workers include managerial, supervisory,

technical, and support staff not directly involved in the production process. Production workers are usually

paid at a hourly or daily rate, while non-production workers are usually salaried employees paid at a fixed

monthly or annual rate.

Gross pay or total earnings (i.e., before any employer deductions for taxes, employee contributions to

social security or pension schemes, insurance premiums, union dues, or other obligations of employees)

usually include, where applicable, premium pay (e.g., overtime payments, shift differentials, and weekend

and holiday pay) and incentive pay (e.g., production bonuses, cost-of-living allowances, commissions, and

hazard pay).

A definition of the minimum wage used by the ILO is “the minimum sum payable to a worker for work

performed or services rendered, within a given period, whether calculated on the basis of time or output,

which may not be reduced either by individual or collective agreement, which is guaranteed by law and

which 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.”20

According to this definition, the minimum wage covers only payments for basic time worked or piece rates
21 Gerald Starr, Minimum Wage Fixing: An International Review of Practices and Problems (Geneva:

International Labour Office, 1981; second printing with corrections, 1993), pp. 17-18.

22 The underlying concern here is the belief that in certain, or even in most, industries a collective process for

establishing wage standards is likely to produce more acceptable wage levels and structures than if wage determination

is left to unregulated labor market pressures and decisions of individual enterprises. See Starr, Minimum Wage Fixing,

pp. 24ff.

I-7

and does not include bonuses or other benefits (in cash or in kind) payable directly or indirectly by the

employer to the worker for work done. The notion of a minimum wage links two concepts: (1) a

wage—remuneration for work done or services provided; and (2) a minimum—a level which may not be

undercut and whose application is guaranteed. Thus, the concept of a minimum wage is linked to work and

distinct from broader notions of social protection concerning a level of income necessary to achieve

minimum living conditions regardless of whether one is employed (e.g., income support in situations arising

out of unemployment, underemployment, or poverty).

ILO Conventions No. 26 and No. 99 address the creation or maintenance of methods or machinery for

fixing minimum wages—as well as their effective regulation—in industry or in certain trades (No. 26) and

in agricultural undertakings (No. 99) to prevent the payment of very low wages in those endeavors.

Recommendations No. 30 and No. 89, which accompany the two conventions, both envision that in fixing

minimum wage rates, the wage-fixing body should take into account the necessity of enabling the workers

concerned to maintain a suitable standard of living (Recommendation No. 30, Part III, and

Recommendation No. 89, Part I, Paragraph 1).

Some of the reasons given by the ILO for establishing a minimum wage are:21

! to provide protection for a small number of low-wage workers who are considered to be in an

especially vulnerable position in the labor market;

! to ensure payment of “fair” wages;22

! to provide a basic floor for the wage structure and reduce poverty by providing all or almost all

workers with “safety net” protection against unduly low wages; and

! as an instrument of macroeconomic policy to achieve broad national goals such as economic

stability and growth and improved the distribution of income.

The notion of a minimum wage which may not be reduced has been conceptualized by some as a “minimum

living wage” to the extent that a minimum wage setting system is portrayed as a means of guaranteeing

workers a minimum level of earnings to meet their basic needs or obtain some basic minimum standard of
23 International Labour Organization, Minimum Wages: Wage fixing machinery, application, and supervision

(Geneva: International Labour Office, 1992), para. 33. Also, recall the hortatory language in the international declarations

and the Mexican Constitution regarding minimum wages which was cited above.

24 International Labour Organization, Minimum Wages: Wage fixing machinery, application, and supervision

(Geneva: International Labour Office, 1992), para. 35 citing International Labour Organization, Report of the Meeting of

Experts of 1967 (Geneva: International Labour Office, 1967), para. 100.

25 International Labour Organization, Minimum Wages: Wage fixing machinery, application, and supervision

(Geneva: International Labour Office, 1992), para. 33 citing International Labour Organization, Minimum wage fixing

machinery and related problems, with special reference to developing countries, Report VII(2), International Labour

Conference, 53rd Session (Geneva: International Labour Office, 1969), p. 111.

I-8

living, which is compatible with human dignity, for themselves (and, in some cases, their families).23 

A 1967 ILO meeting of experts stated: “the minimum wage is the wage considered sufficient to satisfy the

vital necessities of food, clothing, housing, education and recreation of the worker, taking into account the

economic and cultural development of each country. In some cases the needs of the family are also taken

into account in the same manner as those of the worker, and in other cases they are covered by family

allowances and other measures of social security.”24

This principle is repeated in Article 3 of ILO Convention No. 131 which specifies factors to be taken into

consideration in determining the level of minimum wages. In addition to taking account of “the needs of

workers and their families,” Article 3(a) of the Convention suggests that the general level of wages in the

country, the cost of living, social security benefits, and the relative living standards of other social groups

should be taken into account, in so far as possible, as well as economic factors (Article 3(b)) such as the

requirements of economic development, levels of productivity, and the attaining and maintaining a high level

of employment. Thus, Convention No. 131 stipulates that social criteria (such as the needs of workers

and their families) should be considered in conjunction with certain economic conditions in determining the

level of minimum wages. In addition, Recommendation No. 135, which accompanies the convention, states

that “Minimum wage rates should be adjusted from time to time to take account of changes in the cost of

living and other economic conditions” (Part V, Paragraph 11), and that “To this end a review might be

carried out of minimum wage rates in relation to the cost of living and other economic conditions, either at

regular intervals or whenever such a review is considered appropriate in light of variations in a cost-of-living

index” (Part V, Paragraph 12).

In the preparatory work leading up to the adoption of Convention No. 131, the ILO’s analysis of

government responses to a questionnaire concerning the criteria to be used in setting minimum wage levels

revealed that while it was necessary to consider the “needs of workers and their families as a basic, or the

basic, purpose of minimum wage fixing ... It would seem, however, appropriate at the same time to recall

that minimum wage fixing alone cannot suffice for the overcoming of poverty and the satisfaction of the

minimum needs of all workers, ... and that minimum wage fixing should form part of a comprehensive policy

aimed at promoting a better life for the masses of the people.”25
26 International Labour Organization, Minimum Wages: Wage fixing machinery, application and supervision

(Geneva: International Labour Organisation, 1992), para. 111.

27 International Labour Organization, Minimum Wages: Wage fixing machinery, application and supervision

(Geneva: International Labour Organisation, 1992), paras. 147-151.

28 International Labour Organization, Minimum Wages: Wage fixing machinery, application and supervision

(Geneva: International Labour Organisation, 1992), paras. 107-110.

29 Gerald Starr, Minimum Wage Fixing: An International Review of Practices and Problems (Geneva:

International Labour Office, 1981; second printing with corrections, 1993), p. 22.

I-9

The ILO has provided some guidance to countries in establishing and adjusting a minimum wage. Minimum

wages may be established either by fixing a single minimum wage of general application or by fixing a series

of minimum wages that apply to certain groups of workers. Minimum wages may be set in three basic

ways, or in a combination of these: (1) legislatively—by means of a statute, regulation, ordinance, decree,

etc.; (2) administratively—by a competent authority; a wage committee, council, or board; industrial labor

court or tribunal; or an arbitration award, where trade unions and employer federations may also be

consulted; or (3) contractually—by collective agreements. Minimum wages may be increased automatically

or provisions may be made for their periodic review.26

Collective bargaining agreements are considered a wage-fixing machinery when they have been given the

force of law as regards to clauses that set minimum wages. Minimum wages set by collective bargaining

may coexist with those set by a legislative or administrative authority. In some cases, collective bargaining

agreements do not require a formal act of “extension” to become binding and labor law may provide the

force of such provisions.27

Minimum wages are often considered to apply to all workers in a given country. However, minimum wage

legislation may exclude certain groups or categories of persons (such as domestic workers or

homeworkers) or industries (e.g., agriculture or fishing). In some cases, persons employed in small

establishments (based on employment size or the firm’s capitalization or sales volume) or engaged in

informal activities may not be covered by minimum wage legislation. Minimum wages may be set by region,

area, or zone; by branch of economic activity; or by occupational category. They may vary based on

gender, age, or seniority. In some countries, lower rates are set for trainees, apprentices, and the

disabled.28 In order to achieve more complete coverage, some countries have introduced general minimum

wages either as a complement or a replacement for industry minimum wages fixed by wages councils or

boards.29

The ILO has suggested three essential elements for the adequate and appropriate enforcement of minimum

wage provisions: (1) providing information to workers and employers on the minimum wage rates fixed;

(2) establishment of effective forms of sanctions to remedy and prevent infringements of the rates

established; and (3) the establishment of appropriate supervision of what actually takes place in the trade
30 International Labour Organization, Minimum Wages: Wage fixing machinery, application and supervision

(Geneva: International Labour Organisation, 1992), para. 342.

31 Robert J. Pember and Marie-Thérèse Dupré, “Statistical aspects of minimum wage determination,” Bulletin

of Labour Statistics, No. 3 (1997), p. 1. This section on measures is based upon the findings presented in this ILO study.

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concerned.30 In a particular country, these elements may be implemented in different ways using different

strategies, and the scope of such enforcement efforts may depend critically upon resources devoted to such

activities as well as the political will or public support to promote such efforts.

Measures

A recent ILO study notes: “A system of minimum wages, whatever its form, cannot work unless it is based

on regular, reliable and timely statistics on a variety of data items, including income, wages, prices and the

characteristics of wage-earners (sex, occupation, skill level, etc.).”31

Six factors to be taken into account in determining minimum wages are set forth in Recommendation No.

135: (1) the needs of workers and their families; (2) the general level of wages in the country; (3) the cost

of living and changes therein; (4) social security benefits; (5) the relative living standards of other social

groups; and (6) economic factors, including the requirement of economic development, levels of

productivity, levels of employment, and the capacity to pay.

The mentioned ILO study suggests statistics needed to quantify the six criteria and how they might be

provided by a national system of labor statistics.

1) The Needs of Workers and their Families

Given an agreed definition and minimum threshold of basic needs for an individual or a family (i.e., a

poverty line), assessments of the adequacy of a minimum wage to meet the needs of households (especially

wage-earner households) can be derived from the following data sources or elements: (a) average

expenditure by low-income households on various goods and services; (b) information on household size

and composition, with particular emphasis on low-income households; (c) current wages paid to unskilled

workers; (d) income distributions of wage-earner households; and (e) average income levels of wageearner households. Since households with income primarily from low-wage unskilled work are most likely

to benefit from minimum wage legislation, attention is usually focused on this group. Relevant statistics

usually can be derived from household income and expenditure surveys, administrative records (income

tax, social security, or wage inspection), or household surveys and population censuses.

2) The General Level of Wages in the Country

The general level of wages in a country is often measured by statistics on average wages by industry, sex,
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occupation, and location. Statistics on current wages for unskilled workers may be useful in assessing the

“adequacy” of wages and the “need” for minimum wages, if the definitions of adequacy and need are clear

and widely accepted within a country. In periodically adjusting minimum wages, reference is often made

to average wages with a view of maintaining a particular ratio between the minimum wage and general wage

levels. Since wage rates vary by establishment and there is rarely a single prevailing wage, wage data are

best collected from establishment surveys or censuses, which usually are based upon business records,

supplemented with information from household surveys and labor inspection reports.

3) Cost of Living and Changes Therein

Measures of changes in the cost of living (aggregate value of a particular basket of household goods and

services) are more common than absolute measures of the level itself. Some countries compile regular

reports of average prices for a selected range of goods and services which may be a useful input into

minimum wage determinations as would average expenditure by specific household type. Changes in price

level are usually measured by a consumer price index. Many countries compile a special consumer price

index designed to capture price levels affecting the welfare and basic needs of low-income wage-earning

households which may be more useful than a more general consumer price index in adjusting minimum

wages levels. Over time, the composition of the basket of goods and services used to compile the

consumer price index will need to be reviewed and updated.

4) Social Security Benefits

Access to social security benefits and other measures to alleviate poverty is an important consideration in

determining minimum wages. Useful statistical information includes the average benefits paid to

beneficiaries and the distribution of benefits paid, ideally cross-classified with information on the

characteristics of the beneficiaries (sex, age, disability status, employment status, etc.) which can be used

to distinguish the disabled, elderly, and other beneficiaries from those who receive the minimum wage safety

net. These data can usually be obtained from social security administrative records, supplemented by

household survey information.

5) Relative Living Standards of Other Social Groups

Measures of relative living standards are usually based on: (a) average income and income distributions of

different social groups; (b) average expenditure (total and on different baskets of goods and services) of

different social groups; and (c) other measures of living standards such as average number of rooms in a

dwelling, proportion of households renting accommodations, average number of household members per

room, type of material of walls or roof, proportion of household members with post-primary education, etc.

The definition of “social group” as well as “household” will vary by country. Measures of living standards

are best provided by household income and expenditure surveys, supplemented by other household surveys

and administrative records.
32 Bureau of Labor Statistics, Glossary of Compensation Terms, Report 923 (Washington: U.S. Department of

Labor, August 1998), p. 51.

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6) Economic Factors

Economic factors to be considered in setting minimum wages include the requirements of economic

development, levels of productivity, the level of employment, and employers’ capacity to pay. Some

relevant economic measures of development that are available from the national accounts statistics of most

countries include: (a) changes in gross domestic product (GDP) per capita at constant prices; (b) changes

in the proportion of GDP contributed by agriculture, manufacturing, and services sectors; (c) changes in

the value of industrial production at constant prices; and (d) changes in the value of foreign trade at constant

prices.

Social measures of economic development available in most population censuses and surveys include: (a)

changes in the proportion of children attending school; (b) changes in the literacy rate; (c) changes in the

number of hospitals and schools per capita; and (d) changes in the accessibility of selected community

facilities (piped water, markets, schools, hospitals, postal services, fire services, police services).

Measures of economic activity that might be considered include: (a) changes in the unemployment rate; and

(b) changes in the percentage of persons employed in agriculture, manufacturing, and services sectors.

Labor productivity measures are less widely available, particularly reliable measures of changes in real

terms of the value-added per employee and output per employee by industry and region, which may be

important since national figures may obscure industrial and regional differences and be misleading for the

purposes of setting minimum wages.

Economic factors influence an employer’s capacity to pay a specified minimum wage and depend, in part,

on (a) other payments such as other labor costs (including employer’s social security expenditures and

other non-wage costs related to employment of labor); (b) payments to other factors of production (profits,

rate of return on investment, etc.); and (c) the effects on the selling price of the product produced and on

subsequent sales. An employer’s capacity to pay may also vary greatly by size of establishment and

capitalization. Labor cost surveys offer a major source of information on these matters. 

Prevailing or Average Wage

Definition

The term “prevailing wage” has been interpreted in a variety of ways, such as the “going rate” or the

average level of wages paid by employers for specific occupations in a community or area. In some cases,

it may refer more broadly to the rate paid to most workers or the rate established by trade union

contracts.32 In most cases, the prevailing or average wage is greater than, or equal to, the minimum wage
33 See National Archives and Records Administration, Code of Federal Regulations, Labor, Title 29, Parts 1.1

and 1.2 (Washington: U.S. Government Printing Office, July 1, 1998), pp. 10-11; see also U.S. Department of Labor,

Growth of Labor Laws in the United States (Washington: U.S. Government Printing Office, 1967), p. 117-120.

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(if one has be set). However, local labor market and economic conditions, the wage setting mechanism,

location, job tenure, size of firm, a firm’s level of capitalization and technology, and the mix of skills

necessary for particular occupations, among other things, may affect the wage rate prevailing in a particular

area or country. By construction, an average wage rate represents a center or middle rate around which

actual wages lie; the quality of this measure as being representative of a worker in a group will depend on

the dispersion or spread of actual wage rates around the average rate, which is likely to be larger the

greater the skill/tenure spread or the production/supervisory worker mix of the representative worker

group. 

In the United States, “prevailing wage” also has a statutory definition. Under the Davis-Bacon Act of 1931,

as amended, and other statutes, there are provisions that workers engaged in construction activity under

contracts with, financed by, or with the assistance of the federal government or the District of Columbia,

be paid not less than the wage rates and fringe benefits prevailing for the corresponding classes of workers

employed on projects similar to the contract work in local areas where such work is performed. If the

same wage is not paid to more than 50 percent of the workers with the same job classification, the

prevailing wage is calculated as the average of wages paid, weighted by the total employed in the

classification.33

Measures

Most countries conduct periodic economic surveys of establishments or households which gather

information on employment and earnings. In some cases, official estimates of earnings are made based

on administrative records or special surveys. Surveys or censuses of establishments (which are usually

legally required to be accountable for tax purposes and maintain a certain level of record keeping) based

on payroll statistics tend to more accurately reflect compensation than surveys of households (where

respondents may not recall or under report). Measures collected and reported may take on a national

character and not conform to international concepts, so international comparisons should be done with care.

Basic wage and earnings statistics which are available in many countries include: average hourly earnings

at a business establishment (payroll data); occupational wages by industry and geographic area; and

employment cost (compensation). Care also needs to be exercised in interpreting average measures at a

high level of aggregation, since these may conceal important differences across regions or across industrial

or economic sectors of an economy.

A major source of wage data is the International Labor Organization (ILO), which receives wage data from
34 International Labour Organisation, Yearbook of Labour Statistics, 1998, Sources and Methods Volume 2,

Employment, Wages, Hours of Work and Labour Costs (Geneva: International Labour Office, 1998); annual publication.

35 This section is based upon Social Security Administration, Social Security Programs Throughout the World

- 1997 (Washington: U.S. Government Printing Office, August 1997), which is issued biennially and describes the

principal features of different national social security systems. 

I-14

its member countries.34 The wage data submitted to the ILO usually cover gross hourly or monthly pay

for all employees or for production workers. In some cases, prevailing or average wage data for the

apparel and footwear industries are not available for a country.

Hours of work per day and the standard workweek are also important factors which will affect earnings

of hourly workers as will the amount of overtime and the rate at which that time is paid. The intensity of

the work effort may vary by industry or occupation. In some industries, such as apparel, work intensity

tends to be seasonal, with periods of slack and periods of peak demand with substantial overtime or roundthe-clock production. 

To evaluate the purchasing power of earnings over a period of time, wages are usually adjusted for inflation

using a national or regional consumer price index (CPI) number to obtain real earnings measures.

Conversion of foreign wage rates or earnings to U.S. dollar figures using market exchange rates permits

wage or earnings comparisons, but do not reflect relative level of well-being which would require

comparisons based on purchasing power parity measures.

The quality of any reported wage data will depend upon the quality of the underlying survey instrument and

be subject to limitations in scope, frequency, and coverage as well as being subject to sampling and nonsampling biases.

Non-Wage Benefits

Non-wage benefits provided to employees in many cases represent a substantial portion of their total

compensation. Monetary benefits provide additional direct-income, or income in lieu of work, while nonmonetary (in-kind or subsidized) benefits reduce workers’ daily expenses and costs incurred by working.

Some non-wage benefits are realized immediately by workers, while others may be deferred or never

actually realized. Non-wage benefits are often used by employers in tight labor market situations to attract

and keep workers (especially low-pay workers) rather than increasing wages, but may be withdrawn once

market conditions loosen. While the provision of non-wage benefits poses immediate costs to the

employer, it is not clear that these costs necessarily reflect the present value of non-wage benefits actually

realized by the employee.

Definition35
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Non-wage benefits augment income and may include: pay for time not worked (e.g., vacations, public

holidays, and sick leave); supplementary pay (e.g., profit-sharing, year-end, attendance, or other

nonproduction bonuses); deferred retirement income (e.g., defined benefit or defined contribution plans);

insurance (e.g., life, health, and disability insurance); social insurance benefits (e.g., social security, health

care, severance pay or unemployment insurance, and workers’ compensation); employee training; and plant

facilities and services (e.g., cafeteria, medical clinic, day care center, recreation center, or housing).

Some non-wage benefits, such as social insurance and retirement benefits, are usually governmentmandated. However, other non-wage benefits may not be required by law, such as those negotiated by

labor unions in collective bargaining agreements, or those that may be the practice of the company or

industry itself, such as providing health or dental insurance or maternity leave (which may or may not be

a “mandated benefit” in some countries), life insurance, transportation, subsidized meals, child care and

recreational facilities, or worker training programs. In addition, there may be privately financed (employeremployee) benefits arrangements, which are available as alternatives to statutory programs, that may or may

not be mandatory in some countries.

The term “social security” refers to programs established by statute that insure individuals against

interruption or loss of earning power, and for certain special expenditures arising from marriage, birth, or

death. Allowances to families for the maintenance of children are also included in this definition. Social

security programs may encompass the following types of coverage: old age, disability, and death (income

support); sickness and maternity (medical and hospital services); work injury (disability income support);

unemployment (income support); and family allowances (cash payments and social services; federal tax

credits or relief).

Income maintenance programs that provide cash benefits are usually provided in three basic ways:

employment-related (based on length of employment and level of earnings at the time of contingency),

universal (flat-rate cash benefits), and means-tested systems (limited to needy or low-income applicants).

Under the first two, the insured can claim benefits as a matter of right, while means-tested benefits are

based on a comparison of a person’s income or resources against a standard usually based on subsistence

needs. Employment-related systems for unemployment, sickness, maternity, or work injury are financed

by employers, workers, or both, and are, in most instances, compulsory for defined categories of workers

and their employers and often are referred to as social insurance systems.

Three other types of programs may also be in place in some countries: 

! Mandatory private insurance programs, which may substitute for or complement social

insurance systems, are funded with mandatory contributions from the employer, or a combination

of employee and employer contributions to the employee’s individual account. The employee must

pay an administrative fee for the account and purchase a separate policy for disability and

survivor’s insurance.
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! Provident funds, which are publicly operated and exist primarily in developing nations, are

essentially compulsory savings programs in which the employee’s regular and voluntary

contributions are withheld from their pay and in some cases are matched by their employers. The

funds are set aside for each employee in a special fund for later repayment to the worker, usually

in a lump sum with accrued interest. Sometimes the beneficiary can opt for a pension, or the

pension is provided to the survivors. 

! Employer-liability systems, where affected employers are required, usually through a labor code,

to provide specific benefits, such as a lump sum to the aged or disabled; provision of medical care,

paid sick leave, or both; payment of maternity benefits or family allowances; provision of temporary

or long-term cash benefits and medical care in case of a work injury; or payment of severance

indemnities in the case of dismissal. This approach does not involve the pooling of risk, since the

liability is placed directly on each employer. Employers, therefore, tend to insure themselves

against this liability and some laws make this compulsory.

In addition to employer provided and financed non-wage benefits, the government in many countries

provides low-income families direct assistance through tax credits, subsidies, and other income transfers

(e.g., earned income tax credit and other tax relief, food stamps, family allowances; etc.).

Measures

Most measures of benefit costs come from estimates produced in the computation of compensation or labor

costs from business records of a company or from the records of offices that administer the benefit

programs. Total compensation costs (and more broadly, labor costs) refer to the costs incurred by the

employer in the employment of labor (fully loaded wages) and include the entire range of wages and

benefits that a worker receives (both current and deferred) as the result of their employment. 

In the United States, hourly compensation costs are defined by the U.S. Bureau of Labor Statistics (BLS)

as hourly direct gross pay plus employer social insurance expenditures and other labor taxes. Hourly direct

gross pay includes all payments made directly to the worker, before payroll deductions of any kind,

consisting of pay for time worked (basic time and piece rates plus overtime premiums, shift differentials,

other premiums and bonuses paid regularly each pay period, and cost-of-living adjustments), and other

direct pay (pay for time not worked, such as vacations, holidays and other leave, except sick leave;

seasonal or irregular bonuses and other special payments; selected social allowances; and the cost of

payments in kind). Employer social insurance expenditures and other labor taxes include: employer

expenditures for legally required insurance programs and contractual and private benefit plans (retirement

and disability pensions, health insurance, income guarantee insurance and sick leave, life and accident

insurance, occupational injury and illness compensation, unemployment insurance, and family allowances),
36 In some countries, social insurance and unemployment insurance programs are financed through general tax

revenues rather than employment taxes placed on the employer.

37Bureau of Labor Statistics, U.S. Department of Labor, International Comparisons of Hourly Compensation

Costs for Production Workers in Manufacturing (September 16, 1998), p. 10.

38 Aldi Hagenaars and Klaas de Vos, “The Definition and Measurement of Poverty,” Journal of Human

Resources, Vol. XXIII, No. 2 (Spring 1988), pp. 211-221. For other general surveys of poverty definitions and measures,

see Rolph van der Hoeven and Richard Anker (eds.), Poverty Monitoring: An International Concern (New York, St.

Martin’s Press, 1994) and Paul Streeten, “Beyond the Six Veils: Conceptualizing and Measuring Poverty,” Journal of

International Affairs, Vol. 52, No. 1 (Fall 1998), pp. 1-31. 

I-17

and, for some countries, certain labor taxes (e.g., taxes on payrolls or employment).36

The BLS definition of hourly compensation costs is less comprehensive than the one used by the ILO in

its definition of total labor costs, which includes, in addition, the costs of recruitment, employee training, and

plant facilities and services (such as cafeterias and medical clinics). The labor costs not included in the BLS

estimates of hourly compensation costs account for no more than 4 percent of total labor costs in any

country for which data are available.37

Assessing Basic Needs: The Poverty Line

Assessing the basic needs of a household or an individual requires: the development of an indicator of wellbeing or welfare, which typically is based on per capita calorie in-take or real per capita consumption

expenditures; setting a normative threshold (a poverty line) that represents a widely accepted minimal level

of well-being for a household or person; and a measure to assess poverty across the population, which is

consistent and representative. Adjustments and refinements may need to be made as the level of economic

development changes and the population gains access to a broader set of goods and services.

Disagreements are likely to arise as to how the poverty measure is defined and how the normative threshold

is set—often, it is based on the cost of either a subsistence food basket or a market basket of essential

goods and services (food, clothing, shelter, and, perhaps, some other items) reflecting “basic needs.”

Thresholds are usually set in terms of income levels required to purchase goods and services related to

basic needs, which raises the question of how income is defined and measured.

Definition

Poverty is a multifaceted notion which may be viewed from different aspects and dimensions. Most

definitions of poverty fall into one of three categories: (1) absolute—having less than some defined

minimum; (2) relative—having less than others in the same society; and (3) subjective—individuals’ feeling

or perception that they do not have enough to get along.38

The poverty line is usually defined as the level of some criterion measure below which a person is
39 This is the standard used by the European Union (EU) and the Organization for Economic Cooperation and

Development (OECD).

40 Soniya Carvalho and Howard White, Combining the Quantitative and Qualitative Approaches to Poverty

Measurement and Analysis: The Practice and the Potential, World Bank Technical Paper No. 366 (Washington: World

Bank, 1997), pp. 4-5.

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considered “poor.” The headcount is the number of persons below the poverty line; sometimes, it is

expressed as the percentage of the population below the poverty line. The poverty gap measures how far

a person or household is below the poverty line. The extent of poverty is clearly influenced by the choice

(absolute, relative, or subjective) of the poverty line.

An absolute poverty line is commonly drawn based on the level of expenditure (or income, consumption,

budget, etc.) required to meet some minimum food and other essential non-food needs; if a person’s (or

family unit’s) income falls below this level, the person or family unit are considered poor. There is often

widespread disagreement on the definition of the minimum standard of living and the identification of

quantifiable measures (such as per capita income or per capita consumption and the cost of minimum basic

commodities) and other essentials (such as calorie intake, housing costs, transportation costs, education

costs) which are needed in order to set the poverty line for a given country. Further, these notions vary

within and across countries and may depend on a variety of social, cultural, institutional, political, economic,

climatic, or development factors.

Relative poverty refers to the position of an individual or household compared to some average income

measure for the country. In this case, a poverty line might be set at one-half of the mean per capita income,

50 percent of median adjusted disposable personal income,39 or at the 40th percentile of the nation’s

income distribution. Relative poverty lines will vary with the level of average (or median) per capita income,

the shape of the distribution of income, and overall economic conditions and are used primarily by

developed countries that are more concerned about the distribution of income than its absolute level.

Notions of absolute poverty, where the poverty line does not vary, may be more relevant for lower-income

developing countries.

Subjective poverty usually involves a broader notion of poverty and deprivation than might be captured in

more quantitative measures of absolute or relative poverty based on income or consumption measures and

attempts to capture the interactions of social, cultural, political, and economic factors (e.g., vulnerability,

isolation, powerlessness, survival, personal dignity, security, self respect, housing quality, basic needs,

nutritional status, access to services, and ownership of assets).40 Subjective poverty assessments, usually

based on open-ended interactive interviews, attempt to measure qualitatively the respondent’s feelings

about deprivation or the individual self-assessment about their situation. This approach usually attempts

to take into consideration the conditions, priorities, and situations of those under study, typically a

community or region of a country. These assessments, while more comprehensive in scope, are based on

smaller and less representative sample sizes and may be less costly and more timely than more quantitative
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assessments based on national censuses or surveys which use probability sampling methods. The poverty

line set under this definition uses some indices of living standards or self-assessments based on a wide range

of non-income measures.

Measures

The kind of poverty definition chosen determines the type of measure. Several general issues related to

poverty measurement are discussed before specific measures are presented.

In determining the poverty line, consumption measures are generally preferred over income measures,

because they more accurately measure deprivation. Also, consumption can be more accurately measured

for households that may have diverse sources of income (some of these may be unmeasured, unreported,

or under-reported income from informal activities) and for which the net income from several activities may

not be known. In addition, income may fluctuate widely from period to period, whereas consumption tends

to be smoother. In most cases, the consumption of leisure is not taken into account, despite the fact that

the quantity and quality of leisure can be a major benefit of socio-economic advance. Similarly, savings

and consumption of own-production are often not accounted for.

Despite the preference for consumption measures, most poverty measures ultimately arrive at a poverty

line based on some measure of income. Since average income or average consumption conceal

differences, measures need to be stratified by other characteristics which look behind income.

Households differ in size, composition, and location (urban/rural), so a simple comparison of aggregate

household consumption can be quite misleading about the well-being of individual members of a given

household. However, measures can be stated in terms of per adult equivalent, i.e., for a household of any

given size and demographic composition (such as one male adult, one female adult, and two children) and

an equivalence scale developed that measures the number of adult males (typically) which that household

is deemed to equivalent to. Separate regional or urban and rural measures may be more revealing than a

composite national average.

The amount of time a person or household spends in poverty may be relevant so that dynamic

considerations and points in the life cycle may add useful information. Other dynamic factors which

influence the setting of poverty lines include the fact that the poverty thresholds may change as income

increases, the choice set of an individual expands and changes with improvements in the level of

development, and that prices of goods and services, and their availability, and the purchasing power of

various groups in society will also change over time. Additional non-income related considerations include

holdings of assets and land, education, access to services and transportation, health related (life expectancy,

nutritional intake), and discretionary spending.

Hagenaars and de Vos describe a variety of poverty measures, based on the absolute, relative, and
41 Aldi Hagenaars and Klaas de Vos, “The Definition and Measurement of Poverty,” Journal of Human

Resources, Vol. XXIII, No. 2 (Spring 1988), pp. 211-221. Hagenaars and de Vos used different poverty measures to

estimate the number of poor (headcount) in Holland. Their results indicate that the headcount varies enormously by

minimum food definition, by household type (one-family, non-working, number of wage earners, etc.), and consumption

behavior (e.g., unable to distinguish poverty from other effects of deprivation such as age, health, and household size).

They found that subjective methods may be useful for identifying subgroups at high poverty risk and that there was

a high correlation among the “basic needs,” “just sufficient,” and “official definition” measures of poverty. However,

they conclude that in the end the definition and measure chosen will probably be less on its merit than on pragmatic

grounds (e.g., data availability), political grounds (i.e., meets widely accepted societal values), or historical grounds. 

42 For variants based, in part, on this method, see B.S. Rowntree, Poverty: A Study of Town Life (London:

Macmillan, 1901), who develops a poverty line based on a standard (expert) budget with monetary amounts for various

necessary consumption items, and Mollie Orshansky, “Counting the Poor: Another Look at the Poverty Profile,” Social

Security Bulletin, Vol. 28, No. 1 (January 1965), who develops poverty thresholds based on a multiple of the dollar

amount for basic food requirements rather than on the dollar amount of different necessary consumption items. Sen has

suggested that poverty should be defined in terms of capabilities rather than the consumption of commodities. Under

this approach, basic needs are absolute in terms of capabilities (the set of choices, opportunities, or access), but not

necessarily in terms of consumption goods or income; see Amartya K. Sen, Commodities and Capabilities (Amsterdam:

North Holland, 1985).

43 Mollie Orshansky, “Counting the Poor: Another Look at the Poverty Profile,” Social Security Bulletin, Vol.

28, No. 1 (January 1965), p. 5. While minimum food-intake requirements (in terms of calories, protein, and other nutrients)

may be somewhat uncontroversial, differences arise with regard to quality, mix, and accessibility of minimum subsistence

diets.

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subjective definitions of poverty.41 Often the measures use some combination or variation of the methods

described below.

1) Absolute Measures

(a) Basic Needs

This method usually determines minimum requirements (generally based on “how much is too little” rather

than “how much is enough”) to meet “basic needs” (e.g., food, clothing, and housing) and the income

necessary to purchase them.42 While adjustments may be made for household composition and size, there

is no consensus on what and how much are needed for “basic needs.” Despite (or because of it) a nation’s

technological and social advancement, there is no generally accepted standard of adequacy for the

essentials of living except for food.43 It becomes more difficult to reach a consensus on a poverty line when

it is set above the level of mere survival (e.g., a subsistence level based on critical food needs). The

measurement problems are compounded once a country passes the stage of the struggle for sheer survival;

yesterday’s luxuries become tomorrow’s necessities. As with any absolute measure, measurement

difficulties increase if the measure is used over time, since economic and social conditions and living

arrangements, among other things, change. In the United States, while not incorporated into the official

poverty measure, the U.S. Census Bureau has measured households’ difficulties in meeting basic needs

such as having enough to eat, meeting essential expenses, paying full utility bills, paying full rent or mortgage,
44 See Kurt J. Bauman, Extended Measures of Well-Being: Meeting Basic Needs, 1995, Household Economic

Studies, Current Population Reports P70-67 (Washington: U.S. Census Bureau, released July 1999); accessible on the

U.S. Census Bureau’s web site at either <http://www.census.gov/Press-Release/www/1999/cb99-130.html> or

<http://www.census.gov/prod/www/abs/popula.html>.

45 See Mollie Orshansky, “Counting the Poor: Another Look at the Poverty Profile,” Social Security Bulletin,

Vol. 28, No. 1 (January 1965), p. 7-9.

46 See V.M. Dandekar, Measurement of Poverty, R.R. Kale Memorial Lecture, 1981 (Pune, India: Spicer College

Press, Gokhale Institute of Politics and Economics), p. 6.

47 See United Nations Development Programme, Human Development Report 1997 (New York: Oxford

University Press, 1997), p. 13.

48 Aldi Hagenaars and Klaas de Vos, “The Definition and Measurement of Poverty,” Journal of Human

Resources, Vol. XXIII, No. 2 (Spring 1988), p. 214.

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going to the doctor or dentist when needed, having telephone or utilities disconnected, or being evicted from

a house or apartment, based on panel data from the Survey of Income and Program Participation (SIPP).44

(b) Food/Income Ratio

This approach, based on the proposition that the ratio of food expenditures to income declines as income

increases (Engel’s Law), uses actual household consumption expenditure data to determine the minimum

share of income (family budget expenditure) needed for food (e.g., a of household expenditures in the

United States45 or 80 percent of household expenditures in India46). Persons or households spending more

than this minimum share are considered poor. The United Nations Development Programme (UNDP) uses

a measure of “ultra-poverty” for the situation where a household cannot meet 80 percent of the Food and

Agriculture Organization of the United Nations–World Health Organization (FAO–WHO) minimum calorie

requirements, even when using 80 percent of its income to buy food.47

(c) Fixed Cost/Income Ratio

This method sets a minimum ratio of fixed costs (i.e., costs of expenditure items which reduce disposable

income such as housing, taxes, energy, insurance, telephone, transportation, education, or other items on

which people will not diminish their expenditures) to income. This method has been used in Dutch social

policy discussions where the ratio has been set at 50 percent.48

(d) Total Expenditure/Income Ratio

In this case, a person is considered poor if their expenditures are greater than current income (i.e., the ratio

of total expenditures over income is greater than one so one needs to borrow or use savings in order to get
49 See, for example, Brian Abel-Smith and Peter Townsend, “The Poor and the Poorest,” Occasional Papers

on Social Administration Number 17 (London: G. Bell & Sons Ltd., 1965) for a discussion of the evolution and

development of this type of relative poverty measure by B.S. Rowntree in England over the period 1899 to 1950. 

50 A variant of this method considers the deprivation standard in terms of social activities (rather than

commodities) as indicators of whether a family is participating in the community’s style of living; see Peter Townsend,

Poverty in the United Kingdom (Harmondsworth: Penguin Books, 1979).

51 See Kathleen Short and Martina Shea, Beyond Poverty, Extended Measures of Well-Being, 1992, Household

Economic Studies, Current Population Reports P70-50RV (Washington: U.S. Census Bureau, released September 1995);

accessible on the U.S. Census Bureau’s web site at <http://www.census.gov/prod/www/abs/popula.html>.

I-22

along).

2) Relative Measures

(a) Income Deprivation

In this approach, the poor are seen as lacking income necessary to purchase basic necessities relative to

others in the society that are able to. Using a broader notion of subsistence, the poverty line is set as a

proportion (say, 60 to 80 percent) of average earnings of manual (unskilled) workers, the average wage

of male heads-of-households, or average weekly earnings of some reference group, where the proportion

depends on the family size.49

(b) Commodity Deprivation

Under this notion, the poor are seen as lacking certain commodities that are common in the society that they

are living in.50 A standard consumption pattern is determined that represents society’s common practice

and poverty is measured as how much one’s actual consumption pattern differs from this standard. Often

a scoring index is developed which indicates the number of times there is a shortfall of not possessing a

certain item (e.g., durable goods such as a car, color television, refrigerator, washing machine, or

expectations about replacing one of these items if it breaks down). Besides being somewhat arbitrary, the

focus on durable goods may mistakenly classify as poor some young starting households which have

accumulated few durable goods. In the United States, while not incorporated into the official poverty

measure, the U.S. Census Bureau has measured the nation’s poor and nonpoor access to consumer

durables such as a washing machine, clothes dryer, dishwasher, refrigerator, freezer, color television, stove,

microwave, VCR, air conditioner, personal computer, and telephone, based on panel data from the Survey

of Income and Program Participation (SIPP).51

3) Subjective Measures

(a) Minimum Income
52 For a further discussion and application of this method, see Theo Goedhart, Victor Halberstadt, Arie Kapteyn,

and Bernard M.S. Van Praag, “The Poverty Line: Concept and Measurement,” Journal of Human Resources, Vol. 12, No.

4 (1977), pp. 503-520; Diane Colasanto, Arie Kapteyn, and Jacques van der Gaag, “Two Subjective Definitions of Poverty:

Results from the Wisconsin Basic Needs Study,” Journal of Human Resources, Vol. 19, No. 1(1984), pp. 127-137; Sheldon

Danziger, Jacques van der Gaag, Michael K. Taussig, and Eugene Smolensky, “The Direct Measurement of Welfare

Levels: How Much Does It Cost to Make Ends Meet?” Review of Economics and Statistics, Vol. 66, No. 3 (1984), pp.

500-505; and Aldi J.M. Hagenaars, The Perception of Poverty (Amsterdam: North Holland Publishing Co., 1986).

I-23

This approach surveys people to determine the income level that they feel is “just sufficient”(or asks for a

level that is “not sufficient” and a level that is “sufficient”) for the household. If their income is less than “just

sufficient,” then they are considered poor.52 The method assumes that “sufficient” and “not sufficient” are

associated with the same levels of welfare throughout the society.

(b) Minimum Consumption

This method surveys people to determine what they consider to be basic needs and how much of these they

need and then compares what they say they need with what they actually purchase. Usually, food is the

relevant category used.

4) Official Measures

The World Bank, the International Labor Office (ILO), and other United Nations institutions are involved

in reporting on poverty, but few institutions are directly involved in poverty-related data collection. 

Poverty analysis is often limited by the availability of accurate data. National household income or

consumption surveys are seldom available for most developing countries. The World Bank, ILO, United

Nations Development Programme (UNDP), World Food Program, and United Nations Statistical Division

have accumulated extensive experience in providing assistance to developing countries in this area. In

addition, international measures of poverty (i.e., methods applicable across countries) have been developed

by the World Bank and the UNDP to assist them in the administration of development aid programs.

(a) National Measures

These measures of poverty are usually developed by national statistical agencies for use by the government

in development planning or as a basis for providing social assistance to the needy. In most cases, either

an absolute or a relative measure is adopted to set the national poverty line. The usual starting point for

setting an absolute country-specific poverty line is the calculation of minimum per capita food and energy

needs on the basis of age- and sex-specific minima. The composition of the food basket is usually

determined by considering the prevailing dietary habits within the country and the cost of the minimum food

basket is usually evaluated using retail prices. The national poverty rate is the percentage of the population

living below the poverty line deemed appropriate for the country by its authorities. The national poverty rate

is often disaggregated into urban and rural poverty rates. National estimates are then based on population-
53 The World Bank’s seminal work on poverty was summarized in its World Development Report 1990: Poverty;

the World Development Report 2000-01 will once again focus on the subject of poverty. See the World Bank’s web

site: <http://www.worldbank.org/povertywdrpoverty/index.htm>. 

54 Since prices of goods and services vary greatly among countries and commercial market exchange rates have

frequent and sometimes sharp fluctuations and do not reliably reflect relative differences in prices, purchasing power

parities, which give the number of foreign units of currency required to buy goods and services equivalent to what can

be purchased with one unit of U.S. (or other base country) currency, provide a better basis for making international

comparisons.

I-24

weighted subgroup estimates from household surveys. Some countries have not adopted an official poverty

measure due to a lack of national consensus on a definition.

The World Bank has developed the Living Standards Measurement Survey (LSMS) to collect data on

poverty and other development indicators in some 30 countries. The national statistical agency in each

country actually carries out the survey. The World Bank’s LSMS surveys are household surveys which

have been conducted during the last 13-14 years. Establishing a reliable system for monitoring living

standards at disaggregated levels requires a well-functioning sample survey apparatus. Many countries

conduct household surveys that generate sufficiently disaggregated information to facilitate planning, and

international survey programs. For other countries, however, the state of the data does not even allow an

accurate estimate of basic indicators. For these countries the World Bank’s Living Standards

Measurement and Social Dimensions of Adjustment surveys provide one way to build local capacity.

(b) International Measures

International organizations such as the World Bank, the United Nations Development Programme (UNDP),

and the International Labor Organization (ILO) regularly publish measures of poverty based on results from

individual national surveys as well as those based on an internationally comparable basis.

The poverty lines published by the World Bank are based on both country-specific (national) and

international poverty lines estimates, expressed in monetary units. Poverty measures are prepared by the

World Bank’s Development Research Group and are updated and revised on a regular basis.53 Countryspecific poverty lines are based on representative primary household surveys conducted by national

statistical offices or by private agencies under government or international agency supervision, or are

obtained from government statistical offices or World Bank country departments.

The World Bank frequently uses two different international poverty line: one which is set at 2 U.S. dollars

(US$) per person per day and the other which is set at US$1 per person per day (the extreme poverty

line), both in 1985 prices adjusted for purchasing power parity.54 The US$1/US$2 international poverty

lines in 1985 purchasing power parity adjusted US$ are roughly equivalent to US$1.50/US$3.00 in terms
55 World Bank, World Development Report: Knowledge for Development 1998-99 (New York: Oxford

University Press, 1999), p. 117.

56 World Bank, World Development Report: Knowledge for Development 1998-99 (New York: Oxford

University Press, 1999), p. 236. For more background on the nature of the 1990 World Bank poverty estimates, see Elaine

K. Chan, “A Compendium of Data on Poverty and Income Distribution,” Background Paper for the World Development

Report 1990 (Washington: World Bank, 1990). In most cases, an absolute poverty line, defined as an expenditure or

income level below which basic needs cannot be satisfied, was arbitrarily set 35 percent higher than the poverty line for

rural areas of India, which at that time was considered to be more representative of many developing countries. The

poverty line corresponded to US$31 (US$1 per person per day) after adjustment for purchasing power parity had been

made to the 1985 official exchange rate. The purchasing power parity poverty line was converted into the national

currency using estimates from Robert Summers and Alan Heston, “A New Set of International Comparisons of Real

Product and Price Levels: Estimates for 130 Countries, 1950-1985,” Review of Income and Wealth, Series 34, No. 1 (March

1988), pp. 1-25. See Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data

(Geneva: International Labour Office, 1996), p. 136.

57 Based on the same dimensions and variables as the HDI, the UNDP has also developed gender-related

development indices (GDIs) to capture inequalities in achievement between men and women and gender empowerment

measures (GEMs) to measure inequalities in opportunities between men and women in key areas of economic and

political participation and decision making and earned income. See United Nations Development Programme, Human

Development Report 1998 (New York: Oxford University Press, 1998), pp. 14-15.

I-25

of 1997 U.S. prices.55 While somewhat arbitrary in definition, the advantage of a common international

poverty line is that it permits comparisons based explicitly on equivalent real baskets of goods and services.

According to the World Bank, the standard of US$1 a day, measured in 1985 international prices and

adjusted to local currency using purchasing power parity conversion factors, was chosen for use in its

World Development Report 1990, which focused on the subject of poverty, because it is typical of the

poverty lines in low-income economies.56 The World Bank acknowledges that while purchasing power

parity factors take into account the local prices of goods and services that are not traded internationally,

they were designed for international national accounts aggregates and not international comparisons of

poverty. Thus, there is no reason to believe that these international poverty lines represent the same level

of deprivation across countries.

The United Nations Development Programme (UNDP) has issued annual reports since 1990 which mark

the progress of human development in countries around the world. Over the years, these reports have

developed more comprehensive country measures of human development and poverty. Based on the

premise that human development is a process of enlarging choices and capabilities, the UNDP measures

(indexes) have been based on three basic dimensions of human development in a country: longevity,

knowledge (or educational attainment), and a decent standard of living.

The UNDP’s Human Development Index (HDI), which measures progress in a country as a whole, is

based on life expectancy at birth (longevity); adult literacy and combined primary, secondary, and tertiary

enrolment (knowledge); and adjusted per capita income in purchasing power parity prices (a decent

standard of living).57
58 United Nations Development Programme, Human Development Report 1998 (New York: Oxford University

Press, 1998), p. 25. See also, United Nations Development Programme, Human Development Report 1997 (New York:

Oxford University Press, 1997) which was devoted entirely to the issue of poverty. See also, the UNDP’s web site:

<http://www.undp.org/undp/hdro>.

I-26

The UNDP also sees human poverty as being multidimensional, that is, more than just a lack of income.

In this view, poverty entails not only the lack of what is necessary for material well-being (i.e., income

poverty), but also the denial of opportunities and choices most basic to human development (viz., a long,

healthy, creative life (longevity); dignity, self-esteem, and respect of others (knowledge); and things that

people value in life (a decent standard of living). “Since income is not the sum total of human lives, the lack

of it cannot be the sum total of human deprivation.”58 The UNDP’s Human Poverty Index measures the

extent of deprivation or the proportion of persons left out of the progress indicated by the HDI.

Since economic and social deprivation varies with the level of development, different measures of poverty

are used by the UNDP for developing and developed countries. For developing countries, which have a

low level of resources, the focus is on hunger, epidemics, illiteracy, and the lack of health services and safe

drinking water. For the industrialized (developed) countries, which are more affluent, the focus is on social

exclusion as reflected in deprivation of income and employment—the necessary means for acquisition of

required material goods and services—and the lack of opportunities and capabilities mirrored in

deficiencies in health and literacy. The specific elements which comprise the UNDP Human Poverty and

Income Poverty Indexes are as follows:

 

! For developing countries, the UNDP’s Human Poverty Index (HPI-1) is based on the percentage

of persons not expected to survive to age 40 (longevity); the percentage of adults who are illiterate

(knowledge); and the percentage of persons without access to health services and safe drinking

water and the percentage of underweight children under five (indicators of deprivation in economic

provisioning for a decent standard of living). The UNDP’s measures of income poverty for

developing countries are based national poverty lines, generally based on the food poverty

measures, and, for international comparison, the World Bank’s international poverty line of US$1

per person per day at 1985 prices adjusted for purchasing power parity. A poverty line of US$2

per person per day at 1985 prices adjusted for purchasing power parity is used for countries in

Latin American and the Caribbean, while a poverty line of US$4 per person per day at 1990

prices adjusted for purchasing power parity is used for Eastern European and Commonwealth of

Independent States (CIS) countries.

! For developed countries, the UNDP’s Human Poverty Index (HPI-2) is based on the percentage

of persons not expected to survive age 60 (longevity); the percentage of adults who are functionally

illiterate (knowledge); the percentage of persons living below the income poverty line of 50 percent

of median disposable income (a decent standard of living); and the proportion of long-term (12

months or more) unemployed (as a measure of social exclusion). Two international poverty lines

are used by the UNDP to determine the income poverty rate in developed countries, a measure
59 The most recent report is Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data (Geneva: International Labour Office, 1996); an updated report is scheduled to be released latter

in 1999.

60 See Richard E. Bilsborrow, Richard B. Anker, and Deborah S. DeGraff, Poverty Monitoring and Rapid

Assessment Surveys (Geneva: International Labour Office, 1998).

61 International Labour Organization, Minimum Wages: Wage fixing machinery, application and supervision

(Geneva: International Labour Organisation, 1992), para. 33.

I-27

of US$14.40 per day at 1985 prices adjusted for purchasing power parity (which is equivalent to

the U.S. poverty line) and the EU and OECD standard of 50 percent of a country’s median

adjusted disposable personal income.

The International Labor Organization (ILO) gathers available poverty estimates and information on the

distribution of income for most countries and provides a summary of these measures in a compendium

which is published every three years.59 National and international poverty estimates (poverty line and

percentage of the population below the poverty line) made by researchers in the private sector and public

sector are provided along with a brief description of the data sources and methodology used.

To help facilitate and improve the rapid and relatively inexpensive collection of information for poverty

monitoring in lower-income countries, the ILO has developed a monograph which outlines methods for

ensuring that information is minimally sufficient, provides a range of poverty indicators, is low in cost and

rapid in execution, is subject to an acceptable degree of measurement error, and is amenable to timely

processing and analysis.60

Meeting Workers’ Needs

The establishment of a minimum wage system is often portrayed as a means for ensuring that workers will

receive a minimum wage-income that enables them to meet their basic needs (and, in some cases, those

of their families); hence the frequent use of the term “minimum living wage” or “living wage.”61

Determination of such a wage raises questions similar to those that arise in the measurement of poverty

(e.g., in terms of definition, content, and composition of households and income or consumption measures

used; and the number of wage earners in a household and other sources of income) and may also challenge

the notion that there should be a single breadwinner for a household. While the concept that a minimum

wage should be a “living wage” may be consonant with some international covenants and declarations and

the goal of reducing poverty, economic and labor market conditions (i.e., the ability to pay such a wage)

may restrain the setting of a “living wage.”

Definition

The term “living wage” is often used as a synonym for a “fair and decent” level of income that would enable
62 For example, ILO Convention No. 131 requires that a minimum wage consider “the needs of workers and their

families.” 

63 For example, in the United States, some of the city living wage campaigns have defined a living wage in the

US$8-10 an hour range, while others have set one in the US$16-19 an hour range. See, for example, Robert Pollin and

Stephanie Luce, The Living Wage: Building a Fair Economy (New York: The Free Press, 1998). 

64 Cited in David N.F. Bell and Robert E. Wright, “The Impact of Minimum Wages on the Wages of the Low

Paid: Evidence from the Wage Boards and Councils,” The Economic Journal, Vol. 106, No. 436 (May 1996), p. 650.

65 Recent examples in the United States include the Living Wage Working Summit held at the University of

California at Berkeley (July 17-19, 1998) and the Global Living Wage Workshop held at the Carter Center in Atlanta

(January 27, 1999).

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workers to meet their “basic needs,” but there is little agreement on the definition of “basic needs” and a

methodology to determine such needs. While there have been a number of declarations and conventions

by regional and international bodies concerning the right of workers to receive an adequate wage,62 they

do not provide a precise definition of what that wage should be or how it should be determined.

For some, “basic needs” mean mere physical subsistence. For others, basic needs include a nutritious diet,

safe drinking water, suitable housing, energy, transportation, clothing, health care, child care, education,

savings for long term purchases and emergencies, and some discretionary income. Even among those who

agree with this more expansive definition, significant differences remain as to what level of income is

required in order to meet these objectives.63 In addition, some have argued that the living wage is not just

about wage levels, but also about other conditions of work. Often, a limit on the number of hours of work

in a workweek (usually 48 hours) is included as part of the living wage proposals.

A number of groups are currently involved in promoting fair and decent wages, often with different

objectives, methods, and countries of application. In Europe, the Council of Europe has set a “decency

threshold,” 68 percent of average gross earnings, which the European Social Charter defines as “the fair

remuneration needed to achieve a decent standard of living...taking account of economic, social and cultural

needs.”64 In the United States, the living wage movement has concentrated on local-level initiatives seeking

to raise wages for those providing services to city governments, while in the developing world, it has

focused on raising wages for unskilled workers in export-oriented businesses or multinational corporations.

Several conferences and meetings have brought together major proponents of a living wage in an attempt

to establish a more uniform definition and methodology as well as to coordinate strategies for raising wages

to living wage levels.65

Although the national economic implications (unemployment, price stability, competitiveness, etc.) of

workers receiving a living wage may not be explicitly addressed in most living wage proposals, they

probably are implicitly incorporated into most. Generally, the richer the country the higher the calculated

real living wage. The tendency for the estimated living wage to increase with the level of development

mirrors a similar tendency for estimates of the absolute poverty level to increase with the level of
66 The absolute level of poverty is based upon an estimate of the minimum consumption needs of a household

(which change with the level of development) and is therefore quite similar to the living wage concept, although the

levels may differ; the relative poverty level is based upon some relationship to the national median or mean income level

and would automatically increase with economic development. See Gordon Fisher, “Is There Such A Thing as a

Absolute Poverty Line Over Time? Evidence from the United States, Britain, Canada, and Australia on the Income

Elasticity of the Poverty Line,” Poverty Measurement Working Papers (Washington: U.S. Census Bureau, 1995).

67 Alfred Marshall, Principles of Economics (London: Macmillan Press, 1890), pp. 121-122.

68 Llewellyn Smith, “The New Survey of London Life and Labour,” Journal of the Royal Statistical Society,

Vol. 92 (1929). 

69 Henry Clay, “Discussion on Mr. Caradog Jones’s Paper ‘The Social Survey of Merseyside’,” Journal of the

Royal Statistical Society, Vol. 94 (1931), pp. 256.

70 Robert W. Kilpatrick, “The Income Elasticity of the Poverty Line,” Review of Economics and Statistics, Vol.

55, No. 3 (August 1973), pp. 327-332.

71 Oscar Ornati, Poverty Amid Affluence (New York: Twentieth Century Fund, 1966).

I-29

development.66 This tendency for the absolute poverty level to increase with economic development is

referred to as the income elasticity of the poverty line. Alfred Marshall commented over a century ago,

“every estimate of necessaries must be relative to a given place and time.”67

Llewellyn Smith even suggested that the public’s perception of what constitutes poverty is simply the

income level of unskilled labor at that place and point in time.68 Henry Clay concluded, “The fact that all

the poverty lines seem to bear a close relation to the wage of unskilled labor in the country in which they

are made makes one doubt the scientific value of the dietetic data on which

the line is based.”69 Although these opinions deal more precisely with the concept of poverty, they would

appear to be even more consistent with the issues raised with regard to the living wage level since the living

wage level is generally defined near the poverty level with perhaps some additional discretionary income.

Kilpatrick70 has calculated the budget costs from 1905 to 1960 of three different baskets of goods and

services in the United States, using Ornati’s71 definition of what a household would need in order to live

at one of three designated levels of well-being—minimum subsistence, minimum adequacy, or minimum

comfort. The latter two levels represent standards of living higher than minimum subsistence or poverty

and, therefore, are similar in spirit to current living wage notions. Kilpatrick found that the minimum

adequacy level rose by 0.88 percent in real terms for each 1.0 percent increase in real disposable income

per capita; the corresponding minimum comfort level increased by 0.998 percent. In a review of relevant

literature, Gordon Fisher has found similar (generally between 0.6 and 1.0) income elasticities for the
72 Gordon Fisher, “Is There Such A Thing as a Absolute Poverty Line Over Time? Evidence from the United

States, Britain, Canada, and Australia on the Income Elasticity of the Poverty Line,” Poverty Measurement Working

Papers (Washington: U.S. Census Bureau, 1995).

73 Gordon Fisher, “Is There Such A Thing as a Absolute Poverty Line Over Time? Evidence from the United

States, Britain, Canada, and Australia on the Income Elasticity of the Poverty Line,” Poverty Measurement Working

Papers (Washington: U.S. Census Bureau, 1995), pp. 34-38.

74 John Ryan, A Living Wage: Its Ethical and Economic Aspects (New York: MacMillan, 1906, third printing

1912; reprinted edition, New York: Arno and the New York Times, 1971), p. 122.

75 See above.

76 Gordon Fisher, “Is There Such A Thing as a Absolute Poverty Line Over Time? Evidence from the United

States, Britain, Canada, and Australia on the Income Elasticity of the Poverty Line,” Poverty Measurement Working

Papers (Washington: U.S. Census Bureau, 1995), p. 32.

77 Robert Kuttner, “Boston’s ‘Living Wage’ Law Highlights New Grassroots Efforts to Fight Poverty,”

Electronic Policy Network (October, 1997).

I-30

poverty line using several different approaches for the United States, Britain, Canada, and Australia.72 An

exception to this pattern is the official U.S. poverty line which has remained fixed in real terms since it was

established in the 1960s; Fisher concludes that this has happened for political reasons (no Administration

wants the poverty rate to go up during its tenure) and because the official poverty level is determined by

theoretical statisticians instead of workers in the field.73 Thus, although the living wage is often discussed

as a living standard that meets some minimum absolute level of well-being, it is apparent that living wages

are culturally defined and based upon and move in tandem with the general living standards of the society.

Measures

There are some general issues that must be addressed before more specific issues impinging on the

calculation of a living wage are considered. First, the number of persons in a household that work needs

to be determined as well as the number of children or other dependents. The number of workers per

household is very important since if there is only one wage earner, the wage would have to be more than

when there are two. For example, Ryan advocated a wage that would allow a man to support a wife and

four or five children.74 Mexico’s Constitution “guarantees” a living wage capable of supporting a family

with one wage earner.75 In 1920, the (Australian) Royal Commission on the Basic Wage developed a

budget for a basic wage for a five-person family with one wage earner.76 The city of Boston’s living wage

for suppliers of services to the city government is set at a level that would allow one wage earner to support

a family of four at the federal poverty line.77 The Council on Economic Priorities Accreditation Agency

(CEPAA) guidelines for the Social Accountability 8000 generally assume two wage earners in calculating

a living wage, while the National Priorities Project (NPP) and Jobs With Justice (JWJ) living wage

estimates assume one wage earner with a family of four.
78 Soniya Carvalho and Howard White, “Combining the Quantitative and Qualitative Approaches to Poverty

Measurement and Analysis,” World Bank Technical Paper No. 366 (Washington: World Bank, 1997). 

79 These approaches require significant data but most, if not all, of it is readily available from existing sources.

I-31

Second, there is the issue whether some internationally recognized and consistent standards should be used

to determine a living wage. Since implementing a living wage in internationally competitive industries could

alter competitiveness, it may be desirable to develop a living wage level which raises workers’ income, but

does not alter the relative competitiveness of industries in specific countries. Also, the observed problem

concerning the income elasticity of absolute poverty needs to be addressed. In addition, the qualitative

approach to poverty—in which each community decides what poverty is based on their own

characteristics—suggests that such an attempt at standardization may not even be desirable.78

There are two basic methodologies with numerous variations which have been used to calculate a living

wage. First, there are those that specify a commodity basket of goods that a person or family would need

to consume in order to satisfy their basic needs. The cost of the basket is determined and the wage level

necessary to buy such a basket is then calculated. This approach, which is related to the construction of

an absolute poverty threshold and appears to directly address the primary objectives of the living wage,

was used by proponents of a living wage at the end of the nineteenth century. It has also been generally

adopted and accepted by consumer, human rights, religious, and labor organizations. The second method,

which is related to the construction of a relative poverty threshold, attempts to impute a living wage from

national economic statistics. This method defines the living wage with reference to historical or crosssectional national income, productivity, or average wage levels. This indirect approach is easier and less

costly to conduct since it does not require the detailed data collection required of the market basket

approaches.79

1) Market Basket Approach

The market basket approach identifies the types and quantities of commodities that are required for a

person or household to attain a certain or desired standard of living. However, significant disagreement

remains as to what types and quantities of commodities should be in the basket, especially since the level

of economic development varies across countries and over time. Once the basket is determined, a pricing

survey is usually undertaken to determine the monetary cost of the basket. This figure is then adjusted by

considering average family size and the number of wage earners. There are two methodologies used to

calculate the costs of the necessary items: (a) pricing the whole basket of goods; and (b) pricing only the

food basket and then extrapolating the costs of the remaining items based on the cost of the food basket.

(a) Full Market Basket

Since the this method specifies the complete basket of required goods and determines their costs, the
80 This was the method used by some of the early writers to estimate a living wage, including John Ryan in

1906; see John Ryan, A Living Wage: Its Ethical and Economic Aspects (New York: MacMillan, 1906, third printing 1912;

reprinted edition, New York: Arno and the New York Times, 1971). Many of these writers simply gave dollar amounts

for the various items and did not specify exact physical quantities.

81 This is represents the current range of estimates; beginning in 1920, the basis for BLS family budgets was

3,500 calories for a man and less for his wife and each child.

82 Derek Calzini, Jake Odden, Jean Tsai, Shawna Huffman, and Steve Tran, “Survey of Vietnamese and

Indonesian Domestic Expenditure Levels: Nike, Inc.,” Dartmouth College, Amos Tuck Business School, November 1997.

83 Global Exchange, Wages and Living Expenses for Nike Workers in Indonesia, 1998; web site:

<http://www.globalexchange.org>.

84 Arthur D. Little, Inc., Fourteenth Report on the Signatory Companies to the Statement of Principles for

South Africa (Cambridge, MA: Industry Support Unit of Arthur Little, 1990).

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approach makes explicit what goods are needed in order to meet basic needs.80 A disadvantage of the

approach is that it requires a significant amount of price data to be collected. For some items such as health

care, monthly or even yearly expenses could vary widely and therefore statistical procedures may have to

be used to estimate their costs in the basket. Although, the approach could be implemented in any country,

the basket of goods required to meet basic needs will vary by time and location as food consumption

patterns, housing needs, family size, education requirements, and public health vary across countries or even

across subregions within a country. There is no scientific method to ensure that living wages would be

comparable from region to region where the baskets varied, since it is widely accepted by the economics

profession that interpersonal comparisons of well-being (utility) cannot be made.

Although the types and quantities of food items that are included in a market basket vary, there appears

to be some general agreement that the basket should at least assure a minimum required calorie intake and

be based on a diet of the most affordable local foods. The typical level of calories varies from around

2,250 to 3,000 per person per day;81 this level provides more energy than is necessary for biological

survival and allows the worker to carry out normal work and life activities. As a practical matter, the

calorie requirement will vary with a person’s weight, state of health, and level of activity. In addition, a

nutritious diet is more than just calories, as it should include the correct proportions of the food types (fruits,

vegetables, etc.). 

 

Recent examples of the full market basket approach include: a 1997 study by Dartmouth College’s Amos

Tuck School of Business of the living wage in Indonesia and Vietnam;82 a 1998 living wage study by Global

Exchange of Indonesia;83 and a 1990 report by Arthur D. Little which determined required wage levels for

compliance with the Statement of Principles for South Africa (a voluntary business code of conduct for

firms then operating in South Africa).84 

A variation of the full market basket approach, referred to as the Purchasing Power Index (PPI) method,
85 See, for example, Center for Reflection, Education and Action (CREA), In Whose Interest: Using the

Purchasing Power Index to Analyze Plans, Programs and Policies of Industrialization and Development in Haiti

(Hartford, CT: CREA, February 1996). As an illustration, Rosenbaum estimates that, in 1996, the “cost” of 1 kilo of rice

for a worker employed at the legal minimum wage was 98 minutes of work in Jakarta, Indonesia; 35 minutes in Matamoros,

Mexico; and 106 minutes in Port-au-Prince, Haiti. Ruth Rosenbaum and David Schilling, Letter to Stephanie Swirsky,

Deputy Director, Public Liaison, U.S. Department of Labor (June 24, 1999), p. 2

86 Although using dollar exchange rates allows one to make comparisons in a common currency it is not clear

if it is a meaningful comparison due to distortions in exchange rates such as the Balassa-Samuelson purchasing power

parity bias (whereby market exchange rates systematically undervalue income and prices in less developed nations). 

87 Results of the Berkeley summit were obtained from the Sweatshop Watch web page:

<http://www.sweatshopwatch.org>.

I-33

estimates the minutes of work time required at the prevailing wage or the minimum wage to purchase a

basket of goods and services and uses these estimates to determine a living wage. Ruth Rosenbaum at the

Center for Reflection, Education and Action has used this method in her living wage studies of Mexico,

Haiti, and Indonesia.85 The work time conversion provides information that allows comparison between

countries with different currencies without the distortions created by conversion into dollars,86 or historical

comparisons independent of nominal dollar evaluations.

The Living Wage Working Summit at Berkeley87 has proposed a formula to estimate the living wage for

a family: take home living wage (LW) should be equal to the cost of a basic needs basket for an individual

(BN) multiplied by average family size (FS), adjusted for the number of adult wage earners (W), plus

housing and energy costs (H), adjusted for the number of adult wage earners (W), plus an additional 10

percent for savings, i.e., LW = 1.10 x [(BNxFS)+H]/W.

The National Priorities Project (and Jobs for Justice) estimates living wages in the United States using a

modified full market basket of goods approach. Expenditure estimates are obtained from different sources

for several broad categories of expenditures: (1) the food expenditure is based on calculations from the

U.S. Department of Agriculture; (2) the housing expenditure uses the 40th percentile of rents as reported

in the U.S. Department of Housing and Urban Development’s Fair Market Rent Survey; (3) the cost of

day care comes from an estimate provided by the Children’s Defense Fund; and (4) transportation,

clothing, and personal expenses are derived from the Bureau of Labor Statistics’ Consumer Expenditure

Survey as to what is typical of lower income households.

The organization Wider Opportunities for Women (WOW) calculates what a family must earn in order to

meet their basic needs (housing, child care, food, transportation, health care, miscellaneous expenses, and

taxes). It uses a market basket approach, pricing each component individually, with data reported to

federal and state agencies. The calculation assumes that adults work full-time and takes into account the

cost of employment (child care, transportation, and taxes) as well as variations in the size and composition

of the family and its geographic location. Estimates of “self-sufficiency” are developed for numerous family
88 See, for example, Diana Pearce and Jennifer Brooks with Laura Henze Russell, The Self-Sufficiency Standard

for Massachusetts: Selected Family Types (Washington: Wider Opportunities for Women, September 1998).

89 See the discussion of the BLS budgets in Appendix B of this report. 

90 There are no methodological differences in general principles between the full market basket and the

extrapolated basket approaches with regard to how the food basket should be determined. In practice, there is no general

agreement, however, as to what specifically should be in the food basket. 

I-34

types and are specific to a geographic area.88

The U.S. Bureau of Labor Statistics (BLS) used the full market basket approach to calculate budgets for

workers’ families which it published in 1919-1920 and from 1948 through 1982; the budget published in

the late 1940s was termed “moderate but adequate.”89 Their methodology for determining the items in the

basket changed through the years. Initially, the items included in the budget were specified according to

the “judgement” of the researcher conducting the study, similar to the manner in which many market baskets

in use today are determined. However, beginning in 1946, information from the BLS’s Survey of

Consumer Expenditure was used to determine the market basket. For the food and housing portions of

the budget, data from actual consumer budget expenditures were used to determine the level of expenditure

consumers actually purchased. The nutritional standard for food was based on the 1945 allowances

recommended by the National Research Council, but the selection of specific foods to meet these standards

was made from a 1941 BLS expenditure survey. In a like manner, specifications for healthful housing were

formulated by the American Public Health Association. Thus experts still used their judgement to determine

what was necessary, but the expenditure level required to attain that level was derived from expenditure

surveys instead of simply specifying the basket and then pricing it. The remainder of the budget level was

set at the income level where families spent all their income (savings were viewed as income being more

than what was necessary while dissaving was viewed as unacceptable). This method of determining the

other components of the basket was modified slightly in the 1960s when quantities of items were

determined by looking at the point where the expenditure-income elasticity of each item reached its

maximum. The BLS budgets specified a full market basket of goods required to attain an “adequate but

moderate” living standard, but the basket of goods was derived largely from expenditure surveys instead

of being proposed by experts. A review of BLS methods in 1980 recommended that the full basket of

goods methodology be replaced by a relative income measure, where an “adequate family budget” was

defined as the median expenditure level for a two-parent family of four. 

(b) Extrapolated Food Basket

A variant of the market basket approach calculates the costs of a food basket in a manner similar to the

full market basket approach,90 and then extrapolates to determine the required level of expenditure of all
91 This approach was used to estimate living wages as early as that of Louise More in 1907. She appears to

have adopted the approach from Richard Mayo-Smith, Science of Statistics: Part II: Statistics and Economics (New

York: Macmillan, 1899).

92 This is a well established empirical relationship of consumer expenditure studies and is referred to as Engel’s

Law.

93 Council on Economic Priorities Accreditation Agency (CEPAA), Guidance Document for Social

ACCOUNTABILITY 8000 (New York: CEPAA, 1998) and web site: <http://www.cepaa.org>. 

94 The guidelines call for verification that food prices reflect the current market situation and that subsides and

inflation effects have been taken into account.

I-35

other goods.91 Generally, it is assumed that workers at the living wage level of income spend the same

percentage of their income on food as the average person in their nation. For example, if the average

consumer spends 25 percent of his/her income on food, then the living wage would be 4-times the cost of

purchasing a basket of necessary food items. This approach requires fewer data elements since the costs

necessary to buy the non-food items—which are generally more difficult to quantify—are imputed from the

cost of the food basket. However, the legitimacy of the extrapolation can be questioned since it would be

expected that less affluent households would spend a higher percentage of their income on food.92

The Council on Economic Priorities has used a variant of the extrapolated food basket approach in their

Social Accountability (SA) 8000 standard.93 The SA 8000 states that the basic food basket for an

adequate diet should provide at least 2,100 calories per day for an individual. Their basic needs formula

first estimates the cost of a basic food basket for one person (BF), based on poverty line data for a country

or statistics generated by local governments, United Nations agencies, or international financial institutions.94

Next, the percentage of household income spent on food is determined, using income and expenditure

statistics from the ILO or other UN agencies. The reciprocal of this ratio yields a multiplier which, when

applied to the cost of the basic food basket, gives an estimate of what the average household needs to

spend per person. This is then multiplied by the number of household members, adjusted for the number

of those contributing to the household’s income (usually household size divided by 2). Finally, an additional

10 percent is added for discretionary income. Thus the formula is: basic needs = (cost of basic food

basket) x (1/percent of average household income spent on food) x (household size/number of wage

earners) x 1.10.

The extrapolated food basket approach was used by Mollie Orshansky of the U.S. Social Security

Administration in the 1960s to develop what later became the official poverty line for the United States.

She had official figures from the U.S. Department of Agriculture for the cost of a minimum adequate diet.

She also had data that the average family spent about one-third of its after-tax money income on food in

1955. Thus, the poverty line was defined as three times the cost of the food basket. Since that time, the
95 Gordon Fisher, “Is There Such A Thing as a Absolute Poverty Line Over Time? Evidence from the United

States, Britain, Canada, and Australia on the Income Elasticity of the Poverty Line,” Poverty Measurement Working

Papers (Washington: U.S. Census Bureau, 1995).

96 Richard Rothstein, Developing Reasonable Standards for Judging whether Minimum Wage Levels in

Developing Nations Are Acceptable (Washington: Economic Policy Institute, 1996).

97 Richard Rothstein, Developing Reasonable Standards for Judging whether Minimum Wage Levels in

Developing Nations Are Acceptable (Washington: Economic Policy Institute, 1996).

I-36

poverty line has been adjusted annually for inflation.95 Many of the municipal living wage proposals for

U.S. cities set a wage that would allow a worker to support a family at or above the official U.S. poverty

line. Therefore, these living wage initiatives are based on an extrapolated food basket methodology. 

2) Imputed from National Economic Statistics

An alternative method to determining a living wage is based on national economic statistics. Several

methods have been suggested: (1) unit cost method; (2) inter-country historical wage comparisons; and

(3) relative income measures.

(a) Unit Cost Method

The unit cost method96 determines the wage level that would equate unit labor costs a nation with that in

the United States, taking account of differences in productivity between countries. Thus, if productivity in

a nation were one-half of that in the United States, the calculated wage which would equalize wage costs

would be one-half of the U.S. wage. Rothstein suggests that this wage could be further adjusted downward

to provide concessions for countries at different levels of development; in some cases, these proposed

adjustments are quite large (e.g., for Bangladesh, the equalizing wage would be adjusted downward by 80

percent). The adjustment factor appears to be arbitrarily determined and not based on a nations’

comparative advantage or opportunity costs. Further, the method itself does not ensure that a wage so

determined is sufficient to achieve the basic needs of workers since their income needs are not taken into

considered in the calculation.

(b) Historical Comparison Method

A second method proposed by Rothstein97 attempts to determine what developing countries’ wages should

be by comparing them to the minimum wages of more advanced countries when they were at similar stages

of economic development. Rothstein uses this method to compare historical minimum wages in the United

States to those currently in Chile, Dominican Republic and Mexico; he found that U.S. minimum wages

were three or four times higher than those currently in Chile or Mexico. The Trade Partnership also used

this method and determined that workers in Bangladesh, China, the Dominican Republic, El Salvador,

Honduras, Guatemala, India, Pakistan, Thailand, and Turkey were being paid “living wages” that are
98 The Trade Partnership, International Child Labor: Options for Action, (Washington: National Retail

Federation and National Retail Institute, December 1997).

99 For more details, see information on Israel in Part II.

100 Peter Townsend, “The Meaning of Poverty,” British Journal of Sociology, Vol. 13, No. 3 (1962).

101 Victor Fuchs, “Towards a Theory of Poverty,” in Task Force on Economic Growth and Opportunity, The

Concept of Poverty (Washington: U.S. Chamber of Commerce, 1965).

102 Harold W. Watts, “Special Panel Suggests Changes in BLS Family Budget Program,” Monthly Labor Review

(December 1980), pp. 3-10.

I-37

appropriate to their country’s level of development, since they were being paid wages similar to U.S. wage

rates when the United States had the same per capita income.98

This method, like the unit costs method, does not ensure that a wage so determined would necessarily be

sufficient to achieve basic needs since U.S. minimum wages may not have been sufficient at earlier times,

inflation and exchange rate adjustments are likely to have introduced significant distortions over the period

of comparison, and the change in the definition and concept of basic needs through time.

(c) Relative Income Methods

Some nations, especially the more developed ones, use relative income measures to set their minimum wage

levels or to define their poverty levels. For example, Israel defines its minimum wage as 47.5 percent of

the gross monthly wage and the poverty line is defined as 50 percent of median net income (adjusted for

family size).99 Peter Townsend first proposed this method in 1962.100 Another early advocate was Victor

Fuchs who wrote “attempts to define poverty in absolute terms are doomed to failure because they run

contrary to man’s nature as a social animal.”101 However, the percentage set is arbitrary and these relative

definitions do not consider the ability of households to purchase a market basket consistent with some

specified standard of living and, hence, do not necessarily guarantee that basic needs will be met. As such,

this method has not been adopted by those making living wage calculations. If the original percentage were

determined based on a market basket approach, then this method could possibly be used as a simple way

to estimate yearly updates in a manner similar to the way market baskets are often updated using an

inflation adjustment instead of a complete recalculation of the costs of the market basket.

In 1980, a committee of experts recommended that the BLS Family Budget Program adopt a relative

income method in place of its established methodology of using full market baskets.102 The committee had

determined that median family income for a two-parent family of four was generally equivalent to the living

standard that had been estimated using the full market basket approach. BLS never implemented the

change in methodology as the entire Family Budget Program was eliminated due to budget cuts in the early

1980s.
I-38

Summary of Available Information on Wages, Benefits, Poverty Line, and Meeting Workers’

Needs for Selected Countries

Minimum Wage

Of the 36 countries or entities examined, only 5 (Hong Kong, Macau, Malaysia, Singapore, and the United

Arab Emirates) do not have a minimum wage. Cambodia is the only country which has established a

minimum wage solely for workers in the apparel industry.

For countries which have a minimum wage, the minimum wage fixing system differs according to objectives

and criteria, machinery and procedures, coverage, and subsequent adjustment as well as the operation and

enforcement of rules established. In many of the countries examined, minimum wages are set by a tripartite

committee or commission comprised of representatives from workers, employers, and the government,

while in others they set by executive decree or legislative actions. The scope of application of minimum

wage laws may be general and applicable nationwide (e.g., in the United States, Spain, Brazil, and the

United Kingdom), or vary by region or jurisdiction of the country (e.g., in Mexico, Canada, Philippines,

and Indonesia), by industry (e.g., in Bangladesh and Cambodia), by skill level or occupation (e.g.,

Bangladesh and Costa Rica), or a combination of these factors. In some cases, minimum wages are set

through industry-wide collective bargaining agreements (e.g., in Italy). While the intent of most minimum

wage legislation is to protect low wage workers and to provide a general wage floor for employment of

workers, there may be groups of workers, professions, occupations, or certain activities which are

excluded. Exclusions are often based on the type and size of the enterprise (e.g., in the Dominican

Republic, Bangladesh, and India), while reduced minimum wage rates may apply to certain workers such

as youth (e.g., youth 18-21 in the United Kingdom) or trainees (e.g., in Bangladesh, El Salvador, and

Thailand). Frequent or substantial increases in the rate of inflation tend to be the primary reason for

countries making upward adjustments in the minimum wage (e.g., Mexico).

All of the countries or entities examined—except Hong Kong—have established limitations on the number

of hours in a standard workweek, which range from 40 to 58 hours per week. Provisions in national

legislation usually provide for higher rates of pay (overtime rates of pay) for the hours worked above the

number in a standard workweek. In at least one case (United Kingdom), there is an absolute limitation

(including overtime) placed on the number of hours of work permitted in a workweek; some countries place

certain limitations on the amount of overtime permitted over a specified time period, while others have no

legal limitations on overtime (e.g., Philippines).

Table I-1 provides a summary of the type of minimum wage fixing mechanism, the current rate applied, and

the number of hours in a standard workweek in the countries examined in this study.

Prevailing or Average Wage

The extent and quality of available information on prevailing or average wages in the manufacturing sector
I-39

and in the footwear and apparel industries varies widely across the 36 countries considered. Average

(hourly, daily, weekly, or monthly) earnings data for workers in all manufacturing are not available for 4

countries (Cambodia, Honduras, Indonesia, and the United Arab Emirates); similar earnings data are not

available for workers in the apparel industry in 4 countries (the Dominican Republic, Nicaragua, Sri Lanka,

and the United Arab Emirates) nor are they available for workers in the footwear industry in 12 countries

(Brazil, Cambodia, the Dominican Republic, El Salvador, Guatemala, Honduras, Jamaica, Nicaragua,

Pakistan, Singapore, Sri Lanka, and the United Arab Emirates). For those countries where average

earnings data are available, coverage may vary by area (e.g., cover only a limited geographical area) or by

industrial classification (e.g., include additional products such as other leather products [footwear] or textile

products [apparel]). Some earnings measures reflect a rate of pay, only pay for time worked (straighttime), or may include (or exclude) some payments or bonuses for time not worked or other in-kind

payments.

A summary of the latest available prevailing or average wage information for the manufacturing sector and

in the footwear and apparel industries for the countries under consideration is provided in Table I-2. The

reader is cautioned against making cross-country comparisons of the wage information due to differences

in definition, period, and coverage. Even within a country, comparisons of earnings data between different

sectors may suffer from similar problems (e.g., some given in hourly or daily rates while others are given

in monthly or annual rate).

Despite these limitations some general observations are possible. For countries where prevailing or average

wage data are available, average earnings in both the footwear and apparel industries, for the most part,

tend to be lower than in all manufacturing but higher than the minimum wage level (except for Cambodia,

Peru, and the Philippines were the minimum wage appears to be close to the prevailing wage in the apparel

industry); average earnings tend to be slightly higher in footwear than in apparel. 

Foreign contract workers comprise the bulk of workers in the footwear and apparel industries in the United

Arab Emirates and the Commonwealth of the Northern Mariana Islands (a U.S. territory) and receive

wages at rates specified in their work contracts which are usually below the prevailing wage rates for

natives in other sectors of the economy. 

Non-Wage Benefits

When certain employer-provided non-wage benefits are required by government, they generally apply to

all private sector workers in industry or manufacturing rather than just to workers in the footwear or apparel

industry. In most countries considered in this study, employers’ payments to their employees for non-wage

benefits account for a substantial portion of average compensation costs (e.g., over 50 percent in Costa

Rica and Guatemala). Most countries provide for a certain number of paid legal public holidays, while

provisions for paid vacation or sick leave appear to be more discretionary. A common non-wage benefit

is the contribution to a compulsory (or in some instances, contractual or private) social security or insurance

scheme (e.g., pension or savings plan, casualty and life insurance, health and maternity care, and severance
I-40

pay or unemployment insurance) established for the employee in which the employer (and, in many cases,

to a lesser extent, the employee and the government) are required to contribute. Other non-wage benefits

are usually discretionary and vary from country to country with the most common examples being the

provision of employee training and education programs and certain plant facilities and services (e.g.,

cafeteria, medical clinic, day care center, recreational facilities, transportation, or housing). Production and

attendance bonuses are also common in the apparel industry. In some countries (especially in Latin

America), year-end Christmas bonuses (up to one-month’s pay) are common.

Required employer contributions to social insurance schemes are usually clearly defined as a percentage

of payroll, but represent deferred payments to the worker. In contrast, vacation and holiday pay and bonus

payments directly augment a worker’s current income. For other benefits (such as provision of plant

facilities and services), it is more difficult to evaluate how these affect a worker’s income. In many

countries, contribution evasion may be widespread or low-wage workers may be excluded from social

insurance schemes due to minimum firm size.

In some countries examined, the government provides family allowances or other direct welfare payments

or subsidies to low income families. Income tax income thresholds are usually set high enough to exempt

many low-wage workers. The extent to which a government participates in social security or insurance

schemes or provides assistance laidoff workers varies widely from country to country.

Poverty Line

Most poverty measures which are available for individual countries are either (1) official or other estimates

of absolute poverty thresholds, usually based on the cost of some specified set of basic needs and

expressed as an income, consumption, or expenditure threshold in national currency terms or as the

percentage of the population below the threshold; or (2) poverty measures for a country which are

produced by the World Bank or UNDP and estimate the percentage of the population with income below

US$1 or US$2 per person per day, in terms of 1985 purchasing power parity adjusted US$. Israel and

Italy are the only countries examined that have officially adopted a relative poverty measure (50 percent

of median net income). In general, since poverty estimates usually require collection of information on

income, consumer expenditures, and prices, estimates are often made less frequently (every three to five

years) than for earnings estimates (monthly or annually). Rapidly unfolding economic events with both

national and international consequences (such as the recent Asian financial crisis) may not be reflected in

these less timely measures. 

For various reasons, 14 of the 36 countries examined have not established an official national poverty line.

Some type of poverty estimate—official or unofficial—is available for each of the countries considered

except for Macau, Singapore, and the United Arab Emirates. Estimates of a national poverty line (absolute

level) were not available for the Dominican Republic (though the percentage of the population below the

line is) or for Canada, Spain, or the United Kingdom (though international poverty measures are).

International poverty measures (in purchasing power parity adjusted US$) are not available for 8 countries
I-41

(Cambodia, El Salvador, Hong Kong, Israel, Mauritius, South Korea, Taiwan, and Turkey).

Nation-specific poverty lines, often with separate urban and rural measures, are useful for individual country

analysis, but cannot be compared with those from other countries since the basis for establishing the poverty

line usually differs across countries. In some cases, it is not clear to what extent, if at all, government

transfer payments, employer provided non-wage benefits, and other sources of income have been taken

into account in establishing the national poverty line. In general, countries with a higher level of

development (and price structure) will usually have higher poverty thresholds that reflect a wider mix,

choice, and availability of goods and services. Estimates based on international poverty lines, which are

adjusted for purchasing power parity, are comparable over space and time, but do not necessarily reflect

the same degree of need across countries since interpersonal welfare comparisons are not possible.

Available national poverty lines (poverty thresholds in national currency) are summarized in Table I-3, the

percentage of the population below the national and international poverty lines are summarized in Table I-4,

and comparisons of international poverty measures are made in Table I-5. 

Meeting Workers’ Needs

For the countries considered, there appears to be little conclusive evidence on the extent to which wages

and non-wage benefits in the footwear and apparel meet workers’ basic needs. As has been noted above,

the prevailing or average wage in the manufacturing sector as well as in the footwear and apparel industries

generally tends to be greater than the minimum wage (if one has been set). Many countries take into

consideration the poverty threshold (if one has been established), among other things, in setting and

adjusting the minimum wage. While in many cases the minimum wage is supposed in theory to meet a

worker’s basic needs, the level at which it is actually set usually represents a political compromise or a

balance between meeting those needs and economic conditions and the employer’s ability to pay. In

assessing the adequacy of wages, decisions must be made on whether one wage earner should be able to

support (meet the basic needs of ) his/her family (support for how many dependents); how much is enough

(poverty measures usually tell us how much is too little); whether income from other sources (investments,

savings, or in-kind or non-cash payments) should be included in determining disposable income; and

whether one’s position in the life-cycle should be considered. As with the construction of poverty

measures, opinions vary widely on these questions, especially with regard to the treatment and valuation

of health care and insurance, housing, and child care expenses.

Only one country (the Philippines) considered here has established a commission to examine the issue of

a living wage. In the United States, the Census Bureau has published alternative poverty measures, and

the federal government is reexamining its official poverty definition which has been in use for over 30 years,

with annual adjustments only for inflation. Several private sector groups have constructed estimates of a

living wage for workers in a few countries (e.g., the United States and Indonesia), but such studies are not

generally available for most other countries. 

Table I-6 presents available information on the national poverty line, the minimum wage, and the prevailing
I-42

or average wage in the footwear and apparel industries for the countries examined. To the extent possible,

adjustments have been made to make the series temporally comparable (i.e., on a per day or month basis,

but not necessarily for the same year), but even comparisons of these measures for a country should be

viewed with extreme caution and as only indicative of orders of relative magnitude rather than in terms of

precise differences. Again, cross-country comparisons are not meaningful due to differences in definition,

scope, and coverage. For several countries where data are available, the minimum wage (and in a few

more countries, the prevailing wage in the footwear or apparel industries) may yield an income above the

national poverty threshold for an individual (and perhaps one dependent, but not for a family of 4 or 5 with

one wage-earner). The answer as to whether this wage is a “living wage” is likely to lie in the eye of the

beholder.
I-43

Table I-1. Minimum Wage Setting and the Number of Hours in a Standard Workweek in Selected Countries

(minimum wage rates in domestic currencies and U.S. dollars and hours in standard workweek)

Countries with a National

Minimum Wage

Countries with a Minimum Wage set by industry,

occupation, skill level, or geographic area

Countries with No Minimum Wage

Brazil

R$136/mo (US$81/mo)

Workweek: 44 hrs/wk

Bangladesh—by industry, occupation, and skill level

Tk600-3,500/mo (US$12.35-76.00/mo)

Workweek: 48 hrs/wk

Hong Kong—except for foreign domestic workers

HK$3,860/mo (US$500/mo)

Workweek: none

Colombia

C$7,881.3/day (US$5.07/day)

Workweek: 48 hrs/wk

Cambodia—for apparel sector only

CR152,000/mo (US$40/mo)

Workweek: 48 hrs/wk

Macau

none

Workweek: 48 hrs/wk

Egypt

£E116/mo (US$34/mo)

Workweek: 42 hrs/wk

Canada—by province or territory

C$5.00-7.15/hr (US$3.35-4.80/hr)

Workweek: 40-48 hrs/wk

Malaysia

none

Workweek: 48 hrs/wk

Israel

45 percent of the national average gross monthly wage;

NIS2,560/mo in 1998 (US$675/mo)

Workweek: 47 hrs/wk

China—by province, autonomous region, or municipality

¥100-320/mo (US$12-39/mo)

Workweek: 40 hrs/wk

Singapore

none

Workweek: 44 hrs/wk

Peru

S/.345/mo (US$100/mo)

Workweek: 48 hrs/wk

Costa Rica—by occupation

C73,258/mo [industry] (US$266/mo)

Workweek: 40 hrs/wk

United Arab Emirates

none

Workweek: 48 hrs/wk

South Korea

W1,525/hr (US$1.27/hr)

Workweek: 44 hrs/wk

Dominican Republic—by size and type of industrial activity

RD$1,932/mo [free trade zones] (US$120.75/mo)

Workweek: 44 hrs/wk

Spain

Ptas2,309/day (US$15.92/day)

Workweek: 40 hrs/wk

El Salvador—by geographic area and industrial activity

C42/day [industry] (US$4.81/day)

Workweek: 44 hrs/wk

Taiwan

NT$15,840/mo (US$476/mo)

Workweek: 48 hrs/wk

Guatemala—by industrial sector

Q21.68/day [industry] (US$3.16/day)

Workweek: 44 hrs/wk

Turkey

TL93.60 mil/mo (US$291/mo)

Workweek: 45 hrs/wk

Honduras—by geographic area and industrial sector

L46.80/day [industry] (US$3.34/day)

Workweek: 44 hrs/wk

United Kingdom

£2.72/hr (US$4.39/hr)

Workweek: 48 hrs/wk*

India—by state by industry and skill level

Rs9.25-80.35/day (US$0.24-2.09/day) 

Workweek: 48 hrs/wk

United States—also by state

National: US$5.15/hr

States: none-US$6.50/hr

Workweek: 40 hrs/wk

Indonesia—by geographic region

Rp130,000-290,000/mo (US$15.12-33.72/mo)

Workweek: 40 hrs/wk

Italy— by sectoral collective bargaining

Lit1,615,000-2,458,000/mo (US$949.44-1,445.03/mo)

Workweek: 40 hrs/wk

Jamaica—by skill or occupation

J$20/hr [general workers] (US$0.55/hr)

Workweek: 40 hrs/wk

Mauritius—by industrial sector

MRs348.36/wk [export processing zones] (US$13.90/wk)

Workweek: 45 hrs/wk

Mexico—by geographic area and occupation

M$29.70-34.45/day (US$3.02-3.24/day)

Workweek: 48 hrs/wk

Nicaragua—by industrial sector

C$600/mo [industry] (US$52/mo)

Workweek: 48 hrs/wk

Pakistan—for unskilled workers only

PRs1,950/mo (US$38/mo)

Workweek: 54 hrs/wk

Philippines—by geographic region

P198/day [Metro Manila] (US$5/day)

Workweek: 48 hrs/wk

Sri Lanka—by industrial sector and skill level

Garments: SLRs2000-2575/mo

 (US$29.00-37.30/mo)

Footwear: SLRs1500-2050/mo

 (US$21.70-29.70/mo)

Workweek: 45 hrs/wk

Thailand—by geographic region

B139-162/day (US$3.58-4.18/day)

Workweek: 48 hrs/wk

Note: Hours of work in a standard workweek are paid at the normal wage rate; hours of work beyond the number in a standard workweek (overtime) are usually paid at higher rates of pay.

* = absolute limit on number of hours worked per week, including overtime.
I-44

Table I-2. Prevailing or Average Wages in the Manufacturing Sector and in the Footwear and Apparel Industries in

Selected Countries, Latest Available Year

(in national currencies and U.S. dollars)

Country Year All Manufacturing Apparel Footwear

Bangladesh 1992

------------------

1996-97

 Tk23.00-59.87/day 

(US$0.59-1.54/day)

-----------------------------------------------

 ...

Tk32.41-36.3.8/day

(US$0.83-0.93/day)

-----------------------------------------------

Tk69-81/day 

(US$1.42-1.67)

Tk147.54/day (skilled only)

(US$4.65/day)

-----------------------------------------------

 ...

Brazil 1994

------------------

1999

R$793 mil/mo 

(US$1,241/mo)

-----------------------------------------------

 ...

R$373 /mo (inc footwear)

(US$81/mo)

-----------------------------------------------

R$300-500/mo

(US$160-270/mo)

 ...

-----------------------------------------------

 ...

Cambodia 1999 ... CR152,000-266,000/mo

(US$40-70/mo)

 ...

Canada 1997

------------------

1998

(Nov)

C$16.9/hr

(US$12.17/hr)

-----------------------------------------------

 ...

C$10.6/hr

(US$7.63)

-----------------------------------------------

C$9.92/hr; C$10.08/hr, inc OT

(US$6.65/hr; US$6.75/hr)

C$11.3/hr

(US$8.16/hr)

-----------------------------------------------

 ...

China 1997 ¥494.42/mo

(US$145.93/mo)

¥647.0/mo (females only)

(US$190.97/mo)

¥388.5-533.9/mo

(US$114.67-157.59/mo)

Colombia 1995 C$326,421/mo

(US$358/mo)

C$176,961/mo

(US$194/mo)

C$197,182/mo 

(US$216/mo)

Costa Rica 1997

------------------

1999

C75,672/mo

(US$325/mo)

-----------------------------------------------

C85,258/mo

(US$310/mo)

C61,055/mo

(US$262/mo)

-----------------------------------------------

 ...

C69,600/mo

(US$299/mo)

----------------------------------------------- 

 ...

Dominican Republic 1997 RD$21.6/hr

(US$1.51/hr)

 ... ...

Egypt 1995

------------------

1999

£E84/wk

(US$16.67/wk)

-----------------------------------------------

 ...

£E45/wk

(US$8.93/wk)

-----------------------------------------------

£E4,476/yr (inc footwear)

(US$1,312/yr)

£E54/wk

(US$10.72/wk

-----------------------------------------------

 ...

El Salvador 1996

------------------

1997

C7.50/hr

(US$0.86)

-----------------------------------------------

 ...

C7.33-7.72/day (inc footwear)

(US$0.84-0.88/day)

-----------------------------------------------

C1,600/mo

(US$183/mo)

 ...

-----------------------------------------------

 ...

Guatemala 1997

-----------------

1999

Q1,430/mo

(US$236/mo)

-----------------------------------------------

 ...

 ...

-----------------------------------------------

Q35/day (maquilas)

(US$6.11/day)

 ...

-----------------------------------------------

 ...

Honduras 1999 ... Two to three times the minimum wage

(maquilas)

 ...

Hong Kong 1998 HK$336.0/day

(US$43.38/day)

HK$250.5/day

(US$32.34/day)

HK$191.9/day [1992]

(US$24.79/day)

India 1995

-----------------

1999

Rs1,211.0/mo

(US$37/mo)

-----------------------------------------------

 ...

Rs1,196.4/mo (inc footwear)

(US$37/mo)

-----------------------------------------------

Rs35-150/day

(US$0.83-3.55/day)

 ...

-----------------------------------------------

Rs30-110/day

(US$0.71-2.60/day)

Indonesia 1999 ... RP130,000-290,000/mo

(US$15.12-33.72/mo)

[the minimum wage]

25 percent higher than the minimum wage

Israel 1997

-----------------

1998

NIS6,733/mo

(US$1,952/mo)

-----------------------------------------------

 ...

NIS20.0/hr

(US$5.80/hr)

-----------------------------------------------

NIS4,313/mo

(US$1,135/mo)

NIS23.0/hr

(US$6.67/hr)

-----------------------------------------------

NIS3,976/mo

(US$1,046/mo)
I-45

Italy 1997

-----------------

1998

Lit28,528/hr [total compensation]

(US$16.75/hr)

-----------------------------------------------

 ...

Lit20,169/hr [1996; total comp]]

(US$13.07/hr)

-----------------------------------------------

Lit26,662,000/yr

(US$15,358.29/yr)

Lit21,531/hr [1996; total comp]

(US$13.95/hr)

-----------------------------------------------

Lit26,766,000/yr

(US$15,418.20/yr)

Country Year All Manufacturing Apparel Footwear

Jamaica 1992

-----------------

1999

J$895/wk

(US$39/wk)

-----------------------------------------------

 ...

 ...

-----------------------------------------------

US$1,800-5,000/yr

 ...

-----------------------------------------------

 ...

Macau 1997

-----------------

1998

P3,323/mo

(US$416/mo)

-----------------------------------------------

 ...

P4,465/mo

(US$559/mo)

-----------------------------------------------

P4,096/mo

(US$529/mo)

P3,601/mo

(US$451/mo)

-----------------------------------------------

P3,252/mo

(US$420/mo)

Malaysia 1995 RM1,002/mo

(US$400/mo)

RM742/mo

(US$296/mo)

RM807/mo

(US$322/mo)

Mauritius 1997

-----------------

1998

MRs148.74/day

(US$7.23/day)

-----------------------------------------------

MRs6,403/mo

(US$256/mo)

MRs132.00/day

(US$6.42/day)

-----------------------------------------------

MRs6,452/mo

(US$258/mo)

MRs137.92/day

(US$6.71/day)

-----------------------------------------------

MRs9,210/mo

(US$368/mo)

Mexico 1997

-----------------

1998

M$12.10/hr

(US$1.53/hr)

-----------------------------------------------

 ...

M$6.40/hr [1996]

(US$0.84/hr)

-----------------------------------------------

US$358.47-2,537.88/mo

M$7.85/hr [1996]

(US$1.03/hr)

-----------------------------------------------

US$976.29-3,828.90/mo

Nicaragua 1997 C$2,724/mo

(US$288/mo)

 ... ...

Pakistan 1994 PRs1,956/mo

(US$64/mo)

PRs1,932/mo (inc footwear)

(US$63/mo)

 ...

Peru 1997

-----------------

1999

S/.24.45/day

(US$9.18/day)

-----------------------------------------------

 ...

S/.15.13/day

(US$5.68/day)

-----------------------------------------------

S/.345/mo [the minimum wage]

(US$100/mo)

S/.16.09/day

(US$6.04/day)

-----------------------------------------------

S/.345/mo [the minimum wage]

(US$100/mo)

Philippines 1995

------------------

1999

P6,654/mo

(US$259/mo)

-----------------------------------------------

 ...

P4,692/mo

(US$182/mo)

-----------------------------------------------

P198/day [Metro Manila]

(US$5/day) [the minimum wage]

P3,505/mo

(US$136/mo)

-----------------------------------------------

P198/day [Metro Manila]

(US$5/day) [the minimum wage]

Singapore 1997 S$2,486.7/mo

(US$1,675/mo)

S$1,477.3/mo (inc footwear)

US$995/mo

 ...

South Korea 1997

-----------------

1999

W1,326.2/mo

(US$1,394.1/mo)

-----------------------------------------------

 ...

W892,400/mo

(US$938.1/mo)

-----------------------------------------------

W872,349/mo

(US$727/mo)

W952,900/mo

(US$1,001.7/mo)

-----------------------------------------------

W1,118,027/mo

(US$932/mo)

Spain 1997

------------------

1998

Ptas1,372/hr

(US$9.37/hr)

-----------------------------------------------

Ptas225,808

(US$1,486/mo)

Ptas903/hr

(US$6.17/hr)

-----------------------------------------------

Ptas232,367/mo

(US$1,529/mo)

Ptas932/hr

(US$6.37/hr)

-----------------------------------------------

 ...

Sri Lanka 1997 SLRs18.15/hr

(US$0.31/hr)

 ... ...

Taiwan 1997

------------------

1998

(Oct)

NT$169.48/hr [total compensation]

(US$5.89/hr)

-----------------------------------------------

NT$32,669/mo

(US$981.72/mo)

NT$109.82/hr [1996; total comp]

(US$4.00/hr)

-----------------------------------------------

NT$24,676/mo

(US$741.53/mo)

NT$132.37/hr [1996; total comp]

(US$4.82/hr)

-----------------------------------------------

NT$22,943/mo

(US$689.45/mo)

Thailand 1997

------------------

1999

B5,935/mo

(US$189/mo)

-----------------------------------------------

 ...

B4,352/mo [1995]

(US$175/mo)

-----------------------------------------------

B52,560/yr (inc footwear)

(US$1,273/yr)

B4,046/mo [1995]

(US$162/mo)

-----------------------------------------------

 ...

Turkey 1996

------------------

1999

TL757,277/day

(US$9.30/day)

-----------------------------------------------

 ...

TL660,045/day

(US$8.11/day)

-----------------------------------------------

TL804 thous/hr (inc textiles&benefits)

(US$2.50/hr) 

 ...

-----------------------------------------------

TL170 mil/mo (priv sect, inc benefits)

(US$528/mo)

United Arab Emirates NA NA NA
I-46

United Kingdom 1997

------------------

1999

£8.53/hr

(US$13.97/hr)

-----------------------------------------------

 ...

£5.42/hr

(US$8.88/hr)

-----------------------------------------------

£140.40/wk

(US$226.75)

£6.02/hr

(US$9.86/hr)

-----------------------------------------------

£140.40/wk

(US$226.75)

United States 1998 US$13.49/hr US$8.52/hr US$8.93/hr (leather)

US$10.06/hr (rubber)

Source: See individual country summaries in Part II.
I-46

Table I-3. The National Poverty Line in Selected Countries, Official Thresholds and Other Estimates, Most Recent

Year

(in national currencies and U.S. dollars)

Country Official Poverty Threshold Other Estimated Poverty Thresholds

Bangladesh Tk550/cap/mo [1995-96]

(US$11.32/cap/mo)

 ...

Brazil None R$45/cap/mo [c.1998-99]

(US$25/cap/mo)

Cambodia None CR1,210-1,819/cap/day [1997]

(US$0.44-0.66/cap/day)

Canada None None

China ¥500/cap/yr [1998]

(US$60/cap/yr)

¥165-220/cap/mo [1998]

(US$20.50-26.50/cap/mo)

Colombia By government estimates, the price of a family

shopping basket is 2.4 times the minimum wage

[1999]

C$567,456/hld/mo

(US$365/hld/mo)

 ...

Costa Rica NA US$100/hld of 5/mo [1999]

Dominican Republic NA ...

Egypt None £E1,354-1,795/cap/yr [1984]

(US$929-1,231/cap/yr)

El Salvador Urban: C1,295-2,590/hld of 4.3/mo [1999]

 (US$148-296/hld of 4.3/mo)

Rural: C904-1,808/hld of 5.9/mo [1999]

 (US$103-206/hld of 5.9/mo)

C2,237-2,620/hld of 4.2/mo [1998]

(US$255-299/hld of 4.2/mo)

Guatemala Q1,156-2,109/hld of 5.38/mo [1998]

(US$169-308/hld of 5.38/mo)

 ...

Honduras NA L69.10/hld of 5/day [1997]

(US$5.06/hld of 5/day)

Hong Kong None HK$9,000/hld/mo [1998] (US$1,150/hld/mo)

HK$3,000/cap/mo [1997] (US$387/cap/mo)

HK$2,500/cap/mo [1996] (US$323/cap/mo)

India Urban: Rs264/cap/mo [1993/94 prices]

 (US$6.24/cap/mo)

Rural: Rs229/cap/mo [1993/94 prices]

 (US$5.41/cap/mo)

 ...

Indonesia Urban: Rp38,246/cap/mo [1996]

 (US$16.32/cap/mo)

Rural: Rp27,413/cap/mo [1996]

 (US$11.70/cap/mo)

Urban: Rp52,470/cap/mo [1998]

 (US$6.11/cap/mo)

Rural: Rp41,588/cap/mo [1998]

 (US$4.84/cap/mo)

 ...

Israel 50 percent of median net income

NIS1,315/cap/mo [1997]

(US$381/cap/mo)

NIS3,366/hld of 4/mo [1997]

(US$976/hld of 4/mo)

 ...
I-47

Country Official Poverty Threshold Other Estimated Poverty Thresholds

Italy Lit663,270/cap/mo [1997]

(US$390/cap/mo)

Lit1,788,388/hld of 4/mo [1997]

(US$1,051/hld of 4/mo)

 ...

Jamaica J$126,922/hld of 5/yr [1997]

(US$3,567/hld of 5/yr)

 ...

Macau None ...

Malaysia RM425/hld of 4.6/mo--peninsular [1995]

(US$170/hld of 4.6/mo)

RM601/hld of 4.8/mo--East Malaysia [1995]

(US$240/hld of 4.8/mo) 

 ...

Mauritius None MRs6,000/mo [1999]

(US$250/mo)

Mexico M$5,041/hld of 4.6/mo [1999]

(US$512/hld of 4.6/mo)

M$3,000/hld/mo [c.1998-99]

(US$305/hld/mo)

Nicaragua C$1,200/hld of 4/mo [1999]

(US$400/hld of 4/mo)

 ...

Pakistan None PRs332/cap/mo [1998]

(US$6.39/cap/mo)

Peru S/.157/mo [1997]

(US$47/mo)

 ...

Philippines P11,388/cap/yr [1997]

(US$315/cap/yr)

 ...

Singapore None ...

South Korea W218,000/mo [1994]

(US$182/mo)

 ...

Spain None ...

Sri Lanka None SLRs717-861/cap/mo [1995-96]

(US$10.40-12.48/cap/mo)

SLRs1,000/hld/mo [1999]

(US$14.50/hld/mo)

Taiwan 60 percent of average per capita expenditures

NT$7,110-11,443/cap/mo [1999]

(US$214-344/cap/mo)

 ...

Thailand B906/cap/mo [1998]

(US$22/cap/mo)

 ...

Turkey None TL264 mil/4hld/mo [1999]

(US$820/4hld/mo)

United Arab Emirates None ...

United Kingdom None ...

United States US$8,316/unrelated individual/yr [1998]

US$16,660/family of 4/yr [1998]

 ...

Note: Poverty thresholds are not necessarily comparable across countries due to national differences in concepts, definitions, and measures.

Source: See individual country summaries in Part II for further information. 
Table I-4. Percent of Population Below the National and International Poverty Line in Selected Countries

 [-----------------------------------------------------------NATIONAL POVERTY LINE -------------------------------------------------------------] [--------------------------------------INTERNATIONAL POVERTY LINE--------------------------------------------] 

Country Survey Year

(ILO)

Rural

(ILO)

Urban

(ILO)

Nationa l

(ILO)

Survey Year

(WB)

Rural

(WB)

Urban

(WB)

Nationa l

(WB)

Nationa l

1989-94

(UNDP)

US$1/day (1985PPP$)

(WB)

US$2/day (1985PPP$)

(WB)

US$1/day (1985PPP$) 1989-94

(UNDP)

US$14.40 a day (1985PPP$)

(UNDP)

50 Percent of Median

Income 1989-94 (UNDP)

Bangladesh 1990 1980 5374 34

66

5073 1995-96 1991-92 39.8 46.0 14.3 23.3 35.6 42.7 48.0 .. .. 28.5 .. ..

Brazil 1990 1980 6347 4315 4825 1990 32.6 13.1 17.4 17.0 23.6 (1995) 43.5 (1995) 28.7 .. ..

Cambodia .. .. .. .. 1997 1993-94 40.1 43.1 21.1 24.8 36.1 39.0 .. .. .. .. .. ..

Canada .. .. .. .. .. .. .. .. .. 0.3 0.4 <<<(1991)>>> 5.9 11.7

China 1990 1980 1224 <1220

9

1996 1994 7.9 11.8 <2<2 6.0 8.4 11.0 22.2 (1995) 57.8 (1995) 29.4 .. ..

Colombia 1990 1980 6845 4340 --

--

1992 1991 31.2 29.0 8.0 7.8 17.7 16.9 19.0 7.4 (1991) 21.7 (1991) 7.4 .. ..

Costa Rica 1990 1980 2817 2710 2813 .. .. .. .. 11.0 18.9 (1989) 43.8 (1989) 18.9 .. ..

Dominican Republic 1990 1980 7843 -- 45 –

44 1992 1989 29.8 27.4 10.9 23.3 20.6 24.5 21.0 19.9 (1989) 47.7 (1989) 19.9 .. ..

Egypt 1990 1980 2119 2926 --

--

.. .. .. .. .. 7.6 (1990-91) 51.9 (1990-91) 7.6 .. ..

El Salvador 1990 1980 56

76

43

--

48

--

1992 55.7 43.1 48.3 38.0 .. .. .. .. ..

Guatemala 1990 1980 8774 62

66

--

--

.. .. .. .. 58.0 53.3 (1989) 76.8 (1989) 53.3 .. ..

Honduras 1990 1980 8455 7114 7837 1992 46.0 56.0 50.0 53.0 46.9 (1992) 75.7 (1992) 46.5 .. ..

Hong Kong .. .. .. .. .. .. .. .. .. .. .. .. .. ..

India 1990 1980 4851 3440 –

48 1994 1992 36.7 43.5 30.5 33.7 35.0 40.9 .. 47.0 (1994) 87.5 (1994) 52.5 .. ..

Indonesia 1990 1980 1444 1726 1539 1990 1987 14.3 16.4 16.8 20.1 15.1 17.4 8.0 7.7 (1996) 50.4 (1996) 14.5 .. ..

Israel .. .. .. .. .. .. .. .. .. .. .. (1997)>>>> .. 16.2

Italy .. .. .. .. .. .. .. .. .. .. .. (1991)>>>> 2 6.5

Jamaica 1990 1980 1851 4

--

12

--

1992 .. .. 34.2 32.0 4.3 (1993) 24.9 (1993) 4.7 .. ..

Macau .. .. .. .. .. .. .. .. .. .. .. .. .. ..

Malaysia 1990 1980 1937 7

13 1729 1989 -- -- 15.5 16.0 4.3 (1995) 22.4 (1995) 5.6 .. ..

Mauritius 1980 12 12 12 1992 -- -- 10.6 11.0 .. .. .. .. ..

Mexico 1990 1980 5554 3736 4443 1988 -- -- 10.1 34.0 14.9 (1992) 40.0 (1992) 14.9 .. ..

Nicaragua 1990 1980 7619 3221 5020 1993 76.1 31.9 50.3 50.0 43.8 (1993) 74.5 (1993) 43.8 .. ..

Pakistan 1990 1980 -- 30 -- 23 --

--

1991 36.9 28.0 34.0 34.0 11.6 (1991) 57.0 (1991) 11.6 .. ..

Peru 1990 1980 7280 5238 6053 1997 1994 64.7 67.0 40.4 46.1 49.0 53.5 32.0 .. .. 49.4 .. ..

Philippines 1990 1980 5259 3745 4554 1997 1994 51.2 53.1 22.5 28.0 37.5 40.6 41.0 26.9 (1994) 62.8 (1994) 27.5 .. ..

Singapore .. .. .. .. .. .. .. .. .. .. .. .. .. ..

South Korea 1980 9 10 10 .. .. .. .. .. .. .. .. .. ..

Spain .. .. .. .. .. .. .. .. .. 0.3 0.5 <<<(1990)>>> 21.1 10.4

Sri Lanka 1990 1980 3223 1216 2720 1990-91 1985-86 38.1 45.5 28.4 26.8 35.3 40.6 22.0 4.0 (1990) 41.2 (1990) 4.0 .. ..

Taiwan .. .. .. .. .. .. .. .. .. .. .. .. .. ..

Thailand 1990 1980 3433 1522 --

--

1992 1990 15.5

--

10.2

--

13.1 18.0 13.0 <2 (1992) 23.5 (1992) 0.1 .. ..

Turkey 1990 14 -- -- .. .. .. .. .. .. .. .. .. ..

United Arab Emirates .. .. .. .. .. .. .. .. .. .. .. .. .. ..

United Kingdom .. .. .. .. .. .. .. .. .. 0.5 0.6 <<<(1991)>>> 13.1 13.5

United States .. .. .. .. .. .. .. .. .. 1.1 1.5 <<<(1994)>>> 14.1 19.1

Note: The proverty rates based on national poverty lines are derived from a host of studies, mostly country studies that used a common methodology and similar poverty lines. They are, therefore, generally comparable over time, and between rural and urban areas, but possibly not between countries. The poverty rates based on national poverty lines represent the percentage of the population (rural, urban, or national) that is below the poverty line, except for El Salvador, Malaysia, and the Philippines where they represent the percentage of households rather than population. The international poverty line of US$14.40 a day per person (in 1985 purchasing power parity adjusted US$) is equivalent to the official U.S. poverty line for a single person. Under the EU and

OECD standard, poverty line is set at 50 percent of the median adjusted disposable personal income; estimate for Israel supplied by U.S. Embassy-Tel Aviv.

Sources: International Labour Organization (ILO), World Labour Report 1997-98, Table 6: GDP, Population and Poverty; Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva: International Labour Office, 1996); World Bank (WB), World Development Indicators 1999, Table 2.7: Poverty, pp. 66-68; United Nations Development Programme (UNDP), Human Development Report 1998, Human Development Indicators, Tables 7 and 27, Human Poverty Profile and Index, pp. 146-147; 186; UNDP, Human Development Report 1999, Tables 4 and 5, pp. 146-149; Timothy M. Smeeding, Financial Poverty in Developed Countries: The Evidence from the Luxembourgh Income Study (LIS), Final Report to the UNDP, Working Paper No. 155, Maxwell School of Citizenship and Public Affairs, Syracuse, NY (April 1997).

I-48
I-49

Table I-5: Percentage of National Population Below International Poverty Lines in Selected Countries

Percentag

e of

National

Populatio

n Below

the

Poverty

Line

International

Absolute Poverty

Line:

US$1/person/day

(1985PPP$)

International Absolute

Poverty Line:

US$2/person/day

(1985PPP$)

International

Absolute Poverty

Line:

US$14.40/person/day

(1985PPP$)

[equivalent to the

U.S. poverty line]

Relative Poverty

Line: 50% of

Median Income

80-90 India

70-79 Guatemala, Honduras,

Nicaragua

60-69 Philippines

50-59 Guatemala China, Egypt, Indonesia,

Pakistan

40-49 Honduras, India,

Nicaragua, Peru

Brazil, Costa Rica,

Dominican Republic,

Mexico, Sri Lanka

30-39

20-29 Bangladesh, Brazil,

China, Philippines

Colombia, Jamaica,

Malaysia, Thailand

Spain

10-19 Costa Rica, Dominican

Republic, Mexico,

Pakistan

United Kingdom,

United States

Canada, Israel,

Spain, United

Kingdom, United

States

1-9 Colombia, Egypt,

Indonesia, Jamaica,

Malaysia, Sri Lanka,

United States

United States Canada, Italy Italy

<1 Canada, Spain, Thailand,

United Kingdom

Canada, Spain, United

Kingdom

Not

Available

Cambodia, El Salvador,

Hong Kong, Israel, Italy,

Macau, Mauritius,

Singapore, South Korea,

Taiwan, Turkey, United

Arab Emirates

Bangladesh, Cambodia, El

Salvador, Hong Kong,

Israel, Italy, Macau,

Mauritius, Peru,

Singapore, South Korea,

Taiwan, Turkey, United

Arab Emirates

31 other countries 30 other countries

Source: See Table I-4.
I-50

Table I-6. National Poverty Lines and Minimum and Prevailing Wages in the Footwear and Apparel Industries in

Selected Countries, Latest Available Year

(in national currencies and U.S. dollars)

Country National Poverty Line Current Minimum Wage

Applicable to Workers in the

Footwear and Apparel Industries

Prevailing Wage in the Footwear

and/or Apparel Industries

Bangladesh Tk550/cap/mo [1995-96]

(US$11.32/cap/mo)

Tk600-3,500/mo

(US$12.35-76.00/mo)

Tk69-81/day [1996/97]

(US$1.42-1.67/day or

 US$36.51-42.51/mo)

Brazil R$45/cap/mo [c.1998-99]

(US$25/cap/mo)

R$136/mo

(US$81/mo)

R$300-500/mo [1999]

(US$160-270/mo)

Cambodia CR1,210-1,819/cap/day [1997]

(US$0.44-0.66/cap/day or

 US$13.38-20.08/cap/mo)

CR152,000/mo

(US$40/mo)

CR152,000-266,000/mo [1999]

(US$40-70/mo)

Canada NA C$5.00-7.15/hr

(US$3.35-4.80/hr)

C$10.08/hr [1998]

(US$6.75/hr)

China ¥165-220/cap/mo [1998]

(US$20.50-26.50/cap/mo)

¥100-320/mo

(US$12-39/mo)

¥388.5-647.0/mo [1997]

(US$114.67-190.97/mo)

Colombia C$567,456/hld/mo [1999]

(US$364.76/hld/mo)

C$7,881.3/day

(US$5.07/day or US$132.23/mo)

C$176,861-197,182/mo [1995]

(US$194-216/mo)

Costa Rica

US$100/hld of 5/mo [1999]

C73,258/mo

(US$266/mo)

C61,055-69,600/mo [1997]

(US$262-299/mo)

Dominican Republic NA RD$1,932/mo

(US$120.75/mo)

RD$21.6/hr (all manuf) [1997]

(US$1.51/hr or US$315.05/mo)

Egypt £E1,354-1,795/cap/yr [1984]

(US$929-1,231/cap/yr

£E116/mo

(US$34/mo or US$408/yr)

£E4,476/yr [1999]

(US$1,312/yr or US$109.33/mo)

El Salvador Urban: C1,295-2,590/hld4.3/mo

 (US$148-296/hld4.3/mo) [1999]

Rural: C904-1,808/hld5.9/mo

 US$103-206/hld5.9/mo) [1999]

C42/day

(US$4.81/day or US$125.44/mo)

C1,600/mo [1997]

(US$183/mo)

Guatemala Q67.50/5.38hld/day [1998]

(US$11.07/hld5.38/day)

Q21.68/day

(US$3.16/day)

Q35/day [1999]

(US$6.11/day)

Honduras L69.10/5hld/day [1997]

(US$5.06/hld5/day)

L46.80/day

(US$3.34/day)

L93.60-140.40/day [1999]

(US$6.86-10.03/day)

Hong Kong HK$9,000/mo [1998]

(US$1,150/mo)

HK$3,860/mo—for foreign domestic workers only

(US$500/mo)

HK$250.50/day [1998]

(US$32.34/day or US$843.43/mo)

India Rs228.9-264.1/cap/mo

[1993/94prices] 

(US$5.41-6.24/cap/mo)

Rs9.25-80.35/day

(US$0.24-2.09/day or 

 US$6.26-54.51/mo)

Rs30-150/day [1999]

(US$0.71-3.55/day or 

US$18.52-92.58/mo)

Indonesia Rp41,588-52,470/cap/mo [1998]

(US$4.84-6.11/cap/mo)

Rp130,000-290,000/mo

(US$15.12-33.72/mo)

Rp130,000-362,500/mo [1999]

(US$15.12-42.06/mo)

Israel NIS1,315/cap/mo [1997]

(US$381/cap/mo)

NIS3,366/hld4/mo 

(US$976/hld4/mo)

NIS2,560/mo [1998]

(US$675/mo)

NIS3,976-4,313/mo [1998]

(US$1,046-1,135/mo)

Italy Lit663,270/cap/mo [1997]

(US$389.93/cap/mo)

Lit1,788,388/hld4/mo

(US$1,051.37/hld4/mo)

Lit1,615,000-2,458,000/mo

(US$949.44-1,445.03/mo)

Lit26,662,000-26,766,000/yr [1998]

(US$15,358.29-15,418.20/yr or

US$1,279.86-1,284.85/mo)
I-51

Country National Poverty Line Current Minimum Wage

Applicable to Workers in the

Footwear and Apparel Industries

Prevailing Wage in the Footwear

and/or Apparel Industries

Jamaica J$126,922/hld5/yr [1997]

(US$3,567/hld5/yr)

J$20/hr

(US$0.55/hr or US$1,377.20/yr) US$1,800-5,000/yr [1999]

Macau NA none P3,252-4,096/mo [1998]

(US$420-529/mo)

Malaysia RM425/hld4.6/mo [1995]

(US$169.58/hld4.6/mo)

none RM742-807/mo [1995]

(US$296-322/mo)

Mauritius MRs6,000/mo [1999]

(US$250/mo)

MRs348.36/wk

(US$13.90/wk or US$55.60/mo)

MRs6,452-9,210/mo [1998]

(US$258-368/mo)

Mexico M$36.53/cap/day [1999]

(US$3.71/cap/day)

M$29.70-34.45/day

(US$3.02-3.24/day)

M$6.40-7.85/hr [1996]

(US$0.84-1.03/hr or

US$6.72-8.24/day)

Nicaragua C$1,200/hld/mo [1999]

(US$400/hld/mo)

C$600/mo

(US$52/mo)

C$2,724/mo (all manuf) [1997]

(US$288/mo)

Pakistan PRs332/cap/mo [1998]

(US$6.39/cap/mo)

PRs1,950/mo

(US$38/mo)

PRs1,932/mo [1994]

(US$63/mo)

Peru S/.157/mo [1997]

(US$47/mo)

S/.345/mo

(US$100/mo)

S/.345/mo [1999]

(US$100/mo)

Philippines P11,388/cap/yr [1997]

(US$315/cap/yr or

US$0.86/cap/day)

P198/day (Metro Manila)

(US$5/day)

P198/day (Metro Manila) [1999]

(US$5/day)

Singapore NA none S$1,477.3/mo [1997]

(US$995/mo)

South Korea W218,000/mo [1994]

(US$182/mo)

W1,525/hr

(US$1.27/hr or US$264.97/mo)

W872,349-1,118,027/mo [1999]

(US$727-932/mo)

Spain NA Ptas2,309/day

(US$15.92/day or US$415.19/mo)

Ptas232,367/mo [1998]

(US$1,529/mo)

Sri Lanka SLRs1,000/hld/mo [1999]

(US$14.50/hld/mo)

SLRs1,500-2,575/mo

(US$21.70-37.30/mo)

SRs18.15/hr (all manuf) [1997]

(US$0.31/hr or US$64.68/mo)

Taiwan NT$7,110-11,443/cap/mo [1999]

(US$213.66-343.87/mo)

NT$15,840/mo

(US$476/mo)

NT$22,943-24,676/mo [1998]

(US$689.45-741.53/mo)

Thailand B906/cap/mo [1998]

(US$22/cap/mo)

B139-162/day

(US$3.58-4.18/day or

US$93.37-109.01/mo)

B52,560/yr [1999]

(US$1,273/yr or

US$106.08/mo)

Turkey TL264 mil/hld4/mo [1999]

(US$820/hld4/mo)

TL93.60 mil/mo

(US$291/mo)

TL804 thous/hr (apparel) [1999]

(US$2.50/hr or US$522/mo)

TL170 mil/mo (footwear) [1999]

(US$528/mo)

United Arab Emirates NA none NA

United Kingdom NA £2.72/hr

(US$4.39/hr or US$210.72/wk)

£140.40/wk [1999]

(US$226.75/wk)

United States US$8,310/unrel indiv/yr [1998]

US$16,655/family of 4/yr

National: US$5.15/hr or

 US$10,300/yr

States: none-US$6.50/hr or

 US$13,000/yr

US$8.52-8.93/hr or 

US$17,040-17,860/yr

Note: Measures are not necessarily comparable across countries due to national differences in concepts, definitions, and measures.

Source: Tables I-1; I-2; and I-3; see individual country summaries in Part II for further information.
PART II

Compendium of Country Information on

Wages, Benefits, Poverty Line, and Meeting Workers’ Needs
1Unless noted otherwise, information presented here is from American Embassy— Dhaka, unclassified telegram

No. 699 (March 31, 1999).

II-1

BANGLADESH1

MINIMUM WAGE

There is no national minimum wage in Bangladesh. However, the Minimum Wages Ordinance (Ordinance

34 of 1961), and associated rules, established a Minimum Wages Board, which the government may ask

to fix the minimum wages “of any particular industry for which no adequate machinery exists for effective

regulation of wages.” In theory, the Board has six months from the date of a request to provide its

recommendations for the government to consider. In setting the levels, the Board typically solicits input

from employer and worker representatives, visits the work sites of the industry concerned, distributes

questionnaires, and holds public meetings.

In November 1990, the government conveyed a request to the Minimum Wages Board to set minimum

wage levels in the garment industry. In 1993, the Board made recommendations to the government, and

on January 12, 1994, the government promulgated a notification of the minimum wage levels for the

industry. There has been no change in these levels since that date. The notification divides employees in

the garment industry into seven categories and sets monthly minimum wages for each:

• Grade I: Pattern master; chief quality controller; chief cutting master; chief mechanic: 3,500 takas

(Tk) or about 76 U.S. dollars (US$), at the exchange rate of Tk48.57 equivalent to US$1.

• Grade II: Senior mechanic; cutting master: Tk2,500 or US$51.47.

• Grade III: Sample machinist; mechanic; senior sewing machine operator; senior winding machine

operator; senior knitting machine operator; senior linking machine operator; senior cutter; senior

quality inspector; senior marker; senior drawingman; senior line leader; senior electrician: Tk1,500

or US$30.88.

• Grade IV: Senior machine operator; winding machine operator; knitting machine operator; linking

machine operator; marker; drawingman; cutter; mending operator; senior pressingman; senior

finishing ironer; senior folder; senior packer: Tk1,200 or US$24.71.

• Grade V: Junior sewing machine operator; junior winding machine operator; junior knitting machine

operator; junior linking machine operator; junior marker; junior drawingman; junior cutter; junior

mending operator; pressingman; finishing ironer; folder; junior electrician; junior packer: Tk1,100

or US$22.65.
2

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1876.

II-2

• Grade VI: Ordinary sewing machine operator; ordinary winding machine operator; ordinary knitting

machine operator; ordinary linking machine operator; ordinary mending machine operator; fusing

machine operator; color tanning machine operator: Tk900 or US$18.53.

• Grade VII: Helper sewing machine operator; helper winding machine operator; helper knitting

machine operator; helper linking machine operator; helper mending operator; helper cutter; helper

marker; helper drawingman; pocket creasing machine operator; line ironer; helper packer; helper

dry washer: Tk600 or US$12.35.

In addition to these seven categories, “trainees or apprentices” receive a monthly salary of not less than

Tk500 or US$10.29. The maximum period of training is set at three months. For workers (like those in

the garment industry) paid on a monthly basis, the hourly wage rate for this calculation is set at the monthly

wage rate divided by 208.

Under the Factories Act, the workweek is six days of eight hours each per day. The U.S. Department of

State has also reported2 that a 60-hour workweek, inclusive of 12 hours of overtime, is permitted.

Overtime hours are to be paid at double the normal wages, but the law is poorly enforced in industries such

as hosiery and ready-made garments.

PREVAILING OR AVERAGE WAGE

According to the Bangladesh Statistical Bureau, in the cotton textile industry, the average daily wage rates

for skilled and unskilled laborers in fiscal year 1996-97 (July 1996-June 1997) were Tk81 (US$1.67) and

Tk69 (US$1.42) per day, respectively. For fiscal year 1995-96, the daily rates were Tk79 (US$1.63)

and Tk68 per day (US$1.40), and in fiscal year 1994-95, Tk74 (US$1.52) and Tk63 (US$1.30),

respectively.

However, there is doubt that garment industry wage rates in general meet the legal minimum wage standard.

According to independent trade unionists, in the garment industry:

• it is common to pay “trainee” wages well past the maximum three months;

• employees are frequently misclassified by employers so that, for example, an employee who should

be a Grade IV senior machine operator is classified as a Grade V junior machine operator, and

is paid Tk1,000 per month rather than Tk1,700 per month; and

• overtime is frequently made mandatory, and compensated at rates below even the nominal straight
3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

II-3

hourly salary, rather than at twice the level.

In addition, it is quite common for employees to receive delayed or no pay at all from the many small and

weakly capitalized employers who are struggling. While the labor laws in theory provide remedies for all

of these violations, the situation in practice is quite different. There are few labor inspectors, and they are

frequently corrupt and hampered by the bureaucracy which further erodes enforcement. More than eighty

percent of the garment labor force is female, often with few alternatives for employment. Except when

conditions become intolerable (as in prolonged nonpayment of wages), employees rarely take action, and

action then is more likely to consist of impromptu work stoppages or processions rather than resort to

official enforcement organs.

The table below presents available data from the International Labor Organization (ILO) on average hourly

earnings (direct wages per worker) in Bangladesh for skilled and unskilled workers in the manufacturing

sector and in the apparel and footwear industries. They include pay for time worked, paid leave, bonuses,

and other benefits paid directly to the employee, but not the cost of social insurance programs.3 Average

hours worked per week for skilled and unskilled workers in the manufacturing sector and in the apparel

and footwear industries were not available from the ILO. Current average earnings, which are reported

by the ILO in the national currency, were converted to US$ using the annual average exchange rate

published in the International Monetary Fund’s International Financial Statistics (March 1999). To

track changes in real earnings (i.e., earnings adjusted for inflation), a real earnings index was computed by

deflating current earnings in the national currency with the annual average national consumer price index as

published in the International Monetary Fund’s International Financial Statistics (March 1999), indexed

to 1990 = 100.

Average Daily Earnings in All Manufacturing, Apparel, and Footwear

Skilled Workers:

Year All Manufacturing Apparel Footwear Real Earnings Index (Tk; 1990=100)

(Tk) (US$) (Tk) (US$) (Tk) (US$) Manuf. Apparel Footwear

1990 na na na na na na na na na

1991 56.11 1.53 33.55 0.92 170.22 4.65 na na na

1992 59.87 1.54 36.38 0.93 147.54 3.79 na na na

1993 na na na na na na na na na

1994 na na na na na na na na na

1995 na na na na na na na na na

1996 na na na na na na na na na

1997 na na na na na na na na na
4

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), p. 29.

II-4

Unskilled Workers:

Year All Manufacturing Apparel Footwear Real Earnings Index (Tk; 1990=100)

(Tk) (US$) (Tk) (US$) (Tk) (US$) Manuf. Apparel Footwear 

1990 na na na na na na na na na

1991 21.80 0.60 19.56 0.53 na na na na na

1992 23.00 0.59 32.41 0.83 na na na na na

1993 na na na na na na na na na

1994 na na na na na na na na na

1995 na na na na na na na na na

1996 na na na na na na na na na

1997 na na na na na na na na na

_________________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 899 - 900.

NON-WAGE BENEFITS

According to official regulations, a housing benefit amounting to 30 percent of the monthly wage rate and

a monthly medical allowance of Tk150 is to be paid to each employee.

A U.S. Social Security Administration survey4 elaborates on three different non-wage benefit programs in

which employers with 10 or more employees in Bangladesh are required to participate for their employees:

(1) a social insurance program, which provides sickness and maternity benefits, in which the employer pays

the total cost and the government provides the hospital facilities; (2) a work injury program, started in 1923,

which is an employer liability program for 34 listed occupational diseases, for which the employer pays the

total cost; and (3) unemployment insurance, which has been a part of the labor code since 1965, for which

the employer pays the total cost. The old age, disability, and death benefits program is a special system

for public-sector employees only.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The poverty line in Bangladesh is an absolute one, calculated on the basis of the ability to purchase sufficient

food. The basic poverty line is based on consumption of 2,122 calories per day. The “hardcore” poor are

those who cannot afford to purchase at least 1,805 calories per day. In this calculation, an additional 30

percent expenditure is allotted for non-food items. In 1995-96, a monthly expenditure of about Tk550

(US$11.32) per person was required to be above the poverty line. Inflation, which ran at about eight

percent in 1998, has increased these figures; about two-thirds of the Bangladesh consumer price index

consists of food items. According to surveys, almost 50 percent of Bangladesh households fall below the
5

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 24-26.

6

 The estimates are referenced as originating from the Bangladesh Bureau of Statistics (BBS), Report of the

Bangladesh Household Expenditure Survey 1985/86 (Dhaka, 1988) and BBS, Statistical Yearbook of Bangladesh

(Dhaka, 1991). The estimates are based on household expenditure surveys and use the food energy intake method to

estimate the poverty line in the rural and urban sectors by determining total (food and non-food) expenditures at which

the expected daily per capita calorie intake is equal to 2,122 calories. According to Martin Ravaillon, “The Challenging

Arithmetic of Poverty in Bangladesh,” Bangladesh Development Studies, Vol. 18, No. 3 (September 1990), pp.35-53, the

BBS estimates appear to be based on a comparison of actual household expenditures with estimated expenditures needed

to reach 2,122 calories per capita per day. BBS poverty lines, in nominal terms, appear to have been constructed by

graphing mean calorie intake against mean income based on grouped data and using this graph to find the income level

at which households typically attain the predetermined calorie norm. See Tabatabai, Statistics on Poverty and Income

Distribution: An ILO Compendium of Data, p. 144.

7

 The estimates are referenced as originating from Martin Ravallion and Binayak Sen, “When Method Matters:

Monitoring Poverty in Bangladesh,” Economic Development and Cultural Change, Vol. 44, No. 4 (July 1996), pp. 761-

792. The estimates are based on household expenditure surveys and use the cost of basic needs approach to estimate

the poverty line in the rural and urban sectors. The cost of a normative minimum food consumption bundle providing

for an average per capita daily intake of 2,112 calories and 58 grams of protein is determined using implicit unit values

for food derived from the household expenditure survey (food poverty line) plus 35 percent of the food poverty line in

1983/84 for non-food essentials. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium

of Data, p. 146.

II-5

poverty line. Just over 25 percent of all households fall into the hard-core poor category.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization5 reports several sets of measures of a national poverty line for Bangladesh:

! for 1981/81, 73.8 percent of the rural Bangladeshi population was below the rural poverty line of

Tk192 per capita per month (expenditure needed for a daily food energy intake of 2,122 calories),

66.0 percent of the urban population was below the urban poverty line of Tk300 per capita per

month (expenditure needed for a daily food energy intake of 2,122 calories), with a national

poverty rate of 73.0 percent; for 1988/89, 48.0 percent of the rural and 44.0 percent of the urban

population were below the monthly per capita expenditures needed for a food energy intake of

2,122 calories.6

! for 1983/84, 52.9 percent of the rural Bangladeshi population was below the rural poverty line of

Tk268.92 per capita per month (rural cost of basic needs) and 40.9 percent of the urban

Bangladeshi population was below the urban poverty line of Tk301.72 per capita per month (urban

cost of basic needs), with a national poverty rate of 52.3 percent; for 1991/92, 52.9 percent of the

rural population was below the rural poverty line of Tk469.13 per capita per month and 33.6

percent of the urban population was below the urban poverty line of Tk534.99 per capita per

month, with a national poverty rate of 49.7 percent.7
8

 The estimate is referenced as originating from Elaine K. Chan, “A Compendium of Data on Poverty and

Income Distribution,” Background Paper for the World Development Report 1990 (Washington: World Bank, 1990), p.

9. It is based on Bangladesh Bureau of Statistics (BBS) Report of the Bangladesh Household Expenditure Survey

1985/86 (Dhaka, 1988) and internal World Bank data. An absolute poverty line, defined as an expenditure level below

which basic needs cannot be satisfied, was arbitrarily set 35 percent higher than the Indian poverty line for rural areas

which at that time was considered to be more representative of many developing countries. The poverty line

corresponded to US$31 after adjustment for purchasing power parity had been made to the 1985 official exchange rate.

The purchasing power parity poverty line was converted into the national currency using estimates from Robert Summers

and Alan Heston, “A New Set of International Comparisons of Real Product and Price Levels: Estimates for 130

Countries, 1950-1985,” Review of Income and Wealth, Series 34, No. 1 (March 1988), pp. 1-25. See Tabatabai, Statistics

on Poverty and Income Distribution: An ILO Compendium of Data, pp. 136; 144-145. 

9

The estimate is referenced as originating from Shashou Chen, Gaurav Datt, and Martin Ravallion, “Is Poverty

Increasing in the Developing World?” Policy Research Working Paper WPS 1146 (Washington: World Bank, 1993).

This study uses essentially the same methodology as the World Bank’s World Development Report 1990, but with

updated purchasing power parity rates. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 137.

10 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p.196.

11 World Bank, Bangladesh: From Counting the Poor to Making the Poor Count, Poverty Reduction and

Economic Management Network (Dhaka: World Bank, South Asia Region, April 29, 1998); this report is available on the

Internet at: <http://www.worldbank.org/html/extdr/offrep/sas/bangladesh-poverty/index.htm>.

II-6

! for 1985, 56.5 percent of the Bangladeshi population was below the poverty line of US$31 per

capita per month, based on 1985 purchasing power parity adjusted US$ (or Tk262).8

! for 1985/86, 17.0 percent of the Bangladeshi population was below the poverty line of US$30.42

per capita per month (i.e., US$1 per day), based on 1985 purchasing power parity adjusted US$;

for 1988/89, 28.5 percent of the national population was under that poverty line.9

According to the World Bank,10 in 1995-96, 35.6 percent of the national Bangladeshi population was

below the national poverty line, with 14.3 percent of the urban population and 39.8 percent of the rural

population falling below the poverty line. By comparison, in 1991-92, 42.7 percent of the national

population fell below the national poverty line, with 23.3 percent of the urban population and 46.0 percent

of the rural population falling below the poverty line.

A recent study11 by the World Bank’s Poverty Reduction and Economic Management Network, South

Asia Region, reports that the Government of Bangladesh has adopted a new method for measuring poverty.

The direct calorie intake (caloric threshold of 2,122 kilocalories per person per day) and food energy

intake (expenditure level at which households are expected to reach the caloric threshold of 2,122

kilocalories per person per day) methods have been used in the past for official poverty measures, but,

according to the World Bank, they are neither representative nor consistent. The cost of basic needs

(expenditure level at which households can afford predetermined basic consumption needs) method, which

typically is more consistent and representative, has been used by independent researchers in Bangladesh
II-7

and abroad; this poverty measurement method was recently adopted by the Government of Bangladesh,

with assistance from the World Bank.

The World Bank report provides the following comparison of the poverty headcount measures (percentage

of the population below the poverty line) using the direct calorie intake and the cost of basic needs methods:

Percentage of the Bangladeshi Population below the Poverty Line, 1983/84 to 1995/96

Method/Area Very Poor (lower caloric threshold/lower poverty

line)

1983/84 1985/86 1988/89 1991/92 

1995/96

Poor (upper caloric threshold/upper poverty line)

 1983/84 1985/86 1988/89 1991/92 

1995/96

Food Energy

Intake

 National

 Rural

 Urban

 36.8 26.9 28.4 28.0 

25.1

 36.7 26.3 28.6 28.3 

24.6

 37.4 30.7 26.4 26.3 

27.3

 62.6 55.7 47.8 47.5 

47.5

 61.9 54.7 47.8 47.6 

47.1

 67.7 62.6 47.6 46.7 

49.7

Cost of Basic Needs

 National

 Rural

 Urban

 40.9 33.8 41.3 42.7 35.6

 42.6 36.0 44.3 46.0 39.8

 28.0 19.9 22.0 23.3 14.3

 58.5 51.7 57.1 58.8 

53.1

 59.6 53.1 59.2 61.2 

56.7

 50.2 42.9 43.9 44.9 

35.0

Note: Poverty line for the Food Energy Intake Method: lower caloric threshold is 1,800 kcal for 1983/84 and 1985/86; and 1,805 kcal

for 1988/89, 1991/92, and 1995/96. The upper caloric threshold is 2,200 kcal for 1983/84 and 1985/86; and 2,122 for 1988/89, 1991/92,

and 1995/96. Part of the large decrease in poverty observed for the upper caloric threshold between 1985/86 and 1988/89 is due to the

lowering of the caloric threshold for 1988/89 and after. The estimates using the Food Energy Intake Method are from the Bangladesh

Bureau of Statistics (BBS), Summary Report of the Household Expenditure Survey 1995/96 (Dhaka, 1997). Poverty line for the Cost

of Basic Needs Method: the food poverty line (cost of a representative, fixed food bundle defined to meet the nutritional norm of 2,122

kcal per person per day) plus either lower (less generous) or upper (more generous) allowances for non-food basic needs, based on

households’ actual non-food expenditures (i.e., non-food expenditures, where total per capita consumption is equal to the regional food

poverty line (lower allowance) and where per capita food expenditures are equal to the regional food poverty line (upper allowance)). The

estimates using the Cost of Basic Needs Method were made by World Bank staff.

Source: World Bank, Bangladesh: From Counting the Poor to Making the Poor Count, Poverty Reduction and Economic Management

Network (Dhaka: World Bank, South Asia Region, April 29, 1998), pp. 6-7; 55-56.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Bangladesh meet workers’ basic needs. Some information from U.S. Department of

State or U.S. Embassy reports indicates more generally that the average monthly wage in Bangladesh is

sufficient to provide an individual with a minimal standard of living, but is not sufficient to provide a decent
12 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1876.

II-8

standard of living for a worker and family.12 The U.S. Embassy did not identify any studies on the living

wage in Bangladesh and observed that since poverty studies indicate that half of the people in Bangladesh

do not have enough to eat, a “living wage” which would allow for some additional expenditure beyond this

absolute level is not often focused on.
1Unless noted otherwise, information presented here is from American Consul—Sao Paulo, unclassified

facsimile (March 11, 1999).

2 U.S. Department of State, Country Reports on Human Rights Practices for 1988 (Washington: U.S.

Government Printing Office, February 1989), p. 482.

3

 For more information on the minimum wage in Brazil, see International Labour Organization (ILO), “Minimum

Wage Fixing in Brazil,” Labour Law and Labour Relations Branch (LEG/REL) Briefing Note No. 9 (Geneva: International

Labour Office, 1997), which is also available on the ILO’s web site:

<http://www.ilo.org/public/english/80relpro/legrel/papers/brfnotes/minwages/brasil3.htm>.

4 Wall Street Journal, Briefly, (May 3, 1999) p. A14.

5

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 534.

6

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 534.

II-8

BRAZIL1

MINIMUM WAGE

The Constitution of 1988 guarantees to all workers a minimum wage and requires that the minimum wage

be readjusted to preserve purchasing power.2 The federal government makes adjustments each May 1,

usually taking into account the rate of inflation. Because social security payments and many salaries

(particularly in state and local governments) are based upon multiples of the minimum wage, the government

must also take into account the budgetary implications of a minimum wage increase.3 The current minimum

wage (as of May 1, 1999) is 136 reals (R$) a month, roughly equivalent to 81 U.S. dollars (US$).4 Many

workers, particularly outside the regulated economy and in the Northeast, reportedly earn less than the

minimum wage.5

The real has depreciated by 50 percent against the U.S. dollar since the end of 1998 and is now floating;

as a result, the real’s value against the U.S. dollar fluctuates considerably from day to day. The information

presented below reflects the exchange rate prevailing on March 10, 1999, R$1.87 for US$1. As the

inflationary effect of this devaluation is only now beginning to take effect, workers have not seen their

purchasing power seriously eroded.

The Constitution limits the workweek to 44 hours and specifies a weekly rest period of 24 consecutive

hours, preferably on Sundays; all workers in the formal sector receive overtime pay for work beyond 44

hours a week, and there are prohibitions against excessive use of overtime.6
7

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

II-9

PREVAILING OR AVERAGE WAGE

The vast majority of workers in the apparel and footwear industries work in factories. Nearly all of them

receive salaries considerably higher than the minimum wage, although salaries vary considerably by region

in Brazil. Average salaries range from R$300 to R$500 (approximately US$160 to US$270) a month in

the apparel industry, and slightly higher in the footwear industry. In addition to this basic salary, each

worker receives a bonus of one month’s pay at the end of each calendar year. Workers also received

other constitutionally-mandated payments which can raise the base salary roughly by 20 percent.

Many enterprises source some parts of production in the apparel and footwear industry. Some of the

“microenterprises” which typically perform these services have been organized as cooperatives

and may fall outside the parameters of labor law. However, out-sourcing represents a very small portion

of the entire industry.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Brazil for all employees in the manufacturing sector and in

the apparel and leather footwear industry. They include pay for time worked, paid leave, bonuses, and

other benefits paid directly to the employee, but not the cost of social insurance programs.7 Average hours

worked per week were not available from the ILO for the manufacturing sector or the apparel and

footwear industry. Current average earnings, which are reported by the ILO in the national currency, were

converted to US$ using the annual average exchange rate published in the International Monetary Fund’s

International Financial Statistics (March 1999). To track changes in real earnings (i.e., earnings

adjusted for inflation), a real earnings index was computed by deflating current earnings in the national

currency with the annual average national consumer price index as published in the International Monetary

Fund’s International Financial Statistics (March 1999), indexed to 1993 = 100.

Average Monthly Earnings in All Manufacturing, and Apparel and Footwear

Year All Manufacturing Apparel & Footwear Real Earnings Index (R$; 1993=100)

 (R$) (US$) (R$) (US$) Manuf. Apparel & Footwear

1990 26,076 1,050 na na 99,038 na

1991 136,699 925 na na 20,767 na

1992 1,562,000 952 776,000 473 1,892 1,974

1993 33,978,000 1,057 16,176,000 503 100 100

1994 793,056,000 1,241 373,067,300 584 5 5

1995 na na na na na na

1996 na na na na na na

1997 na na na na na na

____________________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 819.
8

Social Security Administration, Social Security Programs Throughout the World-1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 49-51.

9

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 534.

10 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 53-55.

II-10

NON-WAGE BENEFITS

Non-wage benefits in the footwear and apparel industries are comparable to those in other Brazilian

industries. Most non-wage benefits are mandated by the Brazilian Constitution, and the costs to employers

can run from 60 to 100 percent of the monthly salary. These include: social security, one month’s paid

vacation, unemployment insurance, meals during working hours, and transportation. Most employers also

provide health care or insurance.

A U.S. Social Security Administration survey8 elaborates on four non-wage benefit programs in which

employers in Brazil are required to participate for their employees: (1) a social insurance program, started

in 1923, which covers sickness, disability, maternity, and death benefits, for which the insured person pays

8-10 percent of their earnings according to their wage level, the employer pays 20 percent of payroll, and

the government pays certain ear-marked taxes to finance administrative costs and defray deficits; (2) work

injury benefits, started in 1919, for which the employer pays the entire cost through premiums of 1-3

percent of payroll according to risk; (3) unemployment insurance, which began in 1965, for which the

government paying the whole cost; and (4) family allowances, which is an employment -related system that

began in 1941 and is funded the same as for pensions above.

ASSESSING BASIC NEEDS: THE POVERTY LINE

Because of wide regional variations in salaries and in the cost of living, the government has no official

poverty line. A recent study by the well-respected Getulio Vargas Foundation determined that the poverty

level is R$45 (approximately US$25) per person per month. Most workers in the apparel industry would

be above this level. However, a 1997 study by the Interunion Department for Socioeconomic Studies and

Statistics estimated that the minimum wage was only slightly more than one-fourth of the amount necessary

to support a family of four.9 The Interunion study weighted urban data more heavily than did the Vargas

Foundation, accounting for some of the disparity in the conclusions. 

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization10 reports several sets of measures of a national poverty line for Brazil:
11 The estimates are referenced as originating from M. Louise Fox and Samuel A. Morley, “Poverty and

Adjustment in Brazil: Past, Present, Future,” in Michael Lipton and Jacques van der Gaag (eds.), Including the Poor,

Proceedings of a Symposium Organized by the World Bank and the International Food Policy Research Institute

(Washington: World Bank, 1993), p. 470. The study uses published tabulations (series Mães e Crianças) of the

distribution of per capita income from household surveys (Pesquisa Nacional por Amostra de Domicilios, PNAD)

conducted by the Instituto Brasileiro de Geografia e Estatística (IBGE); income is reported in minimum salaries (after 1986,

the piso nacional). To correct for changes in the real minimum wage, the poverty line is obtained by converting minimum

salaries for the reference month for each year into constant cruzados, and then converting this value into constant 1980

minimum salaries. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 160.

12 The following currency changes have occurred since this estimate was made: in 1990, 1 cruzeiro = 1 nuevo

cruzado; in 1993, 1 cruzeiro real = 1,000 cruzeiros; and in 1994, 1 real = 2,750 cruzeiros reales.

13 The estimates are referenced as originating from special tabulations prepared for the ILO in 1995 by the

Economic Commission for Latin America and the Caribbean (ECLAC), which updated previous estimates in ECLAC,

Magnitud de la Pobreza en América Latina en los Años Ochenta (Santiago: ECLAC, 1990), pp. 24; 115. The tabulations

are based on household surveys and use a methodology that sets poverty lines based on the minimum per capita foodenergy needs for age- and sex-specific minima as recommended by the FAO/WHO. The composition of the food basket

takes into account the prevailing national dietary habits. The cost of the minimum food basket is evaluated using retail

prices for the lowest quality varieties in the capital city or its metropolitan area (prices prevailing in other cities and in

rural areas were generally unavailable). Minimum food budgets for other urban areas are set at 5 percent below the

capital's, and for rural areas at 25 percent below the capital's. Averages for urban areas and at the nation level are

calculated using population weights. To reflect minimum expenditures on non-food needs, the urban poverty line is set

at double the corresponding minimum food budget, and the rural poverty line at 75 percent above the cost of the rural

minimum food basket. The poverty lines in national currencies were not provided in the ILO compendium. The ECLAC

methodology is discussed more fully in J.C. Feres and A. León, “The Magnitude of Poverty in Latin America,” CEPAL

Review, No. 41 (August 1990), pp. 133-151. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 137.

II-11

! for 1981, 46.8 percent of the rural and 14.9 percent of the urban Brazilian population were below

the poverty line of a per capita income of one-quarter of the inflation-adjusted 1980 minimum

wage, with a national poverty rate of 24.8 percent; for 1987, 46.3 percent of the rural and 14.8

percent of the urban population were below the same poverty line, with a national poverty rate of

23.3 percent.11

! for 1979, 68.2 percent of the rural Brazilian population was below the rural poverty line of a

monthly per capita budget of 13,790 nuevo cruzados12 in second half of the year 1988 prices and

33.5 percent of the urban Brazilian population was below the urban poverty line of a monthly per

capita budget of 20,970 nuevo cruzados in second half of the year 1988 prices, with a national

poverty rate of 45.1 percent; for 1990, 63 percent of the rural population was below the rural

poverty line and 43 percent of the urban population was below the urban poverty line, with a

national poverty rate of 48 percent.13

! for 1979, 55.0 percent of the rural and 23.9 percent of the urban Brazilian population were below

the poverty line of a monthly per capita income of US$60 in 1985 purchasing power parity

adjusted US$, with a national poverty rate of 34.1 percent; for 1989, 63.1 percent of the rural and
14 The estimates are referenced as originating from George Psacharopoulos, Samuel Morely, Ariel Fiszbein,

Haeduck Lee, and Bill Wood, Poverty and Income Distribution in Latin America: The Story of the 1980s, Latin America

and the Caribbean Technical Department, Regional Studies Program, Report No. 27 (Washington: World Bank, 1993),

Tables 13.1–13.2 and pp. 62-69. The study is based on national-level household surveys compiled by the Economic

Commission for Latin America and the Caribbean (ECLAC) and the World Bank. The poverty lines, in 1985 purchasing

power parity adjusted US$, were converted into national currencies, but were not provided in the ILO compendium. See

Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 138.

15 World Bank, World Development Report 1998-99 (New York: Oxford University Press), p. 196.

16 World Bank, Brazil: A Poverty Assessment (Washington: World Bank, 1995), p. 1.

17 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 534.

18 See DIEESE web site: <http://www.dieese.org.br/bol/boletim.html>.

II-12

33.2 percent of the urban population were below the same poverty line, with a national poverty

rate of 40.9 percent.14

According to the World Bank15, in 1990, 17.4 percent of Brazil’s national population was below the

national poverty line, with 13.1 percent of the urban and 32.6 percent of the rural population falling below

the poverty line. In 1995, 43.5 percent of the population was below the international poverty standard of

US$2 per person per day and 23.6 percent was below the international standard of US$1 per person per

day, both in 1985 purchasing power parity adjusted US$. Within Brazil, there are wide disparities in the

extent of poverty; more than half of all poor Brazilians live in the Northeast.16

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Brazil meet workers’ basic needs. Some information from U.S. Department of State

or U.S. Embassy reports indicates more generally that the minimum wage is not sufficient to provide a

decent standard of living for a worker and family in Brazil,17 but the U.S. Embassy is not aware of studies

of a living wage in Brazil.

The Interunion Department of Socioeconomic Studies and Statistics (DIEESE), created by a group of trade

unions in 1955, provides studies and statistics on living conditions in Brazil and a monthly calculation of the

“minimum wage necessary.”18
1

 Unless noted otherwise, information presented here is from American Embassy–Phnom Penh, unclassified

telegram No. 1544 (July 2, 1999).

2

 U.S. Department of State, Bureau of East Asian and Pacific Affairs, unclassified facsimile (November 29, 1999).

3

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 836.

II-13

CAMBODIA1

MINIMUM WAGE

The apparel sector is the only industrial sector in Cambodia in which there is a legally-prescribed minimum

wage. The monthly minimum wage in the apparel sector is 152,000 riels (CR) or 40 U.S. dollars (US$)

at the current exchange rate, although apprentices may be paid a minimum wage of CR114,000 (US$30)

a month for a maximum period of two months. The minimum wage was established on January 17,

1997—prior to the promulgation of Cambodia’s 1997 Labor Law—by agreement between the Ministry

of Social Affairs, Labor, and Veterans Affairs (now known as the Ministry of Social Affairs, Labor,

Vocational Training, and Youth Rehabilitation— MOSALVTYR) and the Garment Manufacturers

Association in Cambodia. It was later issued as a subdecree by the MOSALVTYR.

Articles 104-112 of Cambodia’s Labor Law set out a process for establishing a guaranteed minimum

wage that “must ensure every worker a decent standard of living compatible with human dignity.”

According to Article 107, the guaranteed minimum wage is to be set by a MOSALVTYR subdecree after

consultation with the Labor Advisory Committee, and may be “adjusted from time to time in accordance

with the evolution of economic conditions and the cost of living.” The Labor Advisory Committee met for

the first time on October 21, 1999, but the minimum wage-setting mechanism has not yet begun operation.2

The Labor Law provides for a standard legal workweek of 48 hours, not to exceed 8 hours per day. The

law stipulates time-and-one-half overtime pay, and double overtime pay if overtime hours are worked at

night or on the employee’s day off. Government enforcement of these standards is weak and workers

frequently complain about being required to work more than 48 hours a week and, especially in the

garment industry, being paid the overtime rate only for the salary component of their paychecks, leaving

piece rates unchanged regardless of the number of hours worked.3

PREVAILING OR AVERAGE WAGE

It is difficult to estimate with certainty the prevailing wage in the apparel industry. Based on visits to more

than 30 garment factories, discussions with workers and trade unionists, and a de-brief with a U.S.

Customs Textile Product Verification Team in March 1999, the American Embassy estimates that the bulk

of Cambodian garment workers make at least CR152,000 (US$40) a month.
4

 World Bank, World Development Indicators 1999 (Washington: World Bank, 1999), p. 66.

5

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 836.

II-14

A significant number of workers (perhaps 25 percent) work more quickly or operate larger machines and

earn a higher monthly wage, generally in the CR190,000-266,000 (US$50-70) range. A smaller

percentage of workers make less than the legal CR152,000 (US$40) minimum per month, generally

because of employer payroll deductions for substandard attendance or poor production.

No data were available for Cambodia from the International Labor Organization (ILO) on average wages

or hours worked in the manufacturing sector or in the apparel or footwear industries.

NON-WAGE BENEFITS

The Labor Law contains provisions mandating holiday and overtime pay, but there are no governmentmandated non-wage benefits in the apparel and footwear industry.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The World Bank reports4 that, in 1997, 40.1 percent of the rural Cambodian population and 21.1 percent

of the urban Cambodian population were below the country-specific poverty line, with a national poverty

rate of 36.1 percent; in 1993/94, 43.1 percent of the rural population and 24.8 percent of the urban

population were below the country-specific poverty line, with a national poverty rate of 39.0 percent. The

American Embassy notes that these poverty figures probably come from a January 1999 report prepared

by the UN system in Cambodia, based on data from the Cambodia Socio-Economic Survey, 1997. The

UN report adds that the poverty line is defined as expenditure required to purchase a food basket which

provides 2,100 calories per day and allow for a non-food expenditure. This expenditure is calculated at

CR1,819 (US$0.66) per day in Phnom Penh, CR1,407 (US$0.51) in other urban areas, and CR1,210

(US$0.44) in rural areas, where US$ amounts are calculated at the June 1997 exchange rate of US$1

equals CR2,760. Since June 1997, the riel has subsequently devalued to 3,800 per US$, so the riel

figures listed above should be adjusted upwards accordingly.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Cambodia meet workers’ basic needs. The U.S. Department of State reports that

the monthly minimum wage in the apparel sector is not sufficient to provide a worker and a family with a

decent standard of living.5 According to the American Embassy, there have been no studies on the issue

of the living wage in Cambodia, probably because of the relatively small size of Cambodia’s formal wage
II-15

sector.
1Unless noted otherwise, information presented here is from American Embassy—Ottawa, unclassified telegram

No. 693 (March 1, 1999).

2

 The exchange rate in March 1999 was approximately US$0.67 to C$1.00.

3

 U. S. State Department, Country Reports on Human Rights Practices for 1998 (Washington: U.S. Government

Printing Office, April 1999), p. 1200.

4

 U. S. State Department, Country Reports on Human Rights Practices for 1998 (Washington: U.S. Government

Printing Office, April 1999), p. 1200.

II-15

CANADA1

MINIMUM WAGE

Minimum wage rates are set in each province and territory. On July 1, 1996, the federal government

passed legislation to align the federal minimum wage rate with the provincial/territorial rates. Previously,

at the federal level, minimum wage rates for federal jurisdiction employees (who comprise about 8 percent

of the Canadian labor force) were established by ministerial order. It was a common practice among most

federal jurisdiction employers (industries such as banking, shipping, air transport, broadcasting, railways,

grain elevators and pipelines) to use the higher provincial or territorial minimum-wage rates. Between 1986

and 1995, the federal hourly minimum wage was unchanged at 4.00 Canadian dollars (C$) or 2.68 U.S.

dollars (US$).2

Typically, a provincial or territorial board or commission has the power to make general or specific orders

that prescribe that no employee within its scope is to earn less that a particular hourly rate. All workers

covered by the empowering legislation are entitled to the minimum wage protection. Some categories of

youth employment are excluded from minimum wage coverage in some provinces. For example, Ontario

and Alberta have a lower minimum wage rate for youths than for adults.3 Individual provincial and

territorial minimum wages generally cover all employees. In Ontario, Quebec, and Newfoundland, the

general minimum wage orders are supplemented by special orders covering particular industries or

occupations.

Minimum wage rates for the provinces currently range from C$5.00 to C$7.15 per hour or about US$3.35

to US$4.80 (see table on next page). Standard work hours vary from province to province, but in all the

limit is 40 to 48 a week with 24 hours of rest.4
5U.S. Department of Labor, Bureau of Labor Statistics, International Comparisons of Hourly Compensation

Costs for Production Workers in Manufaturing,1975-1997, Supplementary Tables for BLS News Release USDL 98-376,

September 16, 1998, p.1-2. 

6

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 734.

II-16

 Hourly Minimum Wage Rates, by Province

Province/Rate and Date Adopted Province/Rate and Date Adopted

Alberta

C$5.00 (US$3.35) April 1, 1992

Nova Scotia

C$5.35 (US$3.58) October 1, 1996

C$5.50 (US$3.69) February 1, 1997

British Columbia

C$7.00 (US$4.69) October 1, 1996

C$7.15 (US$4.79) April 1, 1998

Ontario

C$6.85 (US$4.59) January 1, 1995

Manitoba

C$5.40 (US$3.62) January 1, 1996

Prince Edward Island

C$5.15 (US$3.45) September 1, 1996

C$6.40 (US$4.29) September 1, 1997

New Brunswick

C$5.68 (US$3.81) July 1, 1996

Quebec

C$6.70 (US$4.49) October 1, 1996

C$6.85 (US$4.59) October 1, 1997

Newfoundland

C$5.00 (US$3.35) September 1, 1996

C$5.25 (US$3.52) April 1, 1997

Saskatchewan

C$5.60 (US$3.75) December 1, 1996

PREVAILING OR AVERAGE WAGE

Average hourly wages in the clothing industry (Canadian Standard Industrial Classification product code

categories 243-249), excluding overtime, for Canada as a whole were C$9.92 in November 1998 and

C$10.18 in November 1997. Hourly earnings including overtime were, respectively, C$10.08 and

C$10.38 for the same months.

The table below presents available data from the International Labor Organization (ILO) on average hourly

earnings (direct wages per worker) in Canada for production workers in the manufacturing sector and in

the apparel and leather footwear industries. Earnings data are only pay for time worked and do not include

paid leave, bonuses, and other benefits paid directly to the employee or the cost of social insurance

programs.5 Average hours worked per week by all employees were 38.5 in all manufacturing, 35.7 in

apparel, and 36.6 in footwear and leather goods for the years 1990 through 1997.6 Current average
7

 Social Security Administration, Social Security Programs Throughout the World (Washington: Government

Printing Office, August 1997), pp. 64-67.

8

 For both the universal and income-tested program benefits (i.e., not earning related), the government pays

the whole cost.

II-17

earnings, which are reported by the ILO in the national currency, were converted to US$ using the annual

average exchange rate published in the International Monetary Fund’s International Financial Statistics

(March 1999). To track changes in real earnings (i.e., earnings adjusted for inflation), a real earnings index

was computed by deflating current earnings in the national currency with the annual average national

consumer price index as published in the International Monetary Fund’s International Financial Statistics

(March 1999), indexed to 1990 = 100.

Average Hourly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (C$; 1990=100)

(C$) (US$) (C$) (US$) (C$) (US$ ) Manuf. Apparel Footwear

1990 14.2 12.16 8.6 7.37 9.4 8.06 100 100 100

1991 14.9 12.97 8.8 7.68 9.6 8.38 99 97 97

1992 15.4 12.72 9.0 7.45 9.3 7.69 101 98 92

1993 15.7 12.17 9.0 6.98 9.6 7.44 101 96 94

1994 16.0 11.69 9.2 6.74 10.0 7.32 103 98 97

1995 16.2 11.80 9.3 6.78 10.1 7.36 102 97 96

1996 16.7 12.26 10.4 7.63 11.5 8.43 104 107 108

1997 16.9 12.17 10.6 7.65 11.3 8.16 103 107 104

____________________________________________________________________________________________

Source: ILO, Yearbook of Labour Statistics, 1998, p. 885.

NON-WAGE BENEFITS

Government-mandated non-wage benefits for workers in the apparel and footwear industries are the same

as for other workers in manufacturing. These benefits may vary somewhat from province to province since

workers in these industries are covered by provincial labor law and social programs. Workers are eligible

as taxpayers for government-provided health care, and they contribute to employment insurance and

pension funds overseen by the federal government. They are also entitled to paid holidays and vacations.

A U.S. Social Security Administration survey7 elaborates on five non-wage benefit programs which

employers in Canada are required to participate in for their employees: (1) old age, disability, and death

insurance, first established in 1927, for which the insured pays 3 percent of earnings and the employer pays

3 percent of payroll;8 (2) sickness and maternity benefits, first appearing in 1977, for which the insured

persons in most provinces do not make any contributions (in Alberta and British Columbia, they pay from

0.2 percent to 2.0 percent of taxable income) and the share paid by employers varies by province from

1 percent to 4.5 percent of payroll, with the government paying the bulk of the cost through provincial

revenues including block grants from the federal government; (3) work injury insurance, which is a

compulsory insurance system with a public carrier, for which employers pay the whole cost which varies
9

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 73.

10 The estimate is referenced as originating from Brigitte Buhmannn, Lee Rainwater, Guenther Schmaus, and

Timothy M. Smeeding, “Equivalence Scales, Well-Being, Inequality, and Poverty: Sensitivity Estimates Across Ten

Countries using the Luxembourg Income Study (LIS) Database,” Review of Income and Wealth, Series 34, No. 2 (June

1988), p. 131.

11 Timothy M. Smeeding, Financial Poverty in Developed Countries: The Evidence from LIS, Final Report to

the UNDP, Working Paper No. 155, Maxwell School of Citizenship and Public Affairs, Syracuse, NY (April 1997), Table

2.

12 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1200.

II-18

according to risk; (4) unemployment insurance system, which dates from 1940, for which the insured pay

2.9 percent earnings and the employer pays 4.13 percent of the insured’s earnings; and (5) family

allowances program, started in 1944, which provides eligible families a refundable tax credit based on their

income and is funded the government.

ASSESSING BASIC NEEDS: THE POVERTY LINE

Statistics Canada does not at present calculate a poverty line based on a market basket approach. Instead,

for purposes of evaluating social programs, Canada uses something called a “low income cutoff”—LICO.

This is based on the percentage of income used by the average family for food, shelter, and clothing and

is converted using a complex formula that accounts for family and community size, among other things.

Discussion with provincial governments on adopting an agreed market-basket approach is underway but

remains controversial.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization9 reports for 1981 that 17.1 percent of the Canadian population was below the poverty line

of 50 percent of median disposable income.10 A more recent study, using the same methods, reports for

1991 that 11.7 percent of the Canadian population was below the poverty line of 50 percent of median

disposable income.11

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Canada meet workers’ basic needs. Some information from U.S. Department of State

or U.S. Embassy reports indicates more generally that a family in Canada whose only employed member

earns the minimum wage would be considered below the poverty line.12 The U.S. Embassy was not able

to identify any studies on a “living wage” or, rather, its Canadian translation: “a minimum viable income.”
1 Unless noted otherwise, information presented here is from American Embassy—Beijing, unclassified telegram

No. 1978 (March 4, 1999).

2 U.S. Department of State, Country Reports on Human Rights Practices for 1995 (Washington: U.S.

Government Printing Office, April 1996), p. 593.

3 U.S. Department of State, Country Reports on Human Rights Practices for 1996 (Washington: U.S.

Government Printing Office, February 1997), p. 639.

4 U.S. Department of State, Country Reports on Human Rights Practices for 1997 (Washington: U.S.

Government Printing Office, March 1998), p. 738.

II-19

CHINA1

MINIMUM WAGE

In compliance with the 1995 China’s Labor Law, all provinces, autonomous regions and municipalities set

a minimum wage for each state enterprise under their jurisdiction. Thus, minimum wage rates vary across

provinces, with different rates for urban and rural areas. The wage is set following consultations with local

Ministry of Labor and Social Security officials, representatives of local enterprises, and trade unions.

Factors considered include: 1) minimum standard of living; 2) average local salary; 3) enterprise

productivity; 4) unemployment and lay-off rate; and 5) the level of local economic development. The

proposed wage is submitted to the provincial government for approval and subsequently recorded by the

State Council. The wage may be adjusted no more than once a year.

In 1995, the minimum wage in Beijing was 240 yuan (¥), about 29 U.S. dollars (US$), per month; in

Zhuhai, it was ¥380 (US$46) per month. In poorer, rural areas, minimum-wage levels were as low as

¥120 (US$14) per month.2 In December 1996, the minimum wage in Beijing was raised to ¥270

(US$32.50) per month; in Shenzen’s and Zhuhai’s Special Economic Zones, it was ¥398 (US$48) per

month; in rural areas, it remained as low as ¥120 (US$14) per month.3

In 1997, the minimum wage in Beijing was ¥270 (US$32.50) per month; in Shenzhen’s and Zhuhai’s

Special Economic Zones, it was ¥240 (US$29) per month; for other parts of Guangdong province, the rate

was ¥320 (US$39) per month. In Hebei province, the minimum wage was ¥140 (US$17) per month in

urban areas, and ¥100 (US$12) per month in rural areas. In Jiangsu province, the minimum wage was

¥280 (US$34) for urban areas and ¥210 (US$25) for all rural areas.4 Minimum-wage figures do not

include free or heavily subsidized benefits which some state-sector employers may provide in kind, such

as housing, medical care, and education.

The government reduced the national standard workweek in 1995 from 44 hours to 40 hours, excluding
5

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 870.

6

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

7

International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 743.

II-20

overtime. The Labor Law mandates a weekly 24-hour rest period and does not allow overtime in excess

of 3 hours a day or 36 hours a month. It also sets forth a required scale of remuneration for overtime

work.5

PREVAILING OR AVERAGE WAGE

For non-state businesses—private, joint ventures, and foreign funded—the salary is decided in collective

consultation with representatives from the enterprise, local workers' congress, and trade union. The salary

may not be lower than what has been set for state-owned enterprises in the area. The wage in both state

and non-state enterprises may be adjusted no more than once a year.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in China for all employees in the manufacturing sector and

average monthly occupational wages for female and male sewing machine operators in apparel

manufacturing and machine sewers in footwear manufacturing. Earnings data for the manufacturing sector

include pay for time worked, paid leave, bonuses, and other benefits paid directly to the employee, but not

the cost of social insurance programs.6 Wages in the apparel and footwear occupations include basic

wages and cost of living allowances, but exclude overtime pay, bonuses, family allowances, in-kind

supplements, and payments for social security. Average monthly hours worked by production workers

in manufacturing were 157.1 for the years 1991 through 1997.7 No data were available from the ILO for

average monthly hours worked by production workers in the apparel or footwear industries. Current

average earnings, which are reported by the ILO in the national currency, were converted to US$ using

the annual average exchange rate published in the International Monetary Fund’s International Financial

Statistics (March 1999). To track changes in real earnings (i.e., earnings adjusted for inflation), a real

earnings index was computed by deflating current earnings in the national currency with the annual average

national consumer price index as published in the International Monetary Fund’s International Financial

Statistics (March 1999), indexed to 1990 = 100.
8

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 78-80. See also, Anne Stevenson-Yang and Steven Shi, Weaving a Social

Safety Net: Labor Developments in China, 1996-1998 (Washington: The U.S.-China Business Council, February 1999),

for more detailed discussion of provincial and local benefits programs in China. 

II-21

Average Monthly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparela Footwearb Real Earnings Index (¥; 1990=100) 

 All Workers Female Workers Male Workers Female Workers Male Workers Manuf. Apparel Footwear

 (¥) (US$) (¥) (US$) (¥) (US$) (¥) (US$) (¥) (US$) All Workers Female Workers Male Workers Female Workers Male Workers

1990 172.25 86.13 170.4 85.20 206.6 103.30 181.9 90.95 191.4 95.70 100 100 100 100 100

1991 190.75 57.24 186.4 55.94 268.7 80.64 228.8 68.66 338.0 101.43 93 91 109 105 148

1992 219.58 65.77 153.9 46.10 163.0 48.82 173.4 51.94 121.1 36.27 94 66 58 70 46

1993 279.00 82.75 241.1 71.50 264.6 78.47 353.3 104.78 na na 106 93 84 127 na

1994 356.92 105.26 410.3 121.00 251.0 74.02 203.9 60.13 200.7 59.19 126 146 74 68 64

1995 430.75 127.06 444.6 131.15 na na 277.4 81.83 na na 131 137 na 80 na

1996 470.17 138.78 684.5 202.04 na na 350.7 103.51 385.0 113.64 133 196 na 94 98

1997 494.42 145.93 647.0 190.97 na na 388.5 114.67 533.9 157.59 134 177 na 100 130

__________________________________________________________________________________________________________________________________________________________

Note: a = sewing machine operator–manufacture of wearing apparel; b = shoe sewer (machine)–manufacture of footwear. na = not available. The number of cities covered for monthly

earnings in apparel and footwear varies from year to year.

Source: All manufacturing from ILO, Yearbook of Labour Statistics, 1998, p. 902; apparel and footwear from ILO, Statistics on Occupational Wages and Hours of Work and on Food Prices,

October Inquiry Results, Special [Annual] Supplement to the Bulletin of Labour Statistics, various years.

NON-WAGE BENEFITS

According to government regulations, all enterprises must provide their workers with: 1) paid annual leave

for government holidays, marriage, and death in the family; 2) monetary subsidies to reduce the cost of

living for expenditures on items such as heating, grain, and health care; 3) “collective welfare facilities” such

as canteens, nursery schools, barber shops, health clinics, and dormitories for singles; and 4) cultural and

recreational benefits such as libraries, gymnasiums, etc. In some provinces, state-owned enterprises are

now no longer required to provide certain social services (such as schooling) that formerly were provided

to workers and their families. There are no tax credits targeted specifically for apparel workers.

A U.S. Social Security Administration survey8 elaborates on several non-wage benefit programs in China:

(1) old age, disability, and death benefits, begun in 1951, are provided by local governments or through

an employer-provided plan with the insured persons paying basic pension insurance up to 3-5 percent of

their earnings base and for individual retirement accounts 3-8 percent of earnings, employers pay basic

pension insurance averaging 20 percent of payroll and for individual retirement accounts up to 11 percent

of payroll, and local governments pay subsidies as needed; (2) sickness and maternity benefits, initially

provided for in 1951, are separate employer-provided programs based on central government guidelines

with insured persons paying up to 1 percent of earnings, employers paying an average of 10 percent of

payroll, and central and local governments contributing subsidies as needed; (3) work injury benefits, also

begun in 1951, are separate employer -provided programs based on central government guidelines for

which the employer pays the whole cost, with central and local governments contributing subsidies as

needed; and (4) unemployment insurance, which began to be offered in 1986, is a provincial city/county

social system based on central government guidelines where the employer pays up to 2 percent of wages

and workers contribute up to 1 percent of their wages, depending upon local government provisions.
9

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 26-28.

10 The estimates are referenced as originating from the World Bank, China: Strategies for Reducing Poverty

in the 1990s, Report No. 10409-CHA (Washington: World Bank, 1992), pp. 146-147. The estimates are based on annual

household surveys conducted by the State Statistical Bureau (SSB). The food component of the subsistence basket

includes modest quantities of vegetable oil, vegetables, pork, and eggs, plus a little more than 0.5 kilograms of grain per

day. Grain foods supply 90 percent and non-grain foods supply 10 percent of the subsistence diet of 2,150 calories per

capita per day. For the urban poverty line, the actual prices paid by the low- income urban population have been imputed

in most cases from the SBB survey data. For the rural poverty line, the State plan prices of grain are used. While the

plan prices are lower than the prices actually paid, this is compensated for by the fact that the survey data tend to

considerably underestimate actual rural income. Non-food subsistence goods are accounted for by inflating food costs

II-22

ASSESSING BASIC NEEDS: THE POVERTY LINE

The central government has set the poverty line at a per capita annual income of ¥500 (US$60). The

purchasing power of ¥500 is estimated to be about US$1,201 with even greater purchasing power in rural

areas. It must be noted that currently the government publicly maintains that there is no urban poverty.

As of the end of 1998, city and provincial governments (with input from local representatives of the

Ministries of Finance, Labor and Social Security, Civil Affairs, and the All China Federation of Trade

Unions) have established a minimum standard of living for 536 of China's 660 urban areas. It is expected

that such standards for all areas will be set by no later than the middle of 1999. This standard, which varies

from city to city, takes into account local conditions such as available subsidies for food, housing, health

care and schooling, as well as the local retail price index. For example, in Beijing the minimum living

standard is ¥200 (US$24) per month per family member. In contrast, Hangzhou in Zhejiang province, has

set a standard of ¥165 (US$20) per month per family member. In September 1999, the central

government raised the minimum living standard nationwide by 30 percent.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization9 reports several sets of measures of a national poverty line for China:

! For 1981, 24.3 percent of the rural Chinese population was below the rural poverty line of ¥158

per capita per year and 1.9 percent of the urban population was below the urban poverty line of

¥171 per capita per year, with a national poverty line of ¥161 per capita per year and a national

poverty rate of 19.8 percent; and

for 1990, 11.5 percent of the rural population was below the rural poverty line of ¥275 and 0.4

percent of the urban population was below the urban poverty line of ¥321 per capita per year, with

a national poverty line of ¥287 per capita per year and a national poverty rate of 8.6 percent.

The poverty line is defined as the expenditure level below which basic needs (including a

subsistence diet which provides 2,150 calories per capita per day) cannot be satisfied.10
by the reciprocal of food’s estimated budget share for low-income households. See Tabatabai, Statistics on Poverty and

Income Distribution: An ILO Compendium of Data, p. 147

11 The estimate is referenced as originating from Shashou Chen, Gaurav Datt, and Martin Ravallion, “Is Poverty

Increasing in the Developing World?” Policy Research Working Paper WPS 1146 (Washington: World Bank, 1993).

This study uses essentially the same methodology as the World Bank’s World Development Report 1990, but with

updated purchasing power parity rates. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 137.

12 World Bank, World Development Indicators 1999 (Washington: World Bank, 1999), p. 66.

13 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 870.

II-23

! for 1990, 13.5 percent of the Chinese population was below the poverty line of US$30.42 per

capita per month (i.e., US$1 per day) in 1985 purchasing power parity adjusted US$.11

The World Bank reports12 that, in 1996, 6.0 percent of the Chinese population was below the national

poverty line, with less than 2 percent of the urban population and 7.9 percent of the rural population living

under the national poverty line; comparable figures for 1994 were 8.4, less than 2, and 11.8 percent,

respectively. In terms of international poverty line, the World Bank reports that 57.8 percent of the

Chinese population was below the international standard of US$2 per person per day and 22.2 percent

was below the standard of US$1 per person per day, both in 1985 purchasing power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in China meet workers’ basic needs. The U.S. Embassy reports that the Chinese

Ministry of Labor and Social Security sets the minimum wage level higher than the local poverty relief

ceiling, but lower than the current wage level of the average worker.13 Although there have been a number

of articles in the Chinese press about the minimum standard of living, the U.S. Embassy is aware of no

formal published studies on the living wage.
1Unless noted otherwise, information presented here is from American Embassy—Bogota, unclassified telegram

No. 2373 (March 5, 1999).

2 U.S. Department of State, Country Reports on Human Rights Practices for 1993 (Washington: U.S.

Government Printing Office, February 1994), p. 402.

3

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 570.

II-24

COLOMBIA1

MINIMUM WAGE

Colombian law defines the minimum wage as the minimum remuneration to which any worker has the right,

for rendering his or her services to an employer, for a period no shorter than the maximum legal workday

(8 hours) and workweek (48 hours). The minimum wage for part-time workers is proportional to hours

worked.

If the National Labor Council—which includes the Finance and Labor Ministers, the major union

confederations, the Industrial Association, the Small Businessmen’s Association, and the Agricultural

Society—fails to reach an agreement, the government sets the rate.2 The 1999 monthly minimum wage is

236,440 Colombian pesos (C$), approximately 152 U.S. dollars (US$), or C$7,881.3 (US$5.07) per

day. The table below gives the minimum wage rate for earlier years. Failure of employers to comply with

minimum wage requirements can be penalized with fines from one to one hundred times the minimum

monthly wage.

Monthly Minimum Wage Rates, 1992-1999

Year C$ US$ 

1993 98,700 114.36

1994 107,000 126.65

1995 118,000 129.27

1996 140,000 135.05

1997 172,682 151.35

1998 203,826 142.93

1999 236,440 152.00

_________________________________________

Note: Rates may not apply for the entire year.

Source: U.S. Department of State, Country Reports on

Human Rights Practices, 1993-98, Colombia, section 6e.

The law provides for a standard workday of 8 hours and a 48-hour workweek, but it does not require

specifically a weekly rest period of at least 24 hours, a failing criticized by the International Labor

Organization.3
4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

5

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 733.

II-25

PREVAILING OR AVERAGE WAGE

According to ASCOLTEX (the Colombian Textile and Apparel Producers’ Association), most large

companies in the apparel and footwear sectors actually pay more than the minimum wage to their workers;

only a few pay just the minimum wage, plus mandatory payments to the government (amounting to roughly

50 percent of salary). However, according to this same source, medium and small companies often violate

legal requirements and pay less than the minimum wage, in many cases without the mandatory social

security allowances. There are no available official statistics on the number of medium and small companies

that fail to comply with the minimum wage. In real terms, average wages deceased 2.3 percent and 2.9

percent, respectively, in the apparel and footwear sectors in 1998.

Under Colombia’s labor code, a worker’s salary includes all that is given to the worker as compensation

for services rendered to an employer, including bonuses, overtime, commissions, payment for work during

mandatory holidays, and permanent per diem expenses. The value of salary can be settled as a fixed

amount, a percentage of sales or collections (as long as it is no less than the legal minimum salary), or part

in cash and part in kind payments. Payments in kind may not exceed 50 percent of the total salary; for a

worker earning the minimum salary, his or her payments in kind may not exceed 30 percent of the total.

This law applies equally to employment in all industrial sectors, including apparel and footwear.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Colombia for all employees in the manufacturing sector and

in the apparel and leather footwear industries. They include pay for time worked, paid leave, bonuses, and

other benefits paid directly to the employee, but not the cost of social insurance programs.4 Average hours

worked per week for all employees in the manufacturing sector were 47.5 for the years 1991 through

1997;5 average weekly hours worked were not available from the ILO for the apparel and footwear

industries. Current average earnings, which are reported by the ILO in the national currency, were

converted to US$ using the annual average exchange rate published in the International Monetary Fund’s

International Financial Statistics (March 1999). To track changes in real earnings (i.e., earnings

adjusted for inflation), a real earnings index was computed by deflating current earnings in the national

currency with the annual average national consumer price index as published in the International Monetary

Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.
6Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 81-83.

II-26

Average Monthly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (C$: 1990=100)

 (C$) (US$) (C$) (US$) (C$) (US$) Manuf. Apparel Footwear

1990 98,730 197 57,040 114 65,209 130 100 100 100

1991 140,031 221 62,317 98 83,718 132 109 84 98

1992 167,106 220 97,838 129 108,131 142 102 104 100

1993 217,741 252 129,274 150 141,578 164 109 112 107

1994 271,109 320 160,064 189 174,918 207 109 112 107

1995 326,421 358 176,961 194 197,182 216 109 102 99

1996 na na na na na na na na na

1997 na na na na na na na na na

_____________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 886.

NON-WAGE BENEFITS

Social security benefits paid to workers by the employer (in addition to salary) as provided by law include:

• bonuses (a month’s salary for each year of work, to be paid in equal amounts every six months);

• severance payments (one month’s salary for each year worked);

• annual leave (15 remunerated business days after one year of service); 

• payments to social security institutions (e.g., the general pension system, general health system, and

professional risks system);

• payments for labor-related accidents;

• payments for professional sickness; and 

• family compensation allowances.

These additional payments approximate 50 percent of the paid wage.

A U.S. Social Security Administration survey6 elaborates on five different non-wage benefit programs in

which employers are required to participate for their employees: (1) old age, disability, and death benefits,

implemented in 1965, is a parallel social insurance and private insurance program with insured persons
7

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 56-57.

8

 The estimates are referenced as originating from special tabulations prepared for the ILO in 1995 by the

Economic Commission for Latin America and the Caribbean (ECLAC), which updated previous estimates in ECLAC,

Magnitud de la Pobreza en América Latina en los Años Ochenta (Santiago: ECLAC, 1990), pp. 24; 115; 116. The

tabulations are based on household surveys and use a methodology that sets poverty lines based on the minimum per

capita food-energy needs for age- and sex-specific minima as recommended by the FAO/WHO. The composition of the

food basket takes into account the prevailing national dietary habits. The cost of the minimum food basket is evaluated

using retail prices for the lowest quality varieties in the capital city or its metropolitan area (prices prevailing in other

cities and in rural areas were generally unavailable). Minimum food budgets for other urban areas are set at 5 percent

below the capital's, and for rural areas at 25 percent below the capital's. Averages for urban areas and at the nation level

are calculated using population weights. To reflect minimum expenditures on non-food needs, the urban poverty line

II-27

paying 3.375 percent of earnings, employers paying 10.125 percent of payroll, and the government pays

a partial subsidy to a solidarity fund; (2) sickness and maternity benefits, first appeared in 1938, and the

insured person pays 4 percent of earnings, the employer pays 8 percent of payroll, and the government

funds the program for low earners through a solidarity fund; (3) work injury benefits, begun in 1915, is a

social insurance system in which the employer bears the entire cost, paying from 0.348 percent to 8.7

percent of payroll according to risk; (4) for unemployment insurance, the labor code requires employers

to provide one month’s severance pay, with more depending upon length of service; and (5) family

allowances, first appearing in 1957, are employment-related, with the employer contributing 4 percent of

payroll for these benefits.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The poverty line in Colombia is defined as the minimum income necessary to satisfy an individual’s basic

needs for subsistence, particularly but not exclusively for food needs. In order to determine the minimum

income, per capita nutrition requirements are established and compared to food prices and the relative

share of food expenditures out of total expenditures. This indicator, however, is arbitrary and is normally

used with other relative indicators like those measuring income distribution.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization7 reports several sets of measures of a national poverty line for Colombia:

! for 1980, 47.7 percent of the rural Colombian population was below the rural poverty line of a

monthly per capita budget of C$12,511 in second half of the year 1988 prices and 39.7 percent

of the urban Colombian population was below the urban poverty line of a monthly per capita

budget of C$17,598 in second half of the year 1988 prices, with a national poverty rate of 42.3

percent; for 1986, 44.5 percent of the rural population was below the same rural poverty line and

40.2 percent of the urban population was below the same urban poverty line, with a national

poverty rate of 41.6 percent. A more recent estimate for the urban population shows that 43

percent of the urban population was below the urban poverty line in 1992.8
is set at double the corresponding minimum food budget, and the rural poverty line at 75 percent above the cost of the

rural minimum food basket. The poverty lines in national currencies were not provided in the ILO compendium. The

ECLAC methodology is discussed more fully in J.C. Feres and A. León, “The Magnitude of Poverty in Latin America,”

CEPAL Review, No. 41 (August 1990), pp. 133-151. See Tabatabai, Statistics on Poverty and Income Distribution: An

ILO Compendium of Data, p. 137.

9

 The estimates are referenced as originating from the International Labour Organization’s Regional Employment

Programme for Latin America and the Caribbean (ILO/PREALC), Colombia: La Deuda Social en los Años 80 (Santiago:

ILO/PREALC, 1990), but not further information is provided in the ILO compendium.

10 The estimates are referenced as originating from George Psacharopoulos, Samuel Morely, Ariel Fiszbein,

Haeduck Lee, and Bill Wood,Poverty and Income Distribution in Latin America: The Story of the 1980s, Latin America

and the Caribbean Technical Department, Regional Studies Program, Report No. 27 (Washington: World Bank, 1993),

pp. 62-69. The study is based on national-level household surveys compiled by the Economic Commission for Latin

America and the Caribbean (ECLAC) and the World Bank. The poverty lines, in 1985 purchasing power parity adjusted

US$, were converted into national currencies, but were not provided in the ILO compendium. See Tabatabai, Statistics

on Poverty and Income Distribution: An ILO Compendium of Data, p. 138.

11 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 196.

II-28

! for 1988, 68 percent of the rural Colombian population was below the poverty line, compared to

85 percent in 1978, and 38.3 percent of the urban Colombian population was below the poverty

line, compared to 43.7 percent in 1982.9

! for 1980, 13.0 percent of the urban Colombian population was below the poverty line of a monthly

per capita income of US$60 in 1985 purchasing power parity adjusted US$; for 1989, 8.0 percent

of the urban population was below the same poverty line.10

The World Bank reports11 that, in 1992, 17.7 percent of the Colombian population was below the national

poverty line, 8.0 percent of the urban population and 31.2 percent of the rural population were living below

the national poverty line; corresponding figures for 1991 were 16.9, 7.8, and 29.0 percent, respectively.

In 1991, 21.7 percent of the Colombian population was below the international poverty line of US$2 per

person per day and 7.4 percent of the population was below the international poverty line of US$1 per

person per day, both in 1985 purchasing power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Colombia meet workers’ basic needs. Some information from U.S. Department of

State or U.S. Embassy reports indicates more generally that the minimum wage is not sufficient to provide

a decent standard of living for a worker and family in Colombia. The U.S. State Department notes that

the monthly minimum wage is based on the government’s target inflation rate, but has not kept up with

actual inflation in recent years. By government estimates, the price of the family shopping basket is 2.4

times the minimum wage. However, 77 percent of all workers earn no more than, and often much less than,
12 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 570.

II-29

twice the minimum wage.12 The U.S. Embassy was not able to identify any studies on the living wage in

Colombia.
1Unless noted otherwise, information presented here is from American Embassy—San Jose, unclassified

telegram No. 517 (March 1, 1999).

2

 Gerald Starr, Minimum Wage Fixing: An International Review of Practices and Problems (Geneva:

International Labour Office, 1981; second printing with corrections, 1993), p. 7.

3

 Gerald Starr, Minimum Wage Fixing: An International Review of Practices and Problems (Geneva:

International Labour Office, 1981; second printing with corrections, 1993), p. 31.

4

 American Embassy–San Jose, Foreign Labor Trends: Costa Rica, 1989, FT-90-33 (Washington: U.S.

Department of Labor, 1990), p. 4.

5

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 576.

6

 For more information on minimum wages in Costa Rica, see International Labour Organization (ILO), “Minimum

Wage Fixing in Costa Rica,” Labour Law and Labour Relations Branch (LEG/REL) Briefing Note No. 10 (Geneva:

International Labour Organization, 1997), which is also available on the ILO’s web site:

<http://www.ilo.org/public/english/80relpro/legrel/papers/brfnotes/minwages/costarr2.htm>.

II-30

COSTA RICA1

MINIMUM WAGE

Minimum wage legislation was first passed in Costa Rica in 1943.2 A national minimum wage board was

created in 1949 to consolidate a decentralized system of regional wages boards.3 From 1949 to 1974,

minimum wages were usually set every two years. In response to pressure to adjust real wages to the

accelerating inflation rate, the National Wage Council began in 1974 to adjust minimum wages annually and

to use explicitly the consumer price index as a guide. Minimum wages began to be revised twice a year

in 1986.4 Until 1988, there were approximately 350 different occupational/industrial minimum wages

specified in legislation, when the number was reduced to about 200. In 1990, there was a further

simplification to about 80 categories. All full-time private- and, since 1984, public-sector employees are

legally covered by minimum wages. Public sector negotiations, based on private sector minimum wages,

normally follow the settlement of private sector negotiations.5

Currently, minimum wages for all sectors are set by the National Wage Council, composed of three

members each from government, business and labor. Under exceptional circumstances, e.g., concerted

pressure from organized labor, wages can be adjusted more frequently. The Wage Council is a legal entity

established by law; its findings are binding on the private sector. The minimum wage for each occupation

that employers are obliged to pay is published in the official gazette.6 The Ministry of Labor supervises

compliance. The Ministry of Labor effectively enforces minimum wages in the San Jose area, but less
7

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 576.

8

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

9

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 734.

II-31

effectively in rural areas.7

Current minimum wages are effective from January 1 to June 30, 1999. The minimum salary paid to a

worker in the footwear and apparel industry is 73,258 colones (C), approximately 266 U.S. dollars (US$)

per month based upon a 40 hour workweek. The following table presents the monthly minimum wage rates

for domestic employees and professionals for the years 1993-98.

Monthly Minimum Wage Rates for Domestic Workers and Professionals

Consumer Real Minimum Wage Index

Year Domestic Workers Professionals Price Index (C; 1993=100) 

 (C) (US$) (C) (US$) (1993=100) Domestic Workers Professionals

1993 16,829 118 81,501 573 100.0 100 100

1994 18,176 116 88,023 560 113.5 95 95

1995 21,928 122 106,282 591 139.9 93 93

1996 25,636 123 124,255 598 164.4 93 93

1997 30,179 130 146,274 629 186.1 96 96

1998 34,440 134 166,700 648 207.1 98 98

_________________________________________________________________________________________________________

Source: U.S. Department of State, Country Reports on Human Rights Practices for 1993-97, Costa Rica 

Country Report (Washington: U.S. Government Printing Office, 1994-98), section 6e.

PREVAILING OR AVERAGE WAGE

The prevailing industrial wage is approximately C85,258 (approximately US$310) per month. Overtime

is paid at 1.5 times these rates. The average labor income in Costa Rica is approximately US$200 per

month.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Costa Rica for all employees in the manufacturing sector and

in the apparel and leather footwear industries. They include pay for time worked, paid leave, bonuses, and

other benefits paid directly to the employee, but not the cost of social insurance programs.8 Average hours

worked per week by all employees were 49.1 in all manufacturing, 48.4 in apparel, and 48.1 in footwear

and leather goods for the years 1990 through 1997.9 Current average earnings, which are reported by the
II-32

ILO in the national currency, were converted to US$ using the annual average exchange rate published in

the International Monetary Fund’s International Financial Statistics (March 1999). To track changes

in real earnings (i.e., earnings adjusted for inflation), a real earnings index was computed by deflating current

earnings in the national currency with the annual average national consumer price index as published in the

International Monetary Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Monthly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (C; 1990=100)

 (C) (US$) (C) (US$) (C) (US$) Manuf. Apparel Footwear

1990 20,037 219 15,532 170 17,039 186 100 100 100

1991 27,229 222 21,652 177 17,803 145 106 108 81

1992 32,949 245 26,656 198 23,161 172 105 109 87

1993 38,631 272 30,828 217 28,752 202 112 115 98

1994 44,720 285 35,023 223 36,370 232 114 115 109

1995 54,365 302 45,105 251 53,656 299 113 121 131

1996 63,894 308 53,629 258 43,282 208 113 122 90

1997 75,672 325 61,055 262 69,600 299 118 123 128

________________________________________________________________________________________________________

_____

Source: ILO, Yearbook of Labour Statistics, 1998, p. 886.

NON-WAGE BENEFITS

Government mandated non-wage benefits for workers in the apparel and footwear industries, paid by the

employer, are as follows (as percentage of the wages paid to the employee):

Health and maternity benefits 9.25 percent

Disability, old age, and death benefits 4.75 percent

Family allowances (welfare) benefits 5.00 percent

Vocational school tax (INA) 2.00 percent

Workers' savings bank 0.50 percent

Social assistance tax (IMAS) 0.50 percent

Occupational hazard insurance (INS) 3.75 percent

Christmas bonus (13th month of pay) 8.33 percent

Paid vacations 4.17 percent

Official holidays 4.17 percent

Reserve for termination and severance 8.33 percent

Total mandatory benefits plus reserves 50.75 percent

Employees contribute a total of 9 percent of their wages to their benefits plan via payroll deductions.
10Social Security Administration, Social Security Programs Throughout the World-1997 (Washington: U.S.

Government Printing Office, August 1997), p. 88-89.

11 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 57-59.

12 The estimates are referenced as originating from special tabulations prepared for the ILO in 1995 by the

Economic Commission for Latin America and the Caribbean (ECLAC), which updated previous estimates in ECLAC,

Magnitud de la Pobreza en América Latina en los Años Ochenta (Santiago: ECLAC, 1990), pp. 24; 115. The tabulations

are based on household surveys and use a methodology that sets poverty lines based on the minimum per capita foodenergy needs for age- and sex-specific minima as recommended by the FAO/WHO. The composition of the food basket

takes into account the prevailing national dietary habits. The cost of the minimum food basket is evaluated using retail

prices for the lowest quality varieties in the capital city or its metropolitan area (prices prevailing in other cities and in

rural areas were generally unavailable). Minimum food budgets for other urban areas are set at 5 percent below the

II-33

A U.S. Social Security Administration survey10 elaborates on four different non-wage benefit programs in

which employers in Costa Rica are required to participate for their employees: (1) a social insurance

program, started in 1943, which covers sickness and maternity, for which the insured person pays 5.5

percent of earnings, the employer pays 9.25 percent of payroll, and the government pays 0.25 percent of

total covered earnings; (2) a social insurance system, started in 1941, which provides old age, disability,

and death insurance, for which the insured person pays 2.5 percent of earnings, the employer pays 4.75

percent of payroll, and the government pays 0.25 percent of total covered earnings; (3) a family allowance

program, started in 1974, which provides assistance for those not meeting qualifications for other pensions,

for which the employer pays 5 percent of payroll and the government pays a percent yield of the sales tax;

and (4) a work injury program, started in 1925, which is a mixed compulsory and voluntary insurance

program with a public carrier, for which the employers pay the whole cost and premiums vary according

to risk.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The U.S. Embassy reports that the poverty line in Costa Rica is approximately US$100 per month for a

family of five.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization11 reports several sets of measures of a national poverty line for Costa Rica:

! for 1981, 28.4 percent of the rural Costa Rican population was below the rural poverty line of a

budget of C2,766 per capita per month in second half of the year 1988 prices and 18.2 percent

of the urban Costa Rican population was below the urban poverty line of a monthly per capita

budget of C4,002 in second half of the year 1988 prices, with a national poverty rate of 23.6

percent; for 1992, 28 percent of the rural population was below the rural poverty line and 27

percent of the urban population was below the urban poverty line, with a national poverty rate of

28 percent.12
capital's, and for rural areas at 25 percent below the capital's. Averages for urban areas and at the nation level are

calculated using population weights. To reflect minimum expenditures on non-food needs, the urban poverty line is set

at double the corresponding minimum food budget, and the rural poverty line at 75 percent above the cost of the rural

minimum food basket. The poverty lines in national currencies were not provided in the ILO compendium. The ECLAC

methodology is discussed more fully in J.C. Feres and A. León, “The Magnitude of Poverty in Latin America,” CEPAL

Review, No. 41 (August 1990), pp. 133-151. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 137.

13 The estimates are referenced as originating from George Psacharopoulos, Samuel Morely, Ariel Fiszbein,

Haeduck Lee, and Bill Wood, Poverty and Income Distribution in Latin America: The Story of the 1980s, Latin America

and the Caribbean Technical Department, Regional Studies Program, Report No. 27 (Washington: World Bank, 1993),

Tables 13.1and 13.2 and pp. 62-69. The study is based on national-level household surveys compiled by the Economic

Commission for Latin America and the Caribbean (ECLAC) and the World Bank. The poverty lines, in 1985 purchasing

power parity adjusted US$, were converted into national currencies, but were not provided in the ILO compendium. See

Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 138.

14 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 196.

15 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 576.

II-34

! for 1981, 16.7 percent of the rural Costa Rican population and 9.9 percent of the urban Costa

Rican population were below the national poverty line of monthly per capita income of US$60 in

1985 purchasing power parity adjusted US$, with a national poverty rate of 13.4 percent; for

1989, 3.2 percent of the rural population and 3.5 percent of the urban population were below the

same poverty line, with a national poverty rate of 3.4 percent.13

The World Bank reports14 that, in 1989, 43.8 percent of the Costa Rican population was below the

international poverty line of US$2 per person per day and 18.9 percent of the population was below the

international poverty line of US$1 per person per day, both in 1985 purchasing power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Costa Rica meet workers’ basic needs. Some information from U.S. Department of

State or U.S. Embassy reports indicates more generally that, especially at the lower end of the wage sale,

the minimum wage in Costa Rica is insufficient to provide a worker and a family a decent standard of

living.15

The U.S. Embassy identified two publications that address issues related to wages in Costa Rica:

! Proyecto Estado de la Nación, “Estado de la Nación en Desarrollo Humano Sostenible,” funded

by the United Nations Development Programme (UNDP), available on the Internet at
II-35

<http://www.estadonacion.or.cr>; and

! Ministerio de Economía e Industria, “Encuesta de Hogares,” San Jose, no date.
1Unless noted otherwise, information presented here is from American Embassy—Santo Domingo, unclassified

telegram No. 1150 (March 4, 1999).

II-35

DOMINICAN REPUBLIC1

MINIMUM WAGE

The minimum wage in the Dominican Republic is set by a National Salary Committee appointed by the

President. The Committee reports to the Secretariat of Labor and its Director General. In order to change

the minimum wage, the Director General, two Committee members appointed by the President, and special

Committee members that represent labor and management hold hearing and then publish proposed

minimum wages. The special Committee members are appointed by the Director General, based on the

recommendation of labor and management organizations.

Employers and workers have 15 days to register objections to a minimum wage recommendation with the

Secretary of Labor. If there are no objections, the new wages become law. If there are objections, the

Secretary of Labor considers them and either approves the new minimum wages (and they become law)

or send the recommendations back to the Committee for further consideration. The minimum wages must

be reviewed at least every two years.

The minimum wage rate established depends on the size of an employer and the nature of its business.

• Since July 29, 1997, the monthly minimum wage in the Free Trade Zones has been 1,932

Dominican Republic pesos (RD$) or about 120.75 U.S. dollars (US$) at the March 1999

exchange rate of RD$16 equal to US$1. 

• Since October 18, 1997, the monthly minimum wages for industrial, commercial, or service

companies have been RD$2,412 (US$150.75) for companies with capital assets of at least

RD$500,000 (US$31,250), RD$1,728 (US$108.00) for those with capital assets between

RD$200,000 and RD$500,000 (US$12,500 to 31,250), and RD$1,555 (US$97.19) for those

with capital assets of RD$200,000 or less.

• Since October 9, 1997, the monthly minimum wages for hotels, restaurants, bars, cafes and

other food service establishments have been RD$2,309 (US$144.31) for companies with capital

assets of more than RD$500,000 (US$31,250), RD$1,649 (US$103.06) for those with capital

assets between RD$200,000 and RD$500,000 (US$12,500 to 31,250), and RD$1,485

(US$92.81) for those with capital assets of RD$200,000 or less.

• Since May 30, 1998, the hourly minimum wages for manufacturers/repairers of shoes, purses,
2

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 607.

3American Embassy—Santo Domingo, unclassified telegram No. 2647 (June 2, 1998).

4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

5

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 737

II-36

bags, belts, etc. outside of the Free Trade Zones have been RD$10.80 (US$0.675) for

companies with capital assets of at least RD$300,000 (US$18,750) and RD$8.64 (US$0.54) for

those with capital assets under RD$300,000.

• The current monthly minimum wage for public sector workers, which is set directly by Presidential

Decree, is RD$1,500 (US$93.75).

• There are also minimum wages for other specific groups (e.g., for security guards or employees

of non-profit organizations), but the wages given above cover the majority of workers employed

in the formal sector.

The Labor Code establishes a standard work period of 8 hours per day and 44 per week. The code also

stipulates that all workers are entitled to 36 hours of uninterrupted rest each week. In practice, a typical

workweek is Monday through Friday plus half a day on Saturday, but longer hours are not unusual. The

code grants workers a 35 percent differential for work totaling between 44 to 68 hours per week and

double time for any hours above 68 hours per week.2

PREVAILING OR AVERAGE WAGE

No information on the prevailing or average wage in the manufacturing sector or the footwear and apparel

industries was provided by the U.S. Embassy, but the Labor Secretariat maintains some aggregate labor

statistics on its web site <http://www.set.gov.do>.3

The table below presents available data from the International Labor Organization (ILO) on average hourly

earnings (direct wages per worker) in the Dominican Republic in for all employees in the manufacturing

sector; data were not available for the apparel and footwear industries. Earnings data include pay for time

worked, paid leave, bonuses, and other benefits paid directly to the employee, but not the cost of social

insurance programs.4 Average hours worked per week by all employees in manufacturing were 44.1 for

the years 1991 through 1997.5 Current average earnings, which are reported by the ILO in the national
6

Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 108-109.

II-37

currency, were converted to US$ using the annual average exchange rate published in the International

Monetary Fund’s International Financial Statistics (March 1999). To track changes in real earnings

(i.e., earnings adjusted for inflation), a real earnings index was computed by deflating current earnings in

the national currency with the annual average national consumer price index as published in the International

Monetary Fund’s International Financial Statistics (March 1999), indexed to 1991 = 100.

Average Hourly Earnings in All Manufacturing

Year All Manufacturing Real Earnings Index (RD$; 1991=100)

(RD$) (US$) Manufacturing

1990 na na na 

1991 10.4 0.82 100

1992 12.2 0.96 113

1993 11.3 0.89 99

1994 17.4 1.32 141

1995 16.6 1.22 119

1996 18.0 1.31 123

1997 21.6 1.51 136 

__________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 821.

NON-WAGE BENEFITS

Government mandated non-wage benefits for workers in the apparel and footwear industry do not differ

from those of other workers:

• Workers in the formal sector are entitled to 14 days of vacation per year and severance pay

equivalent to almost one month of pay per year of service. 

• Some workers receive health care through the Dominican Institute of Social Security (IDSS), a

government agency funded by workers, employers, and the government. The IDSS also pays and

employees a portion of their salary if they miss more than seven days of work due to illness/injury.

• In the Free Trade Zones, most companies have “collective vacations” in which the businesses close

during the December holiday season. The employees are obligated to use their 14 vacation days

at that time. Outside of the Free Trade Zones, it is more typical that employees take their vacation

days on the anniversary of their date of hire.

A U.S. Social Security Administration survey6 elaborates on three different non-wage benefit programs in

which employers in the Dominican Republic are required to participate for their employees: (1) old age,
7

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 59.

8

 The estimates are referenced as originating from the World Bank, Social Indicators of Development 1988

(Washington: World Bank, 1988). The poverty estimates are based upon an estimated absolute poverty income level

below which a minimal nutritionally adequate diet plus essential non-food requirements are not affordable. According

to the UN’s Food and Agriculture Organization (FAO), The Impact of Development Strategies on the Rural Poor (Rome:

FAO, 1988), p. 7, the poverty lines were determined by: (1) identifying the food basket consumed by low-income groups

in the country (taken to be the 20th percentile of the household income distribution); (2) estimating the quantities of that

food basket necessary to provide the minimum calories and proteins required for nutritional needs; (3) costing the

minimum food basket at appropriate retail market prices; and (4) adding the estimated monetary equivalent of essential

non-food needs (clothing, shelter, etc.). See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 139.

9

 The estimate is referenced as originating from Idriss Jazairy, Mohiuddin Alamgir, and Theresa Panuccio, The

State of World Rural Poverty: An Inquiry into Its Causes and Consequences (New York: New York University Press,

1992). The estimates in the study are based upon internal working documents or working papers of the International

Fund for Agricultural Development (IFAD) and are usually provisional and rounded to the nearest multiple of 5. In many

cases, the estimates do not appear to based on household survey data, but were included in the ILO compendium since

they relate to countries for which there were no other available estimates. See Tabatabai, Statistics on Poverty and

Income Distribution: An ILO Compendium of Data, p. 138.

II-38

disability, and death benefits were instituted in 1947 as a social insurance system and currently the insured

person pays 2.5 percent of earnings according to 15 different wage classes, the employer pays 7.5 percent

of payroll according to the wage classes, and government pays 2.5 percent of total taxable earnings and

any deficit; (2) sickness and maternity benefits, started in 1947, are financed in the same manner as for

pensions; and (3) work injury is covered under a law enacted in 1932, with the employer paying the entire

cost of the insurance based on risk factors—the average payment is about 2.5 percent of payroll.

ASSESSING BASIC NEEDS: THE POVERTY LINE

There are no current data available regarding the poverty line. The Central Bank last conducted a poverty

line study in 1989. The U.S. Embassy estimates that approximately 60 percent of the Dominican

population lives in poverty.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization7 reports several sets of measures of a poverty line for the Dominican Republic:

! for 1978, 43 percent of the rural Dominican population was below the rural poverty line of an

annual per capita income of US$263 and 45 percent of the urban Dominican population was below

the urban poverty line of an annual per capita income of US$451, with a national poverty rate of

44 percent.8

! for 1988, 78 percent of the rural Dominican population was below the poverty line.9
10 The estimates are referenced as originating from George Psacharopoulos, Samuel Morely, Ariel Fiszbein,

Haeduck Lee, and Bill Wood, Poverty and Income Distribution in Latin America: The Story of the 1980s, Latin America

and the Caribbean Technical Department, Regional Studies Program, Report No. 27 (Washington: World Bank, 1993),

pp. 62-69. The study is based on national-level household surveys compiled by the Economic Commission for Latin

America and the Caribbean (ECLAC) and the World Bank. The poverty lines, in 1985 purchasing power parity adjusted

US$, were converted into national currencies, but were not provided in the ILO compendium. See Tabatabai, Statistics

on Poverty and Income Distribution: An ILO Compendium of Data, p. 138.

11 The estimate is referenced as originating from Shaohua Chen, Gaurav Datt, and Martin Ravallion, “Is Poverty

Increasing in the Developing World?” Policy Research Working Paper WPS 1146 (Washington: World Bank, 1993).

The study follows the same methodology as that used by the World Bank in its World Development Report 1990 (i.e.,

using an international poverty line of US$1/US$2 a day per person in 1985 purchasing power parity adjusted US$), except

that the data base has been considerably expanded and the purchasing power parity rates updated. The poverty line

in the national currency was not provided in the ILO compendium. See Tabatabai, Statistics on Poverty and Income

Distribution: An ILO Compendium of Data, p. 137.

12 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 196.

II-39

! for 1989, 4.9 percent of the Dominican population was below the poverty line of a monthly per

capita income of US$30 in 1985 purchasing power parity adjusted US$; 24.1 percent of the

Dominican population was below the poverty line of a monthly per capita income of US$60 in

1985 purchasing power parity adjusted US$.10

! for 1989, 22.3 percent of the Dominican population was below the poverty line of US$30.42 per

person per month (i.e., US$1 per person per day) in 1985 purchasing power parity adjusted

US$.11

The World Bank reports12 that, in 1992, 20.6 percent of the Dominican Republic’s population was below

the national poverty line, with 10.6 percent of the urban population and 29.8 percent of the rural population

living below the national poverty line; corresponding figures for 1989 were 24.5, 23.3, and 27.4 percent,

respectively. In terms of the international poverty line, in 1989, 47.7 percent of the Dominican population

was below the standard of US$2 per person per day and 19.9 percent was below the standard of US$1

per person per day, both in1985 purchasing power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in the Dominican Republic meet workers’ basic needs. Some information from U.S.

Department of State or U.S. Embassy reports indicates more generally that the minimum wage in the

Dominican Republic does not provide a decent standard of living for a worker and family and, for example,

covers only a fraction of the living costs for a family in Santo Domingo, where many families receive only
13 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 606. 

14 Union of Needletrades, Industrial and Textile Employees (UNITE), A UNITE Report on Campus Caps Made

By BJ&B in the Dominican Republic (New York: UNITE, 1998), p. 6. This report is available on UNITE’s web site at:

<http://www.uniteunion.org/sweatshops/schoolcap/schoolcap.html>.

II-40

the minimum wage.13 No information on the living wage issue was provided by the U.S. Embassy.

A report by the Union of Needletrades, Industrial and Textile Employees (UNITE) states that:14

The base pay for a typical worker for a full 44-hour work-week amounts to [US]$30.54, or 69¢ per hour.2

This is only a of what the Dominican government estimates to be the necessary income for a typical

family to meet its basic needs.3

________________

2

 Take-home pay is lower, because of a legally required reduction of about 2.5% for social security (public health

care).

3

 Calculation done by Dominican economist Felipe Santos based on the Central Bank of the Dominican Republic’s

study, “Estudios sobre gastos e ingresos de la unidad familiar.”
1Unless noted otherwise, information presented here is from American Embassy—Cairo, unclassified telegram

No. 1827 (March 9, 1999).

2 American Embassy—Cairo, unclassified telegram No. 1913 (February 19, 1998).

3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

4

International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 729.

II-41

EGYPT1

MINIMUM WAGE

Minimum wages are set by a combination of law and Presidential Decree.2 Law 47 of 1978 established

a wage scale for public sector employees. Private sector wages generally follow or exceed public sector

wages. Wage increases are determined during consultations that occur after the government's June

announcement of its annual wage hikes. Representatives of business groups, trade unions, and the Ministry

of Manpower meet in informal discussions to determine what, if any, increase should occur in the private

sector. Agreements reached in these sessions are non-binding.

The current monthly minimum wage, set in January of 1999, is 116 Egyptian pounds (£E), or approximately

34 U.S. dollars (US$), based on a 6-day, 42 hour workweek. An increase in the minimum wage is set by

the government on an annual (or occasionally semi-annual) basis. 

PREVAILING OR AVERAGE WAGE

The average annual wage in the apparel and footwear industries is US$1,312.

The table below presents available data from the International Labor Organization (ILO) on average

weekly earnings (direct wages per worker) in Egypt for wage earners in the manufacturing sector and in

the apparel and footwear industries. They include pay for time worked, paid leave, bonuses, and other

benefits paid directly to the employee, but not the cost of social insurance programs.3 Average weekly

hours paid for production workers were 57 in all manufacturing, 55 in apparel, and 53.7 in footwear and

leather goods for the years 1990 through 1995.4 Current average earnings, which are reported by the ILO

in the national currency, were converted to US$ using the annual average exchange rate published in the

International Monetary Fund’s International Financial Statistics (March 1999). To track changes in real

earnings (i.e., earnings adjusted for inflation), a real earnings index was computed by deflating current

earnings in the national currency with the annual average national consumer price index as published in the

International Monetary Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.
5

 Social Security Administration,Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 112-114.

6

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 47-48.

II-42

Average Weekly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (£E; 1990=100)

 (£E) (US$) (£E) (US$) (£E) (US$) Manuf. Apparel Footwear

1990 54 18.98 30 10.54 34 11.95 100 100 100

1991 55 11.54 36 7.55 40 8.39 85 100 98 

1992 62 13.51 37 8.06 39 8.50 84 91 84

1993 70 15.11 39 8.42 41 8.85 85 85 79

1994 77 15.55 40 8.08 49 9.90 86 81 87

1995 84 16.67 45 8.93 54 10.72 81 79 83

1996 na na na na na na na na na

1997 na na na na na na na na na

___________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 875.

NON-WAGE BENEFITS

Minimum wage workers are estimated to receive around US$180 annually in fringe benefits and

allowances. There are no specific mandated non-wage benefits or tax credits for workers in the apparel

and footwear industries.

A U.S. Social Security Administration survey5 elaborates on four different non-wage benefit programs in

which employers must enroll their employees: (1) a social insurance system, begun in 1950, for old age,

disability, and death benefits, in which the insured person pays 14 percent of the basic wage and 11 percent

of the variable wage, employers pay 26 percent of the basic wage and 24 percent of the variable wage,

and the government pays 1 percent of the payroll plus any deficit; (2) for sickness and maternity benefits,

which were implemented in 1964, the insured person pays 1 percent of earnings, employers pay 4 percent

of the payroll, and the government pays nothing; (3) work injury benefits, which began in 1936 and into

which the employer pays 3 percent of the payroll and the insured person and the government pay nothing;

and (4) unemployment insurance, which is a compulsory insurance system, begun in 1959, into which the

employer pays 2 percent of payroll and the government covers any deficit.

ASSESSING BASIC NEEDS: THE POVERTY LINE

There is no officially accepted poverty line. A compendium of poverty and income distribution statistics

prepared by the International Labor Organization6 reports several sets of household poverty measures for

Egypt:

! for 1984, 34.0 percent of the urban Egyptian households were below the poverty line of annual per
7

 The estimates are referenced as originating from Karima Korayem, The Impact of Economic Adjustment

Policies on the Vulnerable Families and Children in Egypt (Cairo: United Nations Children’s Fund [UNICEF], 1987),

p. 46. The report presents separate estimates of income poverty lines for families in urban and rural areas, based on the

Family Budget Survey 1981/82. The methodology involved: (1) determinating the minimum required levels of calories

and protein for the average household in each area, based on FAO/WHO recommendations, and the age and sex

distribution of the respective populations (5.8/5.2 members per average rural/urban household); (2) determinating three

different types of typical diets in each area, using data on food consumption patterns from the national Nutrition

Institute; (3) estimating the minimum food expenditures by taking the average cost of the three diets in each area, using

the official food price lists published by the Egyptian Central Agency for Public Mobilisation and Statistics (CAPMAS)

and the Ministry of Supply; (4) estimating minimum expenditures by dividing food costs by relevant food expenditure

ratios from the survey; and (5) determinating the corresponding poverty line incomes. See Hamid Tabatabai, Statistics

on Poverty and Income Distribution: An ILO Compendium of Data, p. 156.

8

 The estimates are referenced as originating from a background paper by Hanaa Kheir-el-Din, “Assessment

of Poverty in Egypt Using Household Data,” mimeograph (1993), p.19, for the United Nations Economic and Social

Commission for Western Asia (ESCWA), A Conceptual and Methodological Framework for Poverty Alleviation in

the ESCWA Region, E/ESCWA/SED/1993/19 (December 19, 1993), p. 16. No further information is provided as to how

the poverty lines were determined.

9

 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 196.

10 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1659.

II-43

capita income of £E1,794.7 and 33.7 percent of the rural Egyptian households were below the

poverty line of annual per capita income of £E1,354.0, for a national household poverty rate of

33.8 percent.7

! for 1981/82, 26.2 percent of the urban Egyptian households and 18.7 percent of the rural Egyptian

households were below the national poverty line; for 1990/91, 29.2 percent of the urban Egyptian

households and 20.8 percent of the rural Egyptian households were below the national poverty

line.8

The World Bank reports9 that, in 1990-91, 51.9 percent of the Egyptian population was below the

international poverty line of US$2 per person per day and 7.6 percent of the population was below the

standard of US$1 per person per day, both in 1985 purchasing power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Egypt meet workers’ basic needs. Some information from U.S. Department of State

or U.S. Embassy reports indicates more generally that base pay is supplemented in Egypt by a complex

system of fringe benefits and bonuses, which may double or triple a worker’s take-home pay. However,

an average worker and family could not survive on a worker’s base pay at the minimum wage rate.10 The

U.S. Embassy is not aware of any studies on the issue of a living wage in Egypt.
1Unless noted otherwise, information presented here is from American Embassy—San Salvador, unclassified

telegram No. 607 (February 22, 1999).

2

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 628.

II-44

EL SALVADOR1

MINIMUM WAGE

Articles 144-146 of the Labor Code guarantee all workers a minimum wage that “sufficiently covers normal

necessities of (workers’) household.” Articles 143-154 set up a National Minimum Wage Board

composed of seven members: three from the government (with one representative each from the Ministries

of Labor, Economy, and Agriculture); two from the labor sector (drawn from labor federations); and two

from the business sector (drawn from business organizations). The board, in consultations with the National

Economic Planning and Coordinating Commission, can recommend changes of the minimum wage to the

President. If accepted, the minimum wage is legally changed by a Presidential Decree. Minimum wages

vary by industry and differ by certain urban and rural areas of the country. The Labor Ministry is

responsible for enforcing minimum wage laws and does so effectively in the formal sector.2

As of February 1999, the daily minimum wage for private industry was 42.00 colones (C)—about 4.81

U.S. dollars (US$). The daily minimum wage for private industry from July 1995 through May 1998 was

C38.50 (US$4.40). In comparing the Salvadoran minimum wage to other countries, it is important to note

that by law, full-time employees receive 7.0 days (56 hours) of pay for working the normal 5.5 day (44

hours) week.

For El Salvador, the minimum wage is more than a lower limit for salaries. The majority of private sector

companies, including virtually all maquilas, use the minimum wage as a base line for comprehensive pay

schedules. Thus, increasing the minimum wage automatically generates a proportional pay increase for all

employees earning hourly wages.

PREVAILING OR AVERAGE WAGE

The apparel industry in El Salvador consists primarily of in-bond assembly plants (maquilas) and—since

the signing of the peace accords in 1992—has been El Salvador’s principal source of new employment.

It is currently the second most important (and fastest growing) export sector for the country. Apparel

plants represent over 90 percent of the total maquila sector. There are no Salvadoran laws on wages and

benefits specific to the apparel industry or maquila sector; all employment is governed by the national labor

code.
II-45

Determining prevailing wages in the apparel maquila industry is difficult due to lack of comprehensive data.

The first of two currently available systematic surveys of wages in the maquila sector was conducted in

1995-1996 by the Office of the Ombudsman for the Defense of Human Rights (the independent, but statefinanced human rights organization, PDDH); the report’s sampling technique and analysis appear well

designed and credible. This survey of maquila workers found that:

21.3 percent received 75- 99 percent of minimum wage;

42.3 percent received 100-107 percent of minimum;

25.1 percent received 108-140 percent of minimum;

 8.4 percent received 141-224 percent of minimum; and

 1.6 percent received 225 percent or more than the minimum wage.

The survey reported that 0.8 percent of the sample did not know how much they made and 0.5 percent

did not respond to the question.

Employers are not required to pay minimum wage to new workers during their initial training period.

Maquila plants have a fairly large turnover rate, and there is a constant influx of new workers throughout

the year. This may be one of the factors affecting the size of the group receiving less than minimum wage.

The survey also indicated that women represented over 91 percent of the workers in the three lowest wage

categories, but only 62 percent of the workers in the two highest wage categories.

The second wage survey, which used social security data, was conducted in August 1998 by the National

Association of Private Enterprise (ANEP), one of the country’s foremost business organizations.

According to the study, in 1997, the minimum wage was C38.5 a day or about C1,155 a month. The

ANEP reported that average monthly maquila wages were:

C1,339 (US$153) for plants with 5-10 workers;

C1,527 (US$174) for plants with 10-50 workers;

C1,588 (US$182) for plants with 50-190 workers;

C1,755 (US$201) for plants with over 100 workers; and

C1,600 (US$183) overall for the entire sector.

Based on the U.S. Embassy’s field observations and information from a variety of sources, the maquila

apparel sector generally pays more than minimum wage—making these jobs some of the most sought after

in the country. The large maquilas, especially those operated by U.S. multinationals and plants located in

export processing zones (EPZs), have prevailing wages much higher than minimum.

The table below presents available data from the International Labor Organization (ILO) on average hourly

earnings (direct wages per worker) in El Salvador for production workers in the manufacturing sector and

in the textile and apparel industry. They include pay for time worked, paid leave, bonuses, and other
3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 737.

5

 Data were available only for the combined industry of textiles and apparel, with separate earnings data for male

and female workers.

II-46

benefits paid directly to the employee, but not the cost of social insurance programs.3 Average hours

worked per week by production workers in manufacturing were 46.0 for the years 1990 through 1996.4

Data were not available from the ILO on average weekly hours worked by production workers in the

textile and apparel industry. Current average earnings, which are reported by the ILO in the national

currency, were converted to US$ using the annual average exchange rate published in the International

Monetary Fund’s International Financial Statistics (March 1999). To track changes in real earnings

(i.e., earnings adjusted for inflation), a real earnings index was computed by deflating current earnings in

the national currency with the annual average national consumer price index as published in the International

Monetary Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Hourly Earnings in All Manufacturing and Textiles and Apparel5

Year All Manufacturing Textiles & Apparel Real Earnings Index (C; 1990=100)

 All Workers Male Workers Female Workers Manuf. Textiles & Apparel

(C) (US$) (C) (US$) (C) (US$) All Wkrs Males Females

1990 3.27 0.41 3.37 0.41 2.53 0.32 100 100 100

1991 4.08 0.50 na na na na 109 na na

1992 4.63 0.50 na na na na 111 na na

1993 5.35 0.62 5.50 0.63 5.03 0.58 108 108 132

1994 6.20 0.71 6.26 0.72 5.93 0.68 114 111 141

1995 6.88 0.79 6.99 0.80 6.70 0.77 115 113 144

1996 7.50 0.86 7.72 0.88 7.33 0.84 114 114 144

1997 na na na na na na na na na

___________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 889.

NON-WAGE BENEFITS

There are no government-mandated non-wage benefits designated only for the apparel or maquila industry.

All employers in the private sector are required by law to give workers paid days off for national holidays

(asueto), a yearly Christmas bonus of two-week’s pay (aguinaldo), and (for workers with more than one

year of service) a yearly paid two-week vacation with vacation bonus of 30 percent of a two-week pay

period. In addition, workers earn mandated separation pay, accumulated at roughly one-month’s base pay

per year worked (or fraction thereof), payable at the time of the termination of their employment.

Individual maquila plants (notably larger companies) and many EPZ park operators offer significant
6

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 115-117.

II-47

voluntary benefit packages which may include medical facilities and services in or near the plant, low or no

interest personal loans, sales of subsidized groceries and goods, sports and recreation facilities for workers

and families, subsidized or low-cost meals at work, and free transportation.

A U.S. Social Security Administration survey6 elaborates on three non-wage benefit programs employers

in El Salvador must enroll for their employees: (1) a social insurance program, started in 1953, which

covers old age, disability, and death benefits, and now also includes mandatory private insurance. A new

law, which took effect in 1997, will eventually phase out the older system. Under the provisions of the new

system, the insured person pays 3 percent of earnings, the employer pays 4.5 percent of the payroll, and

the government guarantees a minimum pension; (2) sickness and maternity benefits, first established in

1949, for which the insured person pays 3 percent of earnings, the employer pays 7.5 percent of the

payroll, and the government pays an annual subsidy; and (3) work injury benefits program, begun in 1911,

for which the contributions are the same as for sickness and maternity.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The Office of Statistics and Census in the Ministry of Economy (Dirección General de Estadística y Censos

[DIGESTYC], Ministerio de Economía) establishes poverty levels every month, based on the cost of a

basic food basket (consisting of milk, meat, beans, rice, tortillas, and seasonal vegetables) and other

essential goods and services (housing, clothing, and other miscellaneous items such as health care,

education, and transportation) for an urban family of 4.3 people and a rural family of 5.9 people. Typically,

a household has more than one wage earner. Two different poverty classifications are used, relative

poverty (income insufficient to purchase the minimum basket of goods and services, including the basic food

basket) and extreme poverty (income insufficient to purchase the basic food basket), for the urban and the

rural populations. As of January 1999, the levels for each, based on monthly household income, were:

Relative Poverty Poverty Line Extreme Poverty Poverty Line 

Urban C2,590 (US$296) Urban C1,295 (US$148)

Rural C1,808 (US$206) Rural C904 (US$103)

The Center for the Defense of the Consumer (Centro para la Defensa del Consumidor—CDC), an NGO,

has also developed poverty lines for a family of 4.2 persons, based on the cost of a basic food basket

(canasta mínima familiar)—extreme poverty—and the cost of an expanded basket of food and other

goods and services such as cleaning and personal hygiene products and some basic services such as water,

electricity, gas for cooking, and transportation (canasta básica ampliada)—relative poverty. According

to the CDC, for November 1998, the extreme poverty line was C2,236.82 per month, with 23.3 percent

of the urban and 33.6 percent of the rural population below this poverty line, and the relative poverty line

was C2,619.78 per month, with 30.5 percent of the urban and 32.5 percent of the rural population below
7

 Centro para la Defensa del Consumidor (CDC), “Tasa de Inflación Mensual y Acumulada: Costo Ponderado

de Canasta Mínima Familiar y Canasta Ampliada, CDC-DIGESTYC: Breve análisis a noviembre de 1998," public

submission by the Chicago Religious Leadership Network on Latin America (CRLN) in response to the U.S. Department

of Labor’s Federal Register notice of June 30, 1999.

8

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 60.

9

 The estimates are referenced as originating from the World Bank, Social Indicators of Development 1988

(Washington: World Bank, 1988). The poverty estimates are based upon an estimated absolute poverty income level

below which a minimal nutritionally adequate diet plus essential non-food requirements are not affordable. According

to the UN’s Food and Agriculture Organization (FAO), The Impact of Development Strategies on the Rural Poor (Rome:

FAO, 1988), p. 7, the poverty lines were determined by: (1) identifying the food basket consumed by low-income groups

in the country (taken to be the 20th percentile of the household income distribution); (2) estimating the quantities of that

food basket necessary to provide the minimum calories and proteins required for nutritional needs; (3) costing the

minimum food basket at appropriate retail market prices; and (4) adding the estimated monetary equivalent of essential

non-food needs (clothing, shelter, etc.). See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 139.

10 The estimates are referenced as originating from George Psacharopoulos, Samuel Morely, Ariel Fiszbein,

Haeduck Lee, and Bill Wood, Poverty and Income Distribution in Latin America: The Story of the 1980s, Latin America

and the Caribbean Technical Department, Regional Studies Program, Report No. 27 (Washington: World Bank, 1993),

pp. 62-69. The study is based on national-level household surveys compiled by the Economic Commission for Latin

America and the Caribbean (ECLAC) and the World Bank. The poverty lines, in 1985 purchasing power parity adjusted

US$, were converted into national currencies, but were not provided in the ILO compendium. See Tabatabai, Statistics

on Poverty and Income Distribution: An ILO Compendium of Data, p. 138.

11 The estimate is referenced as originating from the UN Economic Commission for Latin America (ECLA),

“Notas sobre la Evolución del Desarrollo del Istmo Centroamericano hasta 1980,” mimeographed , Mexcio City (1982),

II-48

this poverty line.7

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization8 reports several sets of measures of a national poverty line for El Salvador:

! for 1978, 32 percent of the rural Salvadorian population was below the rural poverty line of annual

per capita income of US$203 and 20 percent of the urban Salvadorian population was below the

urban poverty line of annual per capita income of US$317, with a national poverty rate of 27

percent.9

! for 1990, 14.9 percent of the urban Salvadorian population was below the poverty line of a

monthly per capita income of US$30 in 1985 purchasing power parity adjusted US$ and 41.5

percent of the urban population was below the poverty line of a monthly income of US$60 in 1985

purchasing power parity adjusted US$.10

! for 1980, 76 percent of the rural Salvadorian households were below the poverty line.11
p. 21. No further information is provided in the ILO compendium. See Tabatabai, Statistics on Poverty and Income

Distribution: An ILO Compendium of Data, p. 60.

12 The estimates are referenced as originating from the World Bank, El Salvador: The Challenge of Poverty

Alleviation, Report No. 11380-UG (Washington: World Bank, 1994), p. 11. No further information is provided in the ILO

compendium. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 60.

13 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 196.

14 World Bank, The Challenge of Poverty Alleviation (Washington: World Bank, 1994), p. 5.

15 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 628.

II-49

! for 1991/92, 55.7 percent of the rural and 43.1 percent of the urban Salvadorian households were

below the poverty line, with a national household poverty rate of 48.2 percent.12

The World Bank reports13 that, in 1992, 48.3 percent of the Salvadoran population was below the national

poverty line, with 43.1 percent of the urban population and 55.7 percent of the rural population living below

the national poverty line.

The World Bank reported in 1994 that those in poverty and extreme poverty are predominantly in rural

areas of El Salvador.14 Sixty one percent of all the country’s poor and 67 percent of the extremely poor

live in rural areas. The incidence of poverty is lowest in the San Salvador metropolitan area with 24

percent of the country’s poor and 14 percent of the extremely poor. Poverty is largely a problem of

underemployment and low productivity rather than one of widespread unemployment. The majority of the

rural poor are engaged in agriculture as self-employed or salaried workers. The majority of the urban poor

are engaged in informal sector activities in the commerce, cottage manufacturing, and agricultural sectors.

Poor female-headed households make up a large share of poor households in urban areas, but this pattern

does not hold for rural areas.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in El Salvador meet workers’ basic needs. Some information from U.S. Department of

State or U.S. Embassy reports indicates more generally that the minimum wage with benefits does not

provide a decent standard of living for a worker and family in El Salvador.15 The U.S. Embassy has not

found any studies on the living wage in El Salvador.
1Unless noted otherwise, information presented here is from American Embassy—Guatemala, unclassified

telegram No. 784 (February 26, 1999).

II-50

GUATEMALA1

MINIMUM WAGE

A trilateral committee representing labor, management, and the Ministry of Labor is named each year to

make recommendations for increases in the minimum wage. Traditionally, business has been represented

by persons chosen by CACIF (the “umbrella” business chamber that includes commercial, industrial,

agricultural, and financial interests), labor is represented by persons selected by the larger labor federations,

and the Ministry of Labor is represented by the Minister of Labor or his or her representative. In the event

that agreement is not possible, the government may decree such increases. Such has been the case for the

past two years, since the tripartite committee has been unable to agree to any changes in the minimum

wage. As a result, both in December 1997 and January 1999, the President has exercised his authority

as the chief executive to mandate changes in the minimum wage.

The minimum-wage level is established for each industry, with an effort to recognize the different job skills

prevalent in some industries. New minimum wage levels set for certain industries need not be set across

the board.

In January 1999, the Ministry of Labor announced that the President had decided to increase the minimum

wage by 10 percent. As a result, the agricultural daily minimum wage is currently 19.64 quetzales (Q),

about 2.87 U.S. dollars (US$) at the exchange rate of Q6.85 to US$1, while the daily nonagricultural

minimum is Q21.68 (US$3.16). The table below presents the minimum wage rates for prior years.

Daily Minimum Wage Rates, 1991-99

Period Industrial Workers Farm Workers

 (Q) (US$) (Q) (US$)

Late 1991-September 1994 14.00 2.42 11.60 2.00

October 1994-December 1995 16.00 2.80 14.50 2.55

January 1996-November 1997 17.60 2.93 15.95 2.66

December 1997-December 1998 19.71 3.03 17.86 2.75

January 1999- 21.68 3.16 19.64 2.87

________________________________________________________________________________________________

Source: U.S. Department of State, Country Reports on Human Rights Practices, Guatemala, Section 6e, 1993-98.
2

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 648.

3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

II-51

The legal workday is 8 hours, and the workweek is 44 hours, but a tradition of longer hours remains in

place due to economic conditions. The amended Labor Code requires a weekly rest period of at least 24

hours.2

PREVAILING OR AVERAGE WAGE

The average “core” daily wage in the maquila apparel sector is Q35 (US$6.11). By law, all workers are

paid an additional two months of salary per year (an aguinaldo at Christmas and a “14th month bonus”

in July). Market conditions usually compel employers to offer food and transport subsidies as well a

performance bonuses. Some companies also offer a health clinic on premises.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Guatemala for all employees in the manufacturing sector.

They include pay for time worked, paid leave, bonuses, and other benefits paid directly to the employee,

but not the cost of social insurance programs.3 Data were not available from the ILO on average weekly

hours worked by production workers in manufacturing or in the textile and apparel industries. Current

average earnings, which are reported by the ILO in the national currency, were converted to US$ using

the annual average exchange rate published in the International Monetary Fund’s International Financial

Statistics (March 1999). To track changes in real earnings (i.e., earnings adjusted for inflation), a real

earnings index was computed by deflating current earnings in the national currency with the annual average

national consumer price index as published in the International Monetary Fund’s International Financial

Statistics (March 1999), indexed to 1990 = 100.

Average Monthly Earnings in All Manufacturing

Year All Manufacturing Real Earnings Index (Q; 1990=100)

 (Q) (US$) All Manufacturing

1990 474 106 100

1991 578 115 92

1992 686 133 99

1993 775 138 100

1994 868 151 101

1995 1138 196 122

1996 1369 226 132

1997 1430 236 126

_______________________________________________________

Source: ILO, Yearbook of Labour Statistics, 1998, p. 890.
4

 Embassy of Guatemala, public submission in response to the U.S. Department of Labor’s Federal Register

notice of June 30, 1999.

5

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 150-151.

II-52

NON-WAGE BENEFITS

Government mandated non-wage benefits for private-sector workers, paid by the employer, are as follows

(as a percentage of wages paid to the employee):4

7th day bonus on completion of work week 16.67 percent

Paid holidays (12 days per year) 3.84 percent

Paid vacation (15 days per year) 4.80 percent

July bonus (1 month’s salary) 8.33 percent

Christmas bonus (1 month’s salary) 8.33 percent

Severance pay (1 month’s pay for each year worked) 8.33 percent

Employee recreation fund (IRTRA) 1.00 percent

Technical training fund (INTECAP) 1.00 percent

Social security 10.00 percent

Total 62.30 percent

In addition, female workers are granted maternity leave of 84 days, and one hour per day for 300 days for

breast-feeding after giving birth.

A U.S. Social Security Administration survey5 elaborates on three non-wage benefit programs in which

employers in Guatemala must participate on behalf of their employees: (1) a social insurance system for old

age, disability, and death benefits, which began in 1969, in which the insured person pays 1.5 percent of

their earnings, the employer pays 3 percent of the payroll, and the government pays 25 percent of the cost

of benefits paid; (2) another social insurance program sickness (begun in 1946) and maternity (begun

in1953) benefits, in which the insured person pays 2 percent of their earnings, the employer pays 4 percent

of the payroll, and the government pays 2 percent of the payroll; and (3) work injury insurance, which

began in 1947 and the insured person pays 1 percent of their earnings, the employer pays 3 percent of the

payroll, and the government pays 1.5 percent of the payroll.

ASSESSING BASIC NEEDS: THE POVERTY LINE

Both the consumer price index and the development of poverty indicators fall within the purview of the

National Statistical Institute (INE). A measure of extreme poverty is based on the cost of a basic food

basket that meets recommended daily calorie requirements (canasta básica de alimentos), and a more

comprehensive poverty measure is based on the cost of a market basket of goods and services (canasta

básica vital) that takes into account things a family needs to survive at a minimal level such as food,

clothing, housing, repairs, transportation, and entertainment. The poverty lines are based on an average
6

 Embassy of Guatemala, public submission in response to the U.S. Department of Labor’s Federal Register

notice of June 30, 1999.

7

 See Commission for the Verification of Corporate Codes of Conduct (COVERCO), Maquilas and Cost of Living

in Guatemala: A Preliminary Overview (Baltimore: Marianist Sharing Fund, October 1998), p. 7, which cites these figures

as coming from a June 1998 report Guatemala: Dissimilarities in Development (in Spanish) by the United Nations

Development Programme. 

8

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 648.

9

 United National Development Programme (UNDP), Human Development Report 1999 (New York: Oxford

University Press, 1999), p. 147.

10 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 196.

11 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 60-61.

12 The estimates are referenced as originating from the World Bank, Social Indicators of Development 1988

(Washington: World Bank, 1988). The poverty estimates are based upon an estimated absolute poverty income level

[but are not provided in the ILO compendium] below which a minimal nutritionally adequate diet plus essential non-food

II-53

family size of 5.38 persons. In August 1998, the monthly cost of the basic food basket (extreme poverty

line) was Q1,155.86 (US$168.74) per family and the monthly cost of the basket of basic goods and

services (poverty line) was Q2,109.20 (US$307.91) per family.6 According to one source,7 about 60

percent of the Guatemalan population is living in poverty and 20 percent in extreme poverty.

The U.S. Department of State reports that the United Nations Development Programme (UNDP) has

estimated that 80 percent of the Guatemalan population lives below the poverty line, including

approximately 60 percent of those employed.8 But the UNDP’s Human Development Report 1999

reports that, in 1989-94, 58 percent of the Guatemalan population was below the national poverty line in

1989-94 and 53 percent of the population was below the international poverty line of US$1 per person

per day in 1985 purchasing power parity adjusted US$.9

TheWorld Bank reports10 that, in 1989, 76.8 percent of the Guatemalan population was below the

international poverty line of US$2 per person per day and 53.3 percent of the population was below the

international poverty line of US$1 per person per day, both in 1985 purchasing power parity adjusted US$.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization11 reports several of measures of a national poverty line for Guatemala:

! for 1978, 74 percent of the rural Guatemalan population was below the rural poverty line and 66

percent of the urban population was below the urban poverty line, with a national poverty rate of

71 percent.12
requirements are not affordable. According to the UN’s Food and Agriculture Organization (FAO), The Impact of

Development Strategies on the Rural Poor (Rome: FAO, 1988), p. 7, the poverty lines were determined by: (1) identifying

the food basket consumed by low-income groups in the country (taken to be the 20th percentile of the household income

distribution); (2) estimating the quantities of that food basket necessary to provide the minimum calories and proteins

required for nutritional needs; (3) costing the minimum food basket at appropriate retail market prices; and (4) adding the

estimated monetary equivalent of essential non-food needs (clothing, shelter, etc.). See Tabatabai, Statistics on Poverty

and Income Distribution: An ILO Compendium of Data, p. 139.

13 The estimates are referenced as originating from the Economic Commission for Latin America and the

Caribbean (ECLAC), Magnitud de la Pobreza en América Latina en los Años Ochenta (Santiago: ECLAC, 1990), pp. 24;

115-116. The tabulations are based on household surveys and use a methodology that sets poverty lines based on the

minimum per capita food-energy needs for age- and sex-specific minima as recommended by the FAO/WHO. The

composition of the food basket takes into account the prevailing national dietary habits. The cost of the minimum food

basket is evaluated using retail prices for the lowest quality varieties in the capital city or its metropolitan area (prices

prevailing in other cities and in rural areas were generally unavailable). Minimum food budgets for other urban areas are

set at 5 percent below the capital's, and for rural areas at 25 percent below the capital's. Averages for urban areas and

at the nation level are calculated using population weights. To reflect minimum expenditures on non-food needs, the

urban poverty line is set at double the corresponding minimum food budget, and the rural poverty line at 75 percent

above the cost of the rural minimum food basket. The poverty lines in national currencies were not provided in the ILO

compendium. The ECLAC methodology is discussed more fully in J.C. Feres and A. León, “The Magnitude of Poverty

in Latin America,” CEPAL Review, No. 41 (August 1990), pp. 133-151. See Tabatabai, Statistics on Poverty and Income

Distribution: An ILO Compendium of Data, p. 137.

14 The estimates are referenced as originating from George Psacharopoulos, Samuel Morely, Ariel Fiszbein,

Haeduck Lee, and Bill Wood, Poverty and Income Distribution in Latin America: The Story of the 1980s, Latin America

and the Caribbean Technical Department, Regional Studies Program, Report No. 27 (Washington: World Bank, 1993),

Table 13.1 and pp. 62-69. The study is based on national-level household surveys compiled by the Economic

Commission for Latin America and the Caribbean (ECLAC) and the World Bank. The poverty lines, in 1985 purchasing

power parity adjusted US$, were converted into national currencies, but were not provided in the ILO compendium. See

Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 138.

II-54

! for 1980, 83.7 percent of the rural Guatemalan population was below the rural poverty line of a

per capita monthly budget of Q84 in second half of the year 1988 prices and 47.0 percent of the

urban Guatemalan population was below the urban poverty line of a per capita monthly budget of

Q122 in second half of the year 1988 prices, with a national poverty rate of 71.1 percent; for

1986, 79.7 percent of the rural population was below the rural poverty line and 60.3 percent of

the urban population was below the urban poverty line, with a national poverty rate of 73.2

percent.13

! for 1989, 79.4 percent of the rural Guatemalan population and 54.8 of the urban Guatemalan

population were below the poverty line of a monthly per capita income of US$60 in 1985

purchasing power parity adjusted US$, with a national poverty rate of 70.4 percent.14

MEETING WORKERS’ NEEDS
15 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 648.

16 Copy of a letter of December 12, 1997, from Stephen Coats to Karen Leahy and Jeff Hermanson; public

submission by the Chicago Religious Leadership Network on Latin America (CRLN) in response to the U.S. Department

of Labor’s Federal Register notice of June 30, 1999.

II-55

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Guatemala meet workers’ basic needs. Some information from U.S. Department of

State or U.S. Embassy reports indicates more generally that the minimum wage is insufficient to provide

a decent standard of living for a worker and family. Although the law sets minimum wages, the legally

mandated minimum wage for most unskilled and semiskilled workers is not always paid.15 The U.S.

Embassy reports that neither the Ministry of Labor nor local labor federations know of any locallydeveloped studies on the issue of a “living wage” in Guatemala.

According to the U.S./Guatemala Labor Education Project (Proyecto de Solidaridad Laboral

EUA/Guatemala), Article 130 of the Guatemalan Labor Code contains the following sentence:16

Every worker has the right to receive a minimum salary that covers his normal material,

moral and cultural needs, and that permits him to satisfy his duties as head of family.
1

 Unless noted otherwise, information presented here is from American Embassy—Tegucigalpa, unclassified

telegram No. 979 (March 26, 1999).

2 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 679.

II-56

HONDURAS1

MINIMUM WAGE

Minimum wages are set according to economic sector and geographic area; they cover only private sector

workers and exclude managers, administrators, and professionals, and domestic service workers. The

tripartite Minimum Wage Commission establishes the minimum wage by consensus, taking as a base the

annual economic study prepared by the Directorate General of Salaries under the Ministry of Labor and

Social Security. In the event the Commission is unable to come to a consensus within the period required

by law, the President has the legal authority to increase the minimum wage.

The federal government normally sets new minimum wage levels in January of each year. In November

1998, however, consultations between the government and representatives of employers and workers in

the wake of Hurricane Mitch resulted in a governmental decision to freeze national minimum wage levels

at their current levels through June 1999. The Minimum Wage Commission will convene in June to

determine whether minimum wage levels should be adjusted, and if so, whether new levels would be made

retroactive. The official daily minimum wage in lempiras (L)—1 U.S. dollar (US$) is equivalent to 14

lempiras—for workers in the maquiladora (i.e., apparel and footwear) sector was L24.50 in 1995, L30.00

in 1996, L39.65 in 1997, and L46.80 in 1998 and to date in 1999.

Minimum wages vary by economic sector and geographical zone, with the lowest rates occurring in the

non-export agricultural sector and the highest rates in the export sector. Urban-zone workers earn slightly

more than those in the country. The law prescribes a maximum 8-hour workday and a 44-hour workweek.

There is a requirement of at least one 24-hour rest period every 8 days.2

PREVAILING OR AVERAGE WAGE

Most maquiladoras in Honduras base their wage scales on production and efficiency, so that the basic wage

of the average laborer in the apparel and footwear sectors fluctuates between double and triple the official

minimum wage.

No data were available for Honduras from the International Labor Organization (ILO) on average wages

or hours worked in the manufacturing sector or in the apparel or footwear industries.
3

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 160-161.

II-57

NON-WAGE BENEFITS

Honduran workers are exempt from paying taxes on the first L70,000 of income, and they can deduct an

additional L20,000 for medical and educational expenses. Honduran companies are required by law to

make the following contributions, based on their global payrolls, to the government:

• 7 percent to the Honduran Social Security Institute, which provides basic medical attention to all

workers; 

• 1.5 percent to the Social Housing Fund, which provides limited housing subsidies; and

• 1 percent to the National Institute for Professional Development, which provides job training.

Companies also are required by law to make the following direct payments to their employees:

• one day’s additional salary each week; 

• one day’s additional salary for each of 11 national holidays;

• annual paid vacation equivalent to 10, 12, 15, or 20 workdays, based after 1, 2, 3, or 4 years,

respectively, of service;

• bonus payments of a month’s salary in June and December of each year;

• an annual educational bonus, based on a percentage of annual salary;

• maternity and lactation bonuses; and

• severance or retirement payments for workers laid off or dismissed without cause, based on years

of employment. 

Most Honduran maquiladoras voluntarily subsidize transportation and meals for their employees, and

provide bonuses for efficiency, punctuality, and informal holidays, such as Mother’s Day.

A U.S. Social Security Administration survey3 elaborates on four different non-wage benefit programs in

which employers in Honduras are required to participate on behalf of their employees: (1) old age,

disability, death social insurance program, begun in 1959, in which insured persons pay 1 percent of their

earnings, employers pay 2 percent of the payroll, and the government pays 1 percent of the payroll; (2)
4

 Colectiva de Mujeres Hondureñas—CODEMUH, “Este es mi salario esta es... mi economía,” (Choloma, Cortés,

no date), which is based on information from the Heraldo Económico; public submission by the Chicago Religious

Leadership Network on Latin America (CRLN) in response to the U.S. Department of Labor’s Federal Register notice

of June 30, 1999.

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sickness and maternity benefits, first legislated in 1952, in which insured persons pay 2.5 percent of their

earnings, employers pay 5 percent of the payroll, and the government pays 2.5 percent of total covered

earnings; (3) work injury benefits, first begun in 1952, are included under sickness benefits above; and (4)

unemployment insurance, which has been part of the Labor Code since 1959 and requires employers to

pay dismissed employees a lump sum based on length of service, not to exceed 11 months’ wages.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The Planning Secretariat (SECPLAN) in the Office of the President of the Republic each year prepares

an analysis of relative levels of poverty and potential in which households nationwide are categorized as

“below the poverty line” (broken down into “indigent” and “poor”) and “not poor.” Among the major

indices analyzed are prices of baskets of basic goods (categorized by region), an annual survey of

household expenses, the proportion of total expenditures on food in household consumption, actual

reported and estimated unreported incomes, and real incomes adjusted by region. The Planning Secretariat

has yet to issue its 1998 analysis, as it is in the process of compensating for nationwide shortfalls of goods,

services, and income in the wake of Hurricane Mitch. Its estimates of levels of poverty and potential, by

percentage of households, for 1995-1997, are:

Household Description 1995 1996 1997

Indigent 47.4 53.7 48.4

Poor 20.4 15.0 17.4

Below the poverty line (indigent +

poor)

67.8 68.7 65.8

Not poor 32.3 31.3 34.2

The Honduran Women’s Collective (Colectiva de Mujeres Hondureñas—CODEMUH) has preformed

an analysis of the social conditions and well-being of maquila workers in Honduras.4 The analysis

compares the minimum wage of a maquila worker (L46.80 per day) to the cost of a market basket of basic

goods and services for a family of five (canasta básica familiar y vivienda) as compiled by official

sources. The daily cost of this basic basket over the last 8 years is as follows:

 1990 1991 1992 1993 1994 1995 1996 1997

Cost of Basic Market Basket

(for a family of five; L per day) 16.43 23.59 25.28 27.76 34.64 42.95 55.43 69.10

The basic market basket for a family (in 1997, L69.10 per day or L2,073 per month) excludes health care,
5

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 62.

6

 The estimates are referenced as originating from the World Bank, Social Indicators of Development 1987

(Washington: World Bank, 1987). The poverty estimates are based upon an estimated absolute poverty income level

below which a minimal nutritionally adequate diet plus essential non-food requirements are not affordable. According

to the UN’s Food and Agriculture Organization (FAO), The Impact of Development Strategies on the Rural Poor (Rome:

FAO, 1988), p. 7, the poverty lines were determined by: (1) identifying the food basket consumed by low-income groups

in the country (taken to be the 20th percentile of the household income distribution); (2) estimating the quantities of that

food basket necessary to provide the minimum calories and proteins required for nutritional needs; (3) costing the

minimum food basket at appropriate retail market prices; and (4) adding the estimated monetary equivalent of essential

non-food needs (clothing, shelter, etc.). See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 139.

7

 The estimates are referenced as originating from special tabulations prepared for the ILO in 1995 by the

Economic Commission for Latin America and the Caribbean (ECLAC), which updated previous estimates in ECLAC,

Magnitud de la Pobreza en América Latina en los Años Ochenta (Santiago: ECLAC, 1990). The tabulations are based

on household surveys and use a methodology that sets poverty lines based on the minimum per capita food-energy

needs for age- and sex-specific minima as recommended by the FAO/WHO. The composition of the food basket takes

into account the prevailing national dietary habits. The cost of the minimum food basket is evaluated using retail prices

for the lowest quality varieties in the capital city or its metropolitan area (prices prevailing in other cities and in rural areas

were generally unavailable). Minimum food budgets for other urban areas are set at 5 percent below the capital's, and

for rural areas at 25 percent below the capital's. Averages for urban areas and at the nation level are calculated using

population weights. To reflect minimum expenditures on non-food needs, the urban poverty line is set at double the

corresponding minimum food budget, and the rural poverty line at 75 percent above the cost of the rural minimum food

basket. The poverty lines in national currencies were not provided in the ILO compendium. The ECLAC methodology

is discussed more fully in J.C. Feres and A. León, “The Magnitude of Poverty in Latin America,” CEPAL Review, No.

41 (August 1990), pp. 133-151. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of

Data, p. 137.

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transportation, entertainment, and school expenses, which CODEMUH estimates would add L700 per

month. This expanded market basket (canasta básica ampliada) for a family of five would have cost

L2,773 per month in 1997.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization5 reports several sets of measures of a national poverty line for Honduras:

! for 1978, 55 percent of the rural Honduran population was below the rural poverty line of an

annual per capita income of US$180 and 14 percent of the urban Honduran population was below

the urban poverty line of an annual per capita income of US$255, with a national poverty rate of

37 percent.6

! for 1992, 84 percent of the rural and 71 percent of the urban Honduran population were below

the poverty line, with a national poverty rate of 78 percent.7

! for 1989, 82.6 percent of the rural and 54.4 percent of the urban Honduran population were below
8

 The estimates are referenced as originating from George Psacharopoulos, Samuel Morely, Ariel Fiszbein,

Haeduck Lee, and Bill Wood, Poverty and Income Distribution in Latin America: The Story of the 1980s, Latin America

and the Caribbean Technical Department, Regional Studies Program, Report No. 27 (Washington: World Bank, 1993),

Table 13.1 and pp. 62-69. The study is based on national-level household surveys compiled by the Economic

Commission for Latin America and the Caribbean (ECLAC) and the World Bank. The poverty lines, in 1985 purchasing

power parity adjusted US$, were converted into national currencies, but were not provided in the ILO compendium. See

Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 138.

9

 The estimate is referenced as originating from Jorge Navarro, “Poverty and Adjustment: The Case of

Honduras”, CEPAL Review, No. 49 (April 1993), pp. 91-101. The study is based on the Multipurpose Permanent

Household Surveys conducted by the Ministry of Planning, Coordination and the Budget (SECPLAN). The SECPLANdefined basket of staple foods is costed at urban and rural prices compiled by the Central Bank. The food share is

assumed to be 50 percent in the urban areas and 75 percent in the rural areas. See Tabatabai, Statistics on Poverty and

Income Distribution: An ILO Compendium of Data, p. 162.

10 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 196.

11 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 679.

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the poverty line of a monthly per capita income of US$60 in 1985 purchasing power parity

adjusted US$.8

! for 1991, 73.0 percent of all Honduran families were below the poverty line of L150.3 per capita

per month for rural families and L309.1 per capita per month for urban families.9

The World Bank reports10 that, in 1992, 50 percent of the Honduran population was below the national

poverty line, with 56 percent of the urban population and 46 percent of the rural population living below

the national poverty line. For the same year, in terms of international poverty lines, the World Bank reports

that 75.7 percent of the Honduran population was below the international poverty line of US$2 per person

per day and 46.9 percent was below the international poverty line of US$1 per person per day, both in

1985 purchasing power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Honduras meet workers’ basic needs. Some information from U.S. Department of

State or U.S. Embassy reports indicates more generally that the minimum wage is considered insufficient

to provide a standard of living above the poverty line for a worker and family. Labor leaders have claimed

that the government has ignored salary issues for workers earning above the minimum wage (for example

those in maquiladoras and in other industries such as banking) and have called for an across-the-board

increase of 40 percent for all workers.11 The U.S. Embassy has been unable to identify any local study on

the “living wage” and considers it likely that none exists, as the “living wage” is virtually unknown in

Honduras as a political or socioeconomic concept.
II-61
1

 Unless noted otherwise, information presented here is from American Consul—Hong Kong, unclassified

telegram No. 1193 (February 26, 1999).

2 U.S. Department of State, Country Reports on Human Rights Practices for 1997 (Washington: U.S.

Government Printing Office, March 1998), p. 753.

3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 745.

II-61

HONG KONG1

MINIMUM WAGE

Wage levels in Hong Kong are customarily fixed by individual agreement between employer and employee.

There is no statutory minimum wage except for foreign domestic workers. The minimum wage rate for

foreign domestic workers was 3,750 Hong Kong dollars (HK$) per month in 1995 and 1996. As of

December 1996, this rate was increased to its current level of HK$3,860, about 500 U.S. dollars (US$),

per month.2

PREVAILING OR AVERAGE WAGE

Due to rising costs, Hong Kong apparel and footwear manufacturers have shifted most of their production

capacity to mainland China. As a result, the number of Hong Kong workers employed by the apparel

sector has fallen from 120,000 in 1993 to 45,000 in 1998. During the same period, the number of workers

in the footwear industry has declined from 1,350 to fewer than 200. The Census and Statistics Department

stopped compiling wage data on the footwear industry in 1994 because the number of workers employed

by the industry had fallen to such a low level.

The table below presents available data from the International Labor Organization (ILO) on average daily

earnings (direct wages per worker) in Hong Kong for production workers in the manufacturing sector and

in the apparel and footwear industries. They include pay for time worked, paid leave, bonuses, and other

benefits paid directly to the employee, but not the cost of social insurance programs.3 Average hours

worked per week by production workers in manufacturing were 44.4 for the years 1990 through 1997;4

however, no data were available from the ILO for average hours worked per week by production workers

in the apparel or footwear industries. Current average earnings, which are reported by the ILO in the

national currency, were converted to US$ using the annual average exchange rate published in the

International Monetary Fund’s International Financial Statistics (March 1999). To track changes in real

earnings (i.e., earnings adjusted for inflation), a real earnings index was computed by deflating current
5

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 162-163.

II-62

earnings in the national currency with the annual average national consumer price index as published in the

International Monetary Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Daily Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (HK$; 1990=100)

(HK$) (US$) (HK$) (US$) (HK$ ) (US$) Manuf. Apparel Footwear

1990 179.5 23.04 171.6 22.03 182.5 23.43 100 100 100

1991 200.7 25.83 188.0 24.19 193.5 24.90 100 98 95 

1992 218.6 28.24 201.3 26.01 191.9 24.79 100 96 86

1993 241.7 31.25 212.6 27.48 na na 102 94 na

1994 266.6 34.50 231.0 29.89 na na 104 94 na

1995 278.0 35.94 238.5 30.83 na na 100 89 na

1996 296.9 38.39 247.2 31.96 na na 100 87 na

1997 322.6 41.67 261.1 33.72 na na 103 87 na

1998 336.0 43.38 250.5 32.34 na na 104 81 na

_____________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 903. For 1998, Census and Statistics Department, Hong Kong

Special Administrative Region, Half-Yearly Report of Wage Statistics (March 1998 and September 1998), Table 6.

NON-WAGE BENEFITS

Hong Kong provides no special government-mandated non-wage benefits or tax credits for workers in the

apparel and footwear industry. Like other workers, however, they are covered by employer-sponsored

workmen’s compensation and receive an end-of-year payment equal to one month’s salary, as well as 7-14

days of annual leave (depending on length of service), sick leave, and 10 weeks of maternity leave.

A U.S. Social Security Administration survey5 elaborates on several non-wage benefits programs in Hong

Kong: (1) old age, disability, and death benefits program is a dual universal and social assistance system

program that was begun in 1971 and for which the government pays the entire cost; (2) sickness and

maternity benefits and work injury benefits programs are part of a dual employer liability and social

assistance system that was begun in 1968 and for which the employer pays the entire cost of the employer

liability program and the government pays the entire cost of the comprehensive social security system; (3)

unemployment benefits, begun in 1977, is a social assistance system in which the government pays the

entire cost; and (4) family allowances program, begun in 1971, in which the government pays the entire

cost.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The Hong Kong Government has not established an official poverty line. In discussions with legislators,

government officials have noted that some international studies have recommended setting the poverty line
6

 Provision Legislative Council, Panel on Welfare Services (Minutes), PLC Paper No. CB(2) 1476 (Hong Kong,

March 24, 1998), Item I, The Measurement of Poverty (Research Report RP 07/PLC, PLC Paper No. CB(2) 1196).

7

 This probably refers to an international poverty measure for industrial countries, which is used by the United

Nations Development Programme (UNDP),that coverts the U.S. poverty line into 1985 purchasing power parity adjusted

US$. See United Nations Development Programme, Human Development Report 1998 (New York: Oxford University

Press, 1998), p. 186.

II-63

at one-half the median household income. In Hong Kong, the median household monthly income in 1998

was HK$18,000 (approximately US$2,300); one-half of that would be HK$9,000 (approximately

US$1,150). Government officials have also reported that, in 1998, 329,800 households (16.4 percent of

all households) had monthly incomes below HK$8,000 (roughly US$1,030) and 231,400 households

(11.5 percent of all households) had monthly incomes below HK$6,000 (about US$770). The number

of persons earning less than HK$6,000 a month in 1998 totaled 410,000, of which 310,000 were women.

In 1998, a meeting of the Panel on Welfare Services reviewed methods and studies to assess poverty in

Hong Kong and noted several results:6

! A December 1996 study by the Hong Kong Council of Social Service (HKCSS) and Oxfam Hong

Kong found 640,000 persons in Hong Kong (11 percent of the population) lived in abject poverty.

! A September 1997 study by the Hong Kong Social Security Society (HKSSS) found 850,000

persons in Hong Kong (13 percent of the population) lived in abject poverty; the study used a

poverty line of HK$2,500 per person per month and was based on 1996 official census data.

! A October 1997 proposal by some Hong Kong academics to use the number of recipients of

Comprehensive Social Security Assistance (CSSA) as a proxy for the number of poor in Hong

Kong. The cost of basic needs method is used by the government as a reference point in

determining CSSA assistance payments. According to a Social Welfare (Social Security) official,

the average payment to an individual under the CSSA program was HK$3,000 per month and

compared favorably to the U.S. poverty standard of US$14.40 per person per day,7 or HK$3,500

per person per month. 

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Hong Kong meet workers’ basic needs. Some information from U.S. Department of

State or U.S. Consulate General reports indicates more generally that the average wage in Hong Kong

generally provides a decent standard of living for a worker and family, but two-income households are the

norm. Foreign domestic workers—the only workers in Hong Kong covered statutorily by minimum wage

provisions—have a decent standard of living because the law requires employers to provide foreign

domestic workers with housing, worker’s compensation insurance, travel allowances, and meals or a meal
8

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 886.

II-64

allowance in addition to the minimum wage.8 The Consulate General has been unable to find any studies

on the living wage in Hong Kong.
1Unless noted otherwise, information presented here is from American Embassy—New Delhi, unclassified

telegram No. 2350 (March 24, 1999).

2

 See Gerald Starr, Minimum Wage Fixing: An International Review of Practices and Problems (Geneva:

International Labour Office, 1981; second printing with corrections, 1993), p. 67.

3

 For a listing of industries covered under the Minimum Wages Act for which the central government may set

minimum wages, the detailed schedule of minimum wage rates it has set, and the detailed schedule of minimum wage rates

by occupation/skill/industry set by each state under the Act, see R.K.A. Subrahmanya and Parduman Singh, Minimum

Wages in India: Scheduled Employments and Rates of Minimum Wages (New Delhi: Social Security Association of India

and Friedrich Ebert Stiftung, 1995). For excerpts from basic documents, reports, special commission recommendations,

and court judgments related to minimum wages in India, see R.K.A. Subrahmanya and Parduman Singh, Minimum Wages

in India: Basic Documents (New Delhi: Social Security Association of India and Friedrich Ebert Stiftung, 1995).

4

 American Embassy—New Delhi, unclassified telegram No. 1344 (February 19, 1998).

5 American Embassy—New Delhi, unclassified telegram No. 1344 (February 19, 1998). Minimum wage rates as

of November 1, 1996 were the latest available figures; conversion to U.S. dollars was made using the February 1998

exchange rate of Rs38.50 to US$1.

II-65

INDIA1

MINIMUM WAGE

The minimum wage is based on the Minimum Wages Act of 1948.2 Setting the minimum wages in India

is the responsibility of the respective state governments. There is no uniform national minimum wage in the

country. Minimum wages vary by skill level, industry, and state.3 There is no prescribed minimum wage

for either the apparel or the footwear industry in any of the states where these products are manufactured.

The Minimum Wages Act is primarily applicable to workers in the unorganized (non-unionized) sector and

empowers both the federal and state governments to fix and revise the minimum wage rates for the

occupations which are covered by the Act and are under their respective jurisdictions.4 The occupations

listed under the federal sphere total 40, and include agriculture, mining, and road construction. The

occupations listed under the state sphere vary from state to state, and range in number from 5 in Manipur

to 72 in Bihar. In the organized sector, wages are normally set by collective bargaining; however, in some

industries (e.g., newspaper, cement, and sugar), wage boards have been established.

Ranges of minimum wages for certain states as of November 1, 1996 are given below in Indian rupees (Rs)

and U.S. dollars (US$):5
6

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1915.

7

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

8

International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 745.

II-66

State Rs per day US$ per day 

Andhra Pradesh 35.00 - 63.00 0.91 - 1.64

Bihar 27.30 - 39.70 0.71 - 1.03

Gujarat 34.00 - 57.90 0.88 - 1.50

Haryana 51.57 - 55.57 1.34 - 1.44

Karnataka 26.00 - 37.32 0.68 - 0.97

Maharashtra 9.25 - 80.35 0.24 - 2.09

Punjab 55.73 - 58.28 1.45 - 1.51

Delhi 64.50 - 68.00 1.68 - 1.77

The Factories Act defines a factory as a unit which employs 10 or more workers and utilizes power for its

operations or has a minimum of 20 workers but does not use power for its operations. The Act establishes

an 8-hour workday, a 48-hour workweek, and various standards for working conditions.6

PREVAILING OR AVERAGE WAGE

The broad range of prevailing wages in the apparel and footwear industries by skill level is:

Apparel

Unskilled Rs 35 to 70 per day (US$ 0.83 to 1.65 per day)

Skilled Rs 80 to 150 per day (US$ 1.89 to 3.55 per day)

Footwear

Unskilled Rs 30 to 50 per day (US$ 0.71 to 1.18 per day)

Skilled Rs 60 to 110 per day (US$ 1.42 to 2.60 per day)

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in India for production workers in the manufacturing sector

and in the combined apparel and footwear industries. They include pay for time worked, paid leave,

bonuses, and other benefits paid directly to the employee, but not the cost of social insurance programs.7

Average hours worked per week by all employees were 46.5 in all manufacturing and 46.6 in the

combined apparel and footwear industries for the years 1990 through 1995.8 Current average earnings,

which are reported by the ILO in the national currency, were converted to US$ using the annual average

exchange rate published in the International Monetary Fund’s International Financial Statistics (March
9

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 170-172.

II-67

1999). To track changes in real earnings (i.e., earnings adjusted for inflation), a real earnings index was

computed by deflating current earnings in the national currency with the annual average national consumer

price index as published in the International Monetary Fund’s International Financial Statistics (March

1999), indexed to 1990 = 100.

Average Monthly Earnings in All Manufacturing and Apparel and Footwear

Year All Manufacturing Apparel & Footwear Real Earnings Index (Rs; 1990=100)

 (Rs) (US$) (Rs) (US$) Manuf. Apparel & Footwear

1990 988.4 56 889.3 51 100 100

1991 1,019.3 45 1,001.3 44 91 99 

1992 932.6 36 975.0 38 74 86

1993 977.4 32 773.0 25 73 64

1994 960.4 31 1,027.8 33 65 77

1995 1,211.0 37 1,196.4 37 74 82

1996 na na na na na na

1997 na na na na na na

_________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 904. 

NON-WAGE BENEFITS

Mandated non-wage benefits for Indian workers are provident fund (social security), health insurance,

yearly bonus, and severance pay. However, all these benefits are applicable only in establishments that fall

under the Factories Act. A large number of small footwear and apparel manufacturing units do not come

under the provisions of the Factories Act. Many of these units manufacture for domestic consumption and

not for the export markets.

A U.S. Social Security Administration survey9 elaborates on four different non-wage benefit programs in

India, which apply only to workers in firms covered by the Factories Act: (1) old age, disability, and death

benefit programs are comprised of the provident (begun in 1952), pension (begun in 1995), gratuity (begun

in 1972), and insurance (begun in 1976) funds. The provident fund provides a lump-sum (total employee

and employer contributions plus interest) old age benefit, into which the insured person pays 10 percent

of their earnings and the employer pays 10 percent of their payroll plus 0.65 percent of payroll for

administration. The pension fund provides an old-age monthly pension, into which the employer pays 8.33

percent of their contributions to the provident fund and the government pays 1.16 percent of the payroll.

The gratuity fund pays a lump-sum (15 days’ wages for each year of continuous service) and is financed

entirely by the employer who pays about 4 percent of the payroll. The insurance fund pays a lump-sum

(up to Rs35,000) and is also financed entirely by the employer who pays 0.5 percent of the payroll plus

0.01 percent toward administration. (2) sickness and maternity benefits, begun in 1948, in which the
10 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 28-34.

11 The estimates are referenced as originating from the World Bank, Social Indicators of Development 1987

(Washington: World Bank, 1987). The poverty estimates are based upon an estimated absolute poverty income level

below which a minimal nutritionally adequate diet plus essential non-food requirements are not affordable. According

to the UN’s Food and Agriculture Organization (FAO), The Impact of Development Strategies on the Rural Poor (Rome:

FAO, 1988), p. 7, the poverty lines were determined by: (1) identifying the food basket consumed by low-income groups

in the country (taken to be the 20th percentile of the household income distribution); (2) estimating the quantities of that

food basket necessary to provide the minimum calories and proteins required for nutritional needs; (3) costing the

minimum food basket at appropriate retail market prices; and (4) adding the estimated monetary equivalent of essential

non-food needs (clothing, shelter, etc.). See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 139.

II-68

insured person pays 1.75 percent of their earnings (none for employees whose average daily wage is below

Rs25), employers pay 4.75 percent of the payroll of covered employees, and the state governments pay

12.5 percent of the cost of medical benefits; (3) work injury benefits, begun in 1923, which are now part

of the social insurance system and have the same source of funds maternity and sickness benefits; and (4)

unemployment insurance, which is a part of the labor code and requires employers to pay severance

indemnity of 15 days’ average pay for each year of employment; eleven states have instituted temporary

unemployment programs funded by the government.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The poverty line in India is defined as the expenditure required for a daily calorie intake of 2,400 per

person in rural areas and 2,100 in urban areas. The government estimates this expenditure at Rs228.9

(US$5.41) per capita per month in rural areas and Rs264.1 (US$6.24) in urban areas at 1993-94 prices.

The poverty line is estimated periodically by conducting sample surveys. These surveys are carried out by

the government’s central statistical organization.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization10 reports numerous sets of measures of a national poverty line for India:

! For 1979, 51 percent of the rural Indian population was below the rural poverty line (annual per

capita income of US$114), 40 percent of the urban Indian population was below the urban poverty

line (annual per capita income of US$132), with a national poverty rate of 48 percent.11

! For 1979/80, 53.3 percent of the rural Indian population was below the rural poverty line (monthly

per capita expenditure of Rs49.09 in 1973/74 rural prices) and 43.0 percent of the urban Indian

population was below the urban poverty line (monthly per capita expenditure of Rs56.64 in

1973/74 urban prices), with a national poverty rate of 51.1 percent;

for 1987/88, 32.7 percent of the rural population was below the same rural poverty line, 19.4
12 The estimates are referenced as originating from the Government of India, Planning Commission, Sixth FiveYear Plan, 1980-85: Mid-term Appraisal (New Delhi, 1983) and Seventh Five-Year Plan, 1985-90 (New Delhi, no date).

The poverty lines are the official poverty lines for India used by the Planning Commission and are based on nutritional

norms (a daily calorie intake of 2,400 per person in rural areas and 2,100 in urban areas) which were recommended by a

special Task Force set up in 1977. Based on household consumption expenditure data, the Commission used linear

interpolation methods to arrive at point estimates of per capita monthly expenditure that were consistent with the

minimum calorie intakes (Rs49.09 and Rs56.64 per capita per month at 1973/74 prices for rural and urban sectors,

respectively). An implicit deflator of private final consumer expenditure is used to estimate current-price poverty lines

for different years. The poverty lines are applied to adjusted consumption expenditure distributions to yield estimates

of poverty in rural and urban areas. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium

of Data, p. 147-148.

13 The estimates are referenced as originating from Suresh D. Tendulkar and L.R. Jain, “Economic Reforms and

Poverty,” Economic and Political Weekly, Vol. 30, No. 23 (June 10, 1995), pp. 1373-1377. The urban and rural poverty

lines are the same as the official poverty lines used by the Indian Planning Commission. The authors feel that the price

deflator used by the Planning Commission is inappropriate and instead estimate regional (by state) rural and urban cost

of living indexes. Also, expenditures on consumer durables are excluded from the consumption data since there were

doubts about their reliability. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of

Data, p. 149.

14 The estimates are referenced as originating from Elaine K. Chan, “A Compendium of Data on Poverty and

Income Distribution,” Background Paper for the World Development Report 1990 (Washington: World Bank, 1990), p.

39. They are based on household consumption expenditure data from the Indian National Sample Survey (NSS) and

internal World Bank data. An absolute poverty line, defined as the expenditure level below which basic needs cannot

be satisfied, is used with two cut-off points corresponding to Rs94 per capita per month (extreme poverty) and Rs127

per capita per month (poverty) in 1985 prices. The first is the Indian poverty line for rural areas (derived by updating

estimates in B.S. Minhas, L.R. Jain, S.M. Kansal, and M.R. Saluja, “On the Choice of Appropriate Consumer Price Indices

II-69

percent of the urban population was below the same urban poverty line, with a national poverty

rate of 29.2 percent.12

! For 1987/88, 44.9 percent of the rural Indian population was below the rural poverty line (monthly

per capita expenditures of Rs49.09 in 1973/74 rural prices), 36.5 percent of the urban Indian

population was below the urban poverty line (monthly per capita expenditures of Rs56.64 in

1973/74 urban prices);

for 1992, 48.1 percent of the rural Indian population was below the same rural poverty line, 33.9

percent of the urban Indian population was below the same urban poverty line.13

! For 1985, 61.4 percent of the rural and 36.5 percent of the urban Indian population were below

the poverty line of US$31 per capita per month in 1985 purchasing power parity adjusted US$

(or Rs127), with a national poverty rate of 55.0 percent;

for the same year, 37.9 percent of the rural and 17.5 percent of the urban Indian population were

below the extreme poverty line of US$23 per capita per month in 1985 purchasing power parity

adjusted US$ (or Rs94), with a national poverty rate of 32.7 percent.14
and Data Sets for Estimating the Incidence of Poverty in India,” Indian Economic Review, Vol. 22, No. 1 (January-June

1987), pp. 19-50), and the second, which is 35 per cent higher, was thought at the time to be more representative and more

common among many developing countries. These two poverty lines correspond to US$23 and US$31 in 1985

purchasing power parity adjusted US$. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, pp. 136; 148.

15 The estimate is referenced as originating from Shashou Chen, Gaurav Datt, and Martin Ravallion, “Is Poverty

Increasing in the Developing World?” Policy Research Working Paper WPS 1146 (Washington: World Bank, 1993).

This study uses essentially the same methodology as the World Bank’s World Development Report 1990, but with

updated purchasing power parity rates. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 137.

16 World Bank, World Development Indicators 1999 (Washington: World Bank, 1999), p. 67.

17 World Bank, Reducing Poverty in India (Washington: World Bank, 1997), p. 8.

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! For 1983, 73.5 percent of the Indian population was below the poverty line of US$30.42 per

capita per month (i.e., US$1 per day) in 1985 purchasing power parity adjusted US$;

for 1989/90, 70.9 percent of the national population was below this poverty line.15

The World Bank reports16 that, in 1994, 35.0 percent of the Indian population was below the countryspecific poverty line, with 36.7 percent of the rural and 30.5 percent of the urban population living below

the poverty line; corresponding figures for 1992 were 40.9, 43.5, and 33.7 percent, respectively. The

same source also reports that, in 1994, 87.5 percent of the Indian population was below the international

poverty line of US$2 per person per day and 52.5 percent of the population was below the poverty

standard of US$1 per person per day, both in 1985 purchasing power parity adjusted US$.

A recent World Bank country poverty assessment report17 states that poverty in India remains

widespread35 percent of the population (37 percent rural and 31 urban) lived below the national poverty

line in 1994 (the latest year for which household survey data are available). India has the largest

concentration of poor people in the world, over 300 million (240 million rural poor and 72 million urban

poor) particularly, in rural areas where almost three out of four Indians and 77 percent of the Indian poor

live.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in India meet workers’ basic needs. Some information from U.S. Department of State

or U.S. Embassy reports indicates more generally that minimum wages provide only a minimal standard

of living for a worker, and are inadequate to provide a decent standard of living for a worker and family.

However, most workers employed in units subject to the Factories Act receive much more than the
18 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1915.

19 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1915.

20 Shanta A. Vaidya, Minimum Wages in India: Concepts and Practices (Bombay: Maniben Kara Institute/

Nagindas Chambers, 1989), Appendix IV.

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minimum wage, including benefits and bonuses.18 The U.S. Embassy was not able to find any studies on

the issue of the living wage in India. Separately, the U.S. Department of State reports, “The directive

principles of the [Indian] Constitution declare that ‘the State shall endeavor to secure . . . to all workers

. . . a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and

social and cultural opportunities.’”19

A study conducted in 1989 by Shanta A. Vaidya at the Maniben Kara Institute in Bombay presents basic

information on the evolution and development of the minimum wage in India, including relevant legislation

and official recommendations related to minimum wage fixing and information on the enforcement of

minimum wage regulations. The study also includes some comparisons of the minimum wage payable in

various industries in different Indian states with the poverty line established by India’s Planning Commission.

Specifically, the minimum wage for an industrial activity in a particular state on January 1, 1986 was

compared to the Commission’s poverty line (Rs608 per person per month in urban areas and Rs533 per

person per month in rural areas, in 1984-85 prices). Sample results presented in the study show that for

the industrial activities considered (printing presses, public transportation, hotels–residential/restaurants,

shops and commercial establishments, and engineering) that there were only two states where industry

monthly minimum wages were above or near the poverty line: Maharashtra (Rs671–printing presses,

Rs606–engineering, and Rs573–public transport) and Kerala (Rs624–engineering).20
1

 Unless noted otherwise, information presented here is from American Embassy—Jakarta, unclassified telegram

No. 1015 (March 2, 1999).

2

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 936.

3

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 937.

II-72

INDONESIA1

MINIMUM WAGE

There is no national minimum wage in Indonesia. Government Regulation No. 8 of 1981 sets forth

procedures for setting regional minimum wages. All workers in the formal sector are covered by minimum

wage regulations. The Minister of Manpower determines minimum wage levels based upon

recommendations made by the National Wage Research Board, and the 27 Provincial Wage Research

Boards. Area wage councils working under the supervision of the National Wage Council establish

minimum wages for regions and individual income requirements to meet basic-needs in each province—a

monetary amount considered sufficient to enable a single worker to meet the basic needs of nutrition,

clothing, and shelter. The government has increased the average minimum wage 70 percent (when adjusted

for inflation) over the past 5 years; however, the high inflation rate in 1998 has depressed sharply the

purchasing power of the minimum wage.2 A table at the end of this country summary contains the regional

minimum scale that will go into effect April 1, 1999 as well as those that were in effect 1994-98.

Companies may apply for postponements or exemptions from minimum wage levels, but must obtain the

agreement of workers at the concerned company in order to obtain Department of Manpower approval

for a postponement. Postponements are granted for a period of three to twelve months. The number of

postponements granted by the government has declined from over 200 in 1997 to 43 in 1998.

Minimum wage regulations provide that up to 25 percent of the wage may be provided in the form of

permanent in-kind benefits such as food, lodging, or transportation. The Labor Law establishes 7- or 8-

hour workdays and a 40-hour workweek, with one 30-minute rest period for each 4 hours of work; the

law also requires one day of rest weekly.3

PREVAILING OR AVERAGE WAGE

The minimum wage is generally the prevailing wage in the apparel and footwear industries, although for

some footwear companies in the export sector, the prevailing wage is up to 25 percent higher than the

current minimum wage.
4

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp.173-174.

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No data were available for Indonesia from the International Labor Organization (ILO) on average wages

or hours worked in the manufacturing sector or in the apparel or footwear industries.

NON-WAGE BENEFITS

There are no government-mandated non-wage benefits or tax credits especially for workers in the apparel

and footwear industries.

A U.S. Social Security Administration survey4 elaborates on three non-wage benefit programs which

employers in Indonesia must participate in for their employees: (1) old age, disability, and death benefits

are made through a provident fund, begun in 1951, in which the insured person pays 2 percent of their

earnings and employers pay 3.7 percent of the payroll; (2) sickness and maternity benefits are part of a

social insurance system that began in 1957 in which the employer pays 6 percent of the payroll for married

employees and 3 percent for single employees; and (3) work injury benefits, now part of the social

insurance system, began in 1939 and the employer pays the entire cost, ranging from 0.24 percent to 1.74

percent of the payroll.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The Indonesian concept of a poverty line is based on a daily minimum requirement of 2,100 calories per

capita, with additional non-food requirements for clothing, schooling, transportation and other living costs,

according to the Central Bureau of Statistics’ (CBS) Statistical Yearbook of Indonesia, 1997. The table

below shows the decline in the percentage of the population below the poverty line from the mid-1970s

until 1996. The recent Asian economic crisis has led to an increase in the number of Indonesians below

the poverty line, however.

Poverty Statistics for Indonesia, 1976-96

Percentage of Number in

Year Population in Poverty

____ _ Poverty___ (millions)

1976 40.1 54.2

1980 28.6 42.3

1984 21.6 35.0

1987 17.4 30.0

1990 15.1 27.2

1993 13.7 25.9

1996 11.3 22.5

____________________________________________

Source: Based on data from CBS provided to U.S. Embassy
5

 International Labour Organization, Jakarta Office, and United Nations Development Programme, Employment

Challenges of the Indonesian Economic Crisis (Jakarta: International Labour Organization, Jakarta Office, June 1998),

pp. 45; 100.

6

 SUSENAS is a household consumption survey rather than an expenditure survey.

7

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 34-36.

II-74

In 1996, the monthly expenditure level per person to meet the poverty line was 38,246 rupiah (Rp) (or

16.32 U.S. dollars (US$) at the average 1996 exchange rate) for urban areas, and Rp27,413 (US$11.70)

for rural areas. These levels are quite low in relation to the internationally-comparable poverty cut-off lines

of US$1 per person per day in urban areas and US$0.80 in rural areas, in 1985 purchasing power parity

adjusted US$. Using these internationally-comparable levels, an International Labor Organization (ILO)

and United Nations Development Programme (UNDP) study5 estimated that the number of Indonesians

living in poverty in 1996 would have been 113.8 million (31.8 million in urban areas and 82.0 million in rural

areas), or 57.4 percent of the national population (43 percent of the urban population and 66 percent of

the rural population) compared to the official 1996 estimate of 22.5 million (7.2 million in urban areas and

15.3 million in rural areas), or 11.3 percent of the national population (9.7 percent of the urban population

and 12.3 percent of the rural population). The same ILO/UNDP study also made estimates of the number

of poor and the poverty rate for 1998 (98.8 million or 48.3 percent of population) and 1999 (137.8 million

or 66.4 percent of the population) by adjusting the 1996 official poverty lines for inflation (16.6 percent in

1997, 80 percent in 1998, and 25 percent in 1999) and using interpollation methods.

In June 1998, CBS estimated that 79.4 million, or 39.1 percent of the population, was below the poverty

level. The figure for 1998 is a matter of controversy. Many analysts say that this figure overestimated the

number in poverty by taking into account price increases (raising the poverty line expenditure levels to

Rp52,470 for urban areas and to Rp4l,588 for rural areas, but both are lower than the 1996 levels in U.S.

dollar terms because of the depreciation of the rupiah) but not accounting for income increases. Other

preliminary estimates have put the 1998 poverty rate at about 14 percent, but this remains an area for

further investigation. The CBS chairman told the press in February 1999 that CBS will survey 65,000

households for the annual National Socioeconomic Survey (Survey Sosial Ekonomi Nasional, referred

to as SUSENAS)

6

 starting in February 1999, which may lead to a revision of the government’s poverty

estimate.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization7 reports several sets of measures of a national poverty line for Indonesia:

! For 1980, 44 percent of the rural Indonesian population was below the rural poverty line (annual

per capita income of US$106) and 26 percent of the urban Indonesian population was the urban
8

 The estimates are referenced as originating from the World Bank, Social Indicators of Development 1988

(Washington: World Bank, 1988). The poverty estimates are based upon an estimated absolute poverty income level

below which a minimal nutritionally adequate diet plus essential non-food requirements are not affordable. According

to the UN’s Food and Agriculture Organization (FAO), The Impact of Development Strategies on the Rural Poor (Rome:

FAO, 1988), p. 7, the poverty lines were determined by: (1) identifying the food basket consumed by low-income groups

in the country (taken to be the 20th percentile of the household income distribution); (2) estimating the quantities of that

food basket necessary to provide the minimum calories and proteins required for nutritional needs; (3) costing the

minimum food basket at appropriate retail market prices; and (4) adding the estimated monetary equivalent of essential

non-food needs (clothing, shelter, etc.). See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 139.

9

 The estimate is referenced as originating from the Central Bureau of Statistics (CBS)–Indonesia, Kemiskinan

dan Pemerataan Pendapatan di Indonesia, 1976-1990 [Poverty and Income Inequality in Indonesia, 1976-1990]

(Jakarta, 1992). According to the World Bank, Indonesia: Poverty Assessment and Strategy Report, Report No. 8519-CR

(Washington, 1990), official poverty lines for rural and urban areas are based on the minimum daily intake of 2,100

calories per person and an allowance for non-food basic necessities. In calculating the expenditure level necessary to

reach the recommended daily dietary allowance, the CBS divides lower income households into several expenditure

categories for both rural and urban households. Then, the implicit “calorie price” is calculated by dividing food

expenditures by the actual calories consumed. The calorie price for that group in which total expenditures are just

sufficient to purchase the recommended daily dietary allowance is then used to calculate the food component of the

poverty line. The allowance for other basic necessities is the percentage of expenditure by households in the selected

expenditure category on a set of non-food basic needs. See Tabatabai, Statistics on Poverty and Income Distribution:

An ILO Compendium of Data, p. 149.

10 The estimate is referenced as originating from Shashou Chen, Gaurav Datt, and Martin Ravallion, “Is Poverty

Increasing in the Developing World?” Policy Research Working Paper WPS 1146 (Washington: World Bank, 1993).

This study uses essentially the same methodology as the World Bank’s World Development Report 1990, but with

updated purchasing power parity rates. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 137.

II-75

poverty line (annual per capita income of US$124), with a national poverty rate of 39 percent.8

! For 1980, 28.4 percent of the rural Indonesian population was below the official rural poverty line

(Rp4,449 per capita per month) and 29.0 percent of the urban Indonesian population was below

the official urban poverty line (Rp6,831 per capita per month), with a national poverty rate of 28.6

percent;

for 1990, 14.3 percent of the rural Indonesian population was below the official rural poverty line

(Rp13,295 per capita per month) and 16.8 percent of the urban Indonesian population was below

the official urban poverty line (Rp20,614 per capita per month), with a national poverty rate of

15.1 percent.9

! For 1984, 38.7 percent of the Indonesian population was below the poverty line of US$ 30.42 per

capita per month (i.e., US$1 per day) in 1985 purchasing power parity adjusted US$;

for 1990, 21.7 percent of the national population was below this poverty line.10
11 World Bank, World Development Indicators 1999 (Washington: World Bank, 1999), p. 67.

12 International Labour Organization, Jakarta Office, and United Nations Development Programme, Employment

Challenges of the Indonesian Economic Crisis (Jakarta: International Labour Organization, Jakarta Office, June 1998);

see also, International Labour Office, South-East Asia and Pacific Multidiciplinary Advisory Team (ILO/SEAPAT),

Indonesia: Social Adjustment through Sound Industrial Relations and Labour Protection (Manila: International Labour

Office, 1995; second revised edition, 1997).

13 Some information regarding Rosenbaum’s study is reported on the Sweatshop Watch web page:

<http://www.sweatshopwatch.org>. 

II-76

The World Bank reports11 that, in 1990, 15.1 percent of the Indonesian population was below the countryspecific poverty line, with 16.8 percent of the urban population and 14.3 percent of the rural population

living below the poverty line; corresponding figures for 1987 were 17.4, 20.1, and 16.4 percent,

respectively. In terms of an international poverty line, the same source reports that, in 1996, 50.4 percent

of the Indonesian population was below the standard of US$2 per person per day and 7.7 percent of the

population was below the standard of US$1 per person per day, both in 1985 purchasing power parity

adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Indonesia meet workers’ basic needs. Some information from U.S. Department of

State or U.S. Embassy reports indicates more generally that Indonesian studies have tended to focus on

employment and income levels, as measured by expenditures on basic needs, rather than on wage levels.

The U.S. Embassy provided the U.S. Department of Labor a study commissioned by the International

Labor Organization which touches on these issues.12

The Indonesian government has developed an index called the “minimum living need” based on a basket

of foodstuffs needed for a 3,000 calorie per person per day diet, as well as other expenditures such as rent,

clothing, basic utensils/furnishings, and utility expenditures. The minimum living need is used as a

benchmark against which the minimum wage is compared. In 1997, the average minimum wage was 95

percent of the average minimum living need. In 1998, the average minimum wage fell to 76 percent of the

minimum living need due to high inflation (78 percent in 1998). According the government, the minimum

wage schedule that goes into effect April 1, 1999 (see table at the end of this section) will be 70 percent

of the current average minimum living need.

Several other studies have addressed the living wage issue in Indonesia. Ruth Rosenbaum of the U.S.-

based Center for Reflection, Education and Action has estimated a living wage for Indonesia for 1996 using

the Purchasing Power Index method.13 Dartmouth College’s Amos Tuck Business School has estimated
14 Derek Calzini, Jake Odden, Jean Tsai, Shawna Huffman, and Steve Tran, Nike Inc.: Survey of Vietnamese and

Indonesian Domestic Expenditure Levels, Field Study in International Business, Dartmouth College, Amos Tuck School,

November 1997.

15 Global Exchange, “Wages and Living Expenses for Nike Workers in Indonesia” (September 1998). See Global

Exchange web site: <http://www.globalexchange.org>. 

II-77

a living wage for 1997,14 and the U.S.-based non-governmental organization Global Exchange has

determined a living wage for 1998.15
II-78

Indonesian Regional Minimum Wage Rates, 1994-99

(effective date; in rupiah per month)

Region 04/01/99 08/01/98 04/01/97 04/01/96 04/01/95 04/01/94

Aceh 171,000 147,000 128,000 115,500 87,500 78,750

North Sumatra 210,000 174,000 151,000 138,000 105,000 93,750

West Sumatra 160,000 137,000 119,000 108,000 81,250 62,500

Riau Province (except Batam) 218,000 174,000 151,500 138,000 103,750 77,500

Batam 290,000 270,000 235,000 220,500 183,750 168,750

Jambi 150,000 137,500 119,500 108,000 82,500 75,000

South Sumatra- mainland 170,000 146,500 127,500 115,500 87,500 75,000

South Sumatra – islands 181,000 155,500 115,500 135,000 87,500 75,000

Bengkulu 150,000 146,500 127,500 115,500 87,500 75,000

Lampung 160,000 145,000 126,000 114,000 87,500 75,000

Jakarta 231,000 198,500 172,500 156,000 115,000 95,000

Central Java 153,000 130,000 113,000 102,000 75,000 67,500

Yogyakarta 130,000 122,500 106,500 96,000 71,250 55,000

South Kalimantan 166,000 144,000 125,000 114,000 87,500 75,000

West Kalimantan 175,000 145,500 126,500 114,000 87,500 75,000

Central Kalimantan 195,000 158,500 138,000 124,500 92,500 68,750

East Kalimantan 194,000 176,000 153,000 138,000 105,000 81,250

South Sulawesi 148,000 129,500 112,500 102,000 77,500 57,500

Southeast Sulawesi 160,000 139,000 121,000 109,500 83,750 70,000

Central Sulawesi 150,000 122,500 106,500 96,000 70,000 57,500

North Sulawesi 155,000 135,500 118,000 108,000 81,250 67,500

Bali (southern districts) 187,000 162,500 141,500 127,500 97,500 82,500

Bali (northern districts) 166,000 162,500 141,500 127,500 97,500 82,500

West Nusatenggara 145,000 124,000 108,000 97,500 73,750 58,750

East Nusatenggara 143,000 122,500 106,500 96,000 72,500 62,500

Maluku 180,000 156,500 136,000 123,000 95,000 77,500

Irian Jaya 225,000 195,500 170,000 154,500 118,750 112,500

East Timor 183,000 158,500 138,000 126,000 95,000 75,000

West Java – I 230,000 198,500 172,500 156,000 115,000 95,000

West Java – II 210,000 181,000 157,500 142,500 115,000 95,000

West Java – III 200,000 167,500 145,500 132,000 115,000 95,000

West Java - IV 195,000 160,000 139,000 129,000 115,000 95,000

East Java – I (Surabaya area) 182,000 152,500 132,500 120,000 92,500 75,000

E. Java – I (south central area) 182,000 152,500 132,500 117,000 92,500 75,000

E. Java – I (city of Madiun) 182,000 152,500 132,500 111,000 92,500 75,000

East Java – II (scattered) 174,000 146,500 127,500 111,000 92,500 75,000

E. Java – II (Jember district) 174,000 146,500 127,500 108,000 92,500 75,000

East Java – III (northeast area) 166,000 139,000 121,000 111,000 92,500 75,000

E. Java – III (southwest area) 166,000 139,000 121,000 108,000 92,500 75,000

E. Java – III (northwest area) 166,000 139,000 121,000 105,000 92,500 75,000

East Java - IV 160,000 134,000 116,500 105,000 92,500 75,000
1

 Unless noted otherwise, information presented here is from American Embassy—Tel Aviv, unclassified

telegram No. 4022 (March 22,1999).

2

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1698.

II-79

ISRAEL1

MINIMUM WAGE

The national minimum wage in Israel is set under the authority of a 1986 law, implemented in 1987. It is

legally defined as a percentage of the gross monthly average wage in the entire economy. Until April 1997,

that percentage was 45 percent; since then, it has been 47.5 percent.

By law the maximum hours of work at regular pay are 47 hours a week, 8 hours per day, and 7 hours on

the day before the weekly rest, which must be at least 36 consecutive hours and include the Sabbath.2 By

national collective agreements, the private sector established a maximum 45-hour workweek in 1988; and

the public sector moved to a 5-day, 421⁄2-hour workweek in 1989.

The table below presents the nominal and real minimum wage in Israel since 1995, expressed as the

monthly average minimum wage in new Israeli shekels (NIS) and in U.S. dollars (US$) per month (per the

local convention of expressing wages and salaries in monthly terms). A level of 180 hours per month was

assumed for computation of the minimum wage per hour. To assess the development of the minimum wage

in real terms, the nominal monthly minimum wage in shekels has been adjusted for inflation (i.e., rise in the

average consumer price index for the year) of 11.3 percent in 1996, 9.0 percent in 1997, and 5.4 percent

for 1998. 

The Nominal and Real Minimum Wage, 1995-98

Unit of Measure 1995 1996 1997 1998*

NIS per month 1758 1996 2309 2563

US$ per month 584 626 669 675

US$ per hour 3.24 3.48 3.72 3.75

Real Minimum Wage Index (1995=100)

100.0 102.0 108.3 114.0

_________________________________________

Note: * Data are based on the first nine months only.
3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

4

International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 747.

II-80

PREVAILING OR AVERAGE WAGE

The table below presents average gross monthly wages per worker, in NIS per month, for workers in the

textile and apparel industry and the leather and footwear industry. These have been converted into US$

per month and per hour at the average exchange rate for the year. For the latter computation, actual hours

worked and paid leave hours per month have been used for the textile and footwear industries for each

year. The table also presents wages in the apparel and footwear industries in real terms. The decline in

real wages since 1995 is mostly attributable to a decline in average hours worked (including paid leave)

per employee from 181 per month in 1995 to 168 in 1998, rather than to a decline in the real hourly wage.

Nominal and Real Monthly Earnings in the Apparel and Shoe Industries, 1995-98

Industry 1995 1996 1997 1998*

Apparel (NIS/mo) 3161 3376 4006 4313

Footwear (NIS/mo) 3283 3449 3962 3976

Apparel (US$/mo) 1052 1059 1161 1135

Footwear (US$/mo) 1090 1082 1149 1046

Apparel (US$/hr) 5.84 5.87 6.38 6.27

Footwear (US$/hr) 6.00 5.98 6.57 6.23

Real Wage Index (1995=100)

Apparel 100.0 95.8 104.3 106.5

Footwear 100.0 94.4 99.5 94.7

________________________________________________

Note: * Data are based on the first nine months only.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Israel for all employees in the manufacturing sector and

average hourly earnings for all employees in the apparel and footwear industries. The earnings data include

pay for time worked, paid leave, bonuses, and other benefits paid directly to the employee, but not the cost

of social insurance programs.3 Average weekly hours worked by all employees were 40.8 in manufacturing

for the years 1990 through 1997; and 38.9 in apparel and 39.2 in footwear and leather goods for the years

1990 through 1994.4 Current average earnings, which are reported by the ILO in the national currency,
II-81

were converted to US$ using the annual average exchange rate published in the International Monetary

Fund’sInternational Financial Statistics (March 1999). To track changes in real earnings (i.e., earnings

adjusted for inflation), a real earnings index was computed by deflating current earnings in the national

currency with the annual average national consumer price index as published in the International Monetary

Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Monthly Earnings in All Manufacturing and Average Hourly Earnings in Apparel and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (NIS; 1990=100)

 (monthly) (hourly) (hourly) Manuf. Apparel Footwear

(NIS) (US$) (NIS) (US$) (NIS) (US$)

1990 2,669 1,295 7.3 3.54 8.9 4.32 100 100 100

1991 3,080 1,351 8.7 3.82 10.2 4.48 97 100 96 

1992 3,514 1,429 10.0 4.07 12.0 4.88 99 103 101

1993 3,917 1,384 11.0 3.89 13.0 4.59 99 102 99

1994 4,427 1,470 13.0 4.32 15.0 4.98 100 107 102

1995 5,061 1,681 15.0 4.98 16.0* 5.31 104 112 98

1996 5,757 1,804 17.0 5.33 20.0 6.27 106 115 111

1997 6,676 1,935 20.0 5.80 23.0 6.67 113 124 117

_____________________________________________________________________________________________

Note: * indicates a break in series due to classification changes; beginning in 1995, includes other leather products. 

Source: ILO, Yearbook of Labour Statistics, 1998, p. 905.

NON-WAGE BENEFITS

Israel’s national insurance institute (social security system) administers a wide variety of benefit programs

for various categories of the population, such as old age benefits, disability payments, unemployment

compensation, and maternity benefits. The principal benefit available to textile and footwear workers (as

well as to most workers in other industries) generally would be the payment made to all families with

children in Israel, regardless of income. Child allowances are based on family size, with larger families

receiving more than proportionately larger benefits, as seen in the following table.

Monthly Child Allowances per Family

In NIS per month: In US$ per month:

Number of

Children 1995 1996 1997 1998* 1995 1996 1997 1998*

 1 123 136 149 159 41 43 43 41

 2 246 272 298 318 82 85 86 83

 3 493 544 597 635 164 171 173 165

 4 990 1094 1201 1278 329 343 348 332

 5 1408 1556 1708 1818 468 488 495 473

 6 1870 2065 2267 2413 621 648 657 627

 7 2299 2541 2790 2968 764 797 809 772

 8 2729 3017 3312 3523 906 946 960 916

 9 3158 3493 3834 4078 1049 1096 1112 1061

______________________________________________________________________________
5

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 184-187.

6

 Thus, the incidence of poverty in Israel is in fact a reflection of the distribution of income rather than a

measure of the number of persons below some absolute standard of living. When the median income rises in real

(inflation-adjusted) terms, the poverty line rises in tandem, and the number of “poor” may also increase if incomes at the

lower end of the income scale rise at a slower rate than the median. For example, while the poverty line rose by 10.8

percent from 1995 to 1996, the CPI rose by an annual average 11.2 percent, indicating a slight real decline in the defined

level of poverty. In 1997, however, the poverty line rose by 12.1 percent, whereas consumer prices rose by only nine

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Note: * Data are based on the first nine months only.

A U.S. Social Security Administration survey5 elaborates on five different non-wage benefit programs

which employers in Israel must participate in for their employees: (1) the old age, disability, and death

benefits program, first legislated in 1953 and subsequently expanded upon, is a dual social insurance (for

all residents) and government-funded social assistance system (means-tested income support). For the

social insurance program, employees contribute 2.22 percent of earnings below one-half of average wage

for old-age and survivors and 4.01 percent of earnings above one half of the average wage, employers

contribute 2.29 percent of payroll, and the government contributes 1.18 percent on earnings above one-half

of average wage (with reduced contributions on earnings below one-half of average wage; (2) sickness and

maternity benefits, begun in 1953, in which the insured person pays 4.8 percent of their earnings for medical

care and 0.6 percent for maternity (3.1 percent and 0.33 percent of earnings below one-half of national

average wage), the employer contributes 0.15 percent for maternity, and the government contributes 0.10

percent for maternity (with reduced contribution for earnings below one-half average wage); (3) work

injury benefits, begun in 1953, in which the employed person pays nothing, employers contribute 0.53

percent of payroll, and the government contributes 0.17 percent of payroll and earnings (with reduced

contribution rates for earnings below one-half of average wage); (4) unemployment insurance, begun in

1970, in which employees contribute 0.15 percent of earnings (0.08 percent, if their earnings are below

one-half of the average wage), employers contribute 0.04 percent of payroll, and the government

contributes 0.11 percent of payroll (or 0.07 percent of earnings below one-half of average wage); and (5)

the family allowances program is a universal system, begun in 1959, in which the employee pays nothing,

the employer contributes 1.88 percent of payroll, and the government contributes 0.60 percent of payroll

(with reduced rates below one-half of average wage).

ASSESSING BASIC NEEDS: THE POVERTY LINE

The measure of poverty in Israel is a relative measure, not an absolute one (i.e., poverty is not defined in

terms of the cost of purchasing some minimum basket of goods of services but instead in relation to the

median income, adjusted for family size. Specifically, a family is considered as poor if its net monthly

income (income from wages and investments, plus transfer payments or other grants, less direct taxes paid)

is 50 percent or less of the median net income, for a family of its size.6 The poverty line for 1995-97, based
percent, implying a three percent real increase in the level of poverty.

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on this relative measure, is presented in the following table.

The Poverty Line, 1995-97

In NIS per month: In US$ per month:

Family

Size 1995 1996 1997 1995 1996 1997

1 1058 1173 1315 351 368 381

2 1693 1876 2104 562 588 610

3 2243 2486 2788 745 780 808

4 2709 3002 3366 900 942 976

5 3174 3518 3945 1054 1104 1144

6 3598 3987 4471 1195 1251 1296

7 4021 4456 4997 1335 1398 1449

8 4402 4878 5470 1462 1530 1586

9 4740 5253 5891 1574 1648 1708

______________________________________________________________

Note: The poverty line is defined as 50 percent of median net income.

Taxes. Because the poverty line is defined in terms of after-tax income, some adjustment to gross wages

must be made for taxes. Israel is a relatively high-tax country, with a steeply progressive income tax and

a complex array of adjustments to individual income taxes depending on residence and family

circumstances. All citizens are eligible for “tax credit points” (i.e., credits against income tax due) which

were worth NIS153 each per month (about US$40) in 1998. These are awarded on the basis of an

individual’s family circumstances. For example, an unmarried man or a married man with a working wife

is eligible for 2.25 credit points; a single woman or a married woman without children would get 2.75 credit

points; a married man with a non-working wife receives 3.25 points; a married woman with children gets

3.75 points; and so on. In addition, residents of designated development priority regions (in which many

textile and shoe plants are located) are eligible for special tax credits of 3-7 percent of monthly income.

The tax rates are presented in the table below.

Tax Rates, 1998

________________________________________________________________________________

Income Tax 

 Monthly Income (NIS) Marginal Tax Rate (percent)

From 0 to 1770 10

 1770 3540 20

 3540 9330 30 

 9330 16910 45

16910 – 50 (top marginal rate)

________________________________________________________________________________

National Insurance (Social Security) 
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Monthly Income (NIS) Employee Contributions Only (in percent) 

From 0 to 2803 2.66 (Reduced rate on salaries up to 1⁄2 average wage)

 2803 to 22420 4.60 (Full rate on amounts from 1⁄2 to four times average wage)

22420 to – 0 (No national insurance due on amounts above four times

 average wage)

________________________________________________________________________________

Incidence of Poverty. Because poverty is defined in relative rather than absolute terms, there has been

no appreciable decline in the poverty rate in Israel over the past two decades despite a substantial increase

in real incomes and consumption, as seen in the following table.

Percentage of Families Below the Poverty Line

Before Transfer After Transfer

Year Payments and Taxes Payments and Taxes

1980 28.1 15.7

1985 31.3 11.4

1990 34.3 14.3

1991 35.3 14.9

1992 34.7 17.2

1993 34.6 16.2

1994 34.2 18.0

1995 33.7 16.8

1996 34.3 16.0

1997 34.3 16.2

_________________________________________

Minimum and Apparel Wages and Poverty: An Example. To bring the foregoing information on wages,

taxes, government benefits, and poverty together, the table below offers the following example of a full-time

male worker, employed in a non-development priority region, with a non-working wife and two children

below the age of 18 earning (a) the minimum wage, and (b) the average monthly wage in the apparel

industry, both for the year 1998. This worker would be eligible for 3.25 tax credit points, equal to a

reduction of income tax of NIS497 per month, which would eliminate the minimum wage worker’s income

tax liability. While this is only a simplified, illustrative example, actual family circumstances could vary

considerably. Amounts are given in shekels per month, except for the last two rows, which have been

converted into U.S. dollars at the average exchange rates of NIS3.45 per dollar for 1997 and 3.80 for

1998. According to this example, a worker earning the average salary in the apparel industry would be

modestly above the poverty line, while a minimum wage worker would be substantially below it.

Minimum and Apparel Wages and Poverty, A Comparison, 1998

 Minimum Apparel

 Item Wage Wage 

Gross Wage Income 2563 4313

 Less: Basic Income Tax 336 763

National Insurance 68 149
II-85

 Plus: Tax Credit Points 336 497

Child Allowance 318 318

Net Monthly Income 2813 4216

Poverty Line (1997) 3366 3366

Net Monthly Income (US$) 740 1109

Poverty Line (1997) (US$) 976 976

______________________________________________________

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Israel meet workers’ basic needs. The U.S. Embassy did not identify any information

on the living wage in Israel.
1 Unless noted otherwise, information presented here is from American Embassy—Rome, unclassified telegram

No. 1694 (March 15, 1999).

2 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1321.

3 Case law in Italy has established that minimum wage rates determined by a sectoral collective agreement must

be applied by employers which are not members of the signatory employers’ organization. See “International Minimum

Pay: Current Minimum Pay Rates,” European Industrial Relations Review, No. 266 (March 1996), p. 17.

4

 Relevant sections of the economic newspaper Il Sole 24 Ore with wage information have been provided to

the U.S. Department of Labor. Figures given in U.S. dollars (US$) have been converted from Italian lire (Lit) at the

exchange rate of Lit1,630 per US$1 for 1995; 1,543 for 1996; 1,701 for 1997; and l,736 for 1998.

II-86

ITALY1

MINIMUM WAGE

Minimum wages are not set by law in Italy, but rather by national sectoral collective-bargaining contracts

and, de facto, apply to all workers in similar occupations.2 Minimum rates are renegotiated every three

to four years, whenever sectoral agreements are renewed. The vast majority of workers are covered by

collective agreements. In the absence of an agreement between labor and management, the courts may

step in to determine fair wages on the basis of practice in related activities or related collective bargaining

agreements.3 Collectively agreed minima apply pro-rata to part-time workers. Trainees and apprentices

receive lower rates, which are set out in agreements. 

Based upon data provided by the textile, apparel, and footwear workers’ union FILTEA-CGIL, minimum

monthly contractual wages set in the national textile and apparel industry contract signed 27 July 1995 are

as follows:4

Grades 01 July 95 01 July 96 01 Jan 97

 (thousands of Italian lire)

01 July 95 01 July 96 01 Jan 97

 (U.S. dollars)

8 (highest) 1,269 2,378 2,438 778.53 1,541.15 1,433.27

1 (lowest) 559 1,592 1,615 342.94 1,031.76 949.44

and the minimum monthly contractual wages set in the national footwear industry contract signed 

12 July 1995 are as follows:

Grades 01 July 95 01 July 96 01 Jan 97

 (thousands of Italian lire)

01 July 95 01 July 96 01 Jan 97

 (U.S. dollars)

8 (highest) 2,330 2,398 2,458 1,429.45 1,554.12 1,445.03
5

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1321.

II-87

1 (lowest) 1,566 1,592 1,615 960.74 1,031.76 949.44

A 1997 law reduced the legal workweek to 40 hours from 48.5 Most collective bargaining agreements

provide for a 36- to 38-hour workweek. The average contractual workweek is 39 hours but is actually

less in many industries. Overtime work may not exceed 2 hours per day or an average of 12 hours per

week.

PREVAILING OR AVERAGE WAGE

The National Statistical Office (ISTAT) prepares indices of average annual contractual wages by sector.

Recent data for the apparel and footwear industries appear below. The wage data include: basic pay, cost

of living increases, thirteenth month pay, and regularly given annual bonuses. Wage increases resulting from

company level bargaining (that can total an additional 30 percent of basic pay) are not included. Social

security contributions paid directly by the employer to the Social Security Institute (INPS) are also not

included. In 1995, employer-paid social security contributions amounted to 44.9 percent of the average

contractual wage in the apparel industry and 46.0 percent in the footwear industry.

Average Annual Contractual Wages for Workers in Apparel and Footwear Industries, 1995-98

Sector

and

Year

Avg. Annual Manual Non-Manual

Salary Before Workers Workers

Taxes

 (thousands of Italian lire)

Avg. Annual Manual Non-Manual

Salary Before Workers Workers

Taxes

 (U.S. dollars)

Apparel

1995

1996

1997

1998

 24,344 23,729 28,997

 21,140 24,454 27,964

 26,001 26,252 29,042

 26,662 25,905 29,843

 14,934.97 14,557.67 17,789.57

 16,292.94 15,848.35 18,123.14

 15,285.71 15,433.27 17,073.49

 15,358.29 14,922.24 17,190.67

Footwear

1995

1996

1997

1998

 24,366 23,905 28,004

 25,163 24,661 29,197

 26,059 25,516 30,437

 26,766 26,174 31,359

 14,948.47 14,665.64 17,180.37

 16,307.84 15,982.50 18,922.23

 15,319.81 15,000.59 17,893.59

 15,418.20 15,077.19 18,063.94

 Source: ISTAT

The table below presents data from the U.S. Bureau of Labor Statistics on hourly compensation costs in

Italy for production workers in the manufacturing sector and in the apparel and footwear industries. They

include pay for time worked, paid leave, bonuses, and other benefits paid directly to the employee as well
6

 U.S. Bureau of Labor Statistics, International Comparisons of Hourly Compensation Costs for Production

Workers In Manufacturing, 1975-1997 (Washington: U.S. Department of Labor, May 1999).

II-88

as the cost of social insurance programs.6 No data were available on average hours worked per week by

production workers in all manufacturing or in the apparel or footwear industries. Current hourly

compensation costs, which are reported by the U.S. Bureau of Labor Statistics in the national currency,

were converted to US$ using the annual average exchange rate published in the International Monetary

Fund’s International Financial Statistics (March 1999). To track changes in real hourly compensation

(i.e., compensation adjusted for inflation), a real compensation index was computed by deflating current

hourly compensation in the national currency with the annual average national consumer price index as

published in the International Monetary Fund’s International Financial Statistics (March 1999), indexed

to 1990 = 100.

Hourly Compensation Costs in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Compensation Index (Lit; 1990=100)

 (Lit) (US$) (Lit) (US$) (Lit ) (US$) Manuf. Apparel Footwear

1990 20,900 17.44 15,695 13.10 16,663 13.91 100 100 100

1991 22,734 18.33 16,783 13.53 17,948 14.47 102 101 101

1992 23,841 19.35 17,700 14.36 18,933 15.36 102 101 102

1993 24,858 15.80 18,332 11.65 19,738 12.54 102 100 102

1994 25,591 15.87 19,040 11.81 20,166 12.51 101 100 100

1995 26,398 16.21 19,432 11.93 20,843 12.80 99 97 98

1996 27,352 17.73 20,169 13.07 21,531 13.95 99 97 97

1997 28,528 16.75 na na na na 101 na na

_____________________________________________________________________________________________

Note: na = not available.

Source: U.S. Department of Labor, Bureau of Labor Statistics, International Comparisons of Hourly Compensation 

Costs for Production Workers in Manufacturing, May, 1999.

NON-WAGE BENEFITS

Minimum contractual wages (i.e., basic take home pay) noted above are only a portion of total wages,

which include:

! Wage increases resulting from company-level bargaining, which takes place in years in between

national labor contracts, i.e., every two years. Company-level bargaining generally has yielded

increases of an estimated 30 percent above the minimum contractual wage; however, only onethird of all companies in the textile and footwear sectors engage in company level collective

bargaining that results in wage increases;

! Separation pay, amounting to one month’s pay for each year of service (withheld by the employer

until the worker quits);
7

 Social Security Administration,Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 188-191.

8

 The results presented here are based upon the latest available report: Council of Ministers, Inquiry

Commission on Poverty, 1997 Report (Rome: Commission on Poverty and Social Exclusion, no date).

II-89

! Social security contributions, paid directly by the employer to the Social Security Institute (INPS)

to cover pension, unemployment, sick leave, and other state-mandated benefits.

A U.S. Social Security Administration survey7 elaborates on five different non-wage benefit programs

which employers in Italy participate on behalf of their employees: (1) old age, disability and death benefits,

begun in 1919, in which the insured person contributes 8.89 percent of earnings up to 63 million lire and

9.9 percent of earnings of 63-250 million lire, the employer contributes 23.8 percent of payroll, and the

government pays the full cost of means-tested allowances and any overall deficit; (2) sickness and maternity

benefits, initiated in 1912 and now a dual social insurance and universal medical care program, in which

the insured person contributes 1 percent of earnings up to 40 million lire plus a solidarity contribution of 0.8

percent on earnings between 40 million and 150 million lire, employers contribute 9.6 percent for sickness

and 1.87 percent of payroll for tuberculosis benefits, and the government pays various subsidies plus a

portion of contributions due from employers; (3) work injury benefits, begun in 1898, in which employers

pay 0.5-16 percent of payroll according to risk (the average for industrial workers is about 3 percent); (4)

unemployment insurance, began in 1919, is a compulsory insurance program for workers in private industry

in which employers pay 1.61-1.91 percent of payroll and the government pays administrative costs plus

various subsidies; and (5) family allowances, begun in 1937, is an employment-related system in which

employers pay 2-5 percent of payroll and the government provides various subsidies to this program.

ASSESSING BASIC NEEDS: THE POVERTY LINE

A “relative poverty” report has been presented every year since 1994 by the Inquiry Commission on

Poverty, in cooperation with ISTAT.8 The poverty line is defined in terms of the national average per

capita consumption expenditures. A two-member household whose consumption expenditures are less

than or equal to the average per capita expenditure on consumption is considered to be poor. In 1997,

11.2 percent of all households in Italy lived in “relative poverty”—which, in terms of individuals, meant

some 6,908,000 persons or 12.2 percent of the Italian population. The poverty line for 1997 was set at

Lit1,233,829 per month for a two-member household. This represented a 3.7 percent increase over the

corresponding 1996 level of Lit1,190,273. Equivalence scales are available adjust for different-sized

households.

A new poverty standard will be initiated by the Commission in its 1998 Report to be issued later this year.

“Absolute poverty,” based on variations in a basket of minimum goods and services, aims at relating

poverty to developments in the living standard.
II-90

The Commission’s 1997 Report offers a preview of the new poverty measure that will be adopted. The

new absolute poverty measure will be based upon a minimum consumption basket comprised of three

components (food and drink, housing, and durable goods) plus an amount for residual expenditures that

will assure a modest but sufficient standard of living in order to avoid any kind of social exclusion. The food

and drink basket is defined in terms of recommended daily allowances and nutritional needs and

requirements, adjusted for age and sex of individuals but not for scale economies for larger families. The

housing expenditure is based on rents for adequate facilities and includes minimum-level expenditures for

utilities. For the durable goods component, three goods were considered as basic needs (color televison,

refrigerator, and washing machine) and monthly depreciation was taken into account. The residual

component, which is to account for clothing and footwear, personal care, cultural and recreational activities,

transportation, and other household expenditures, is defined as a percentage of expenditure on food and

drink, ranging from 33 percent for two-member households to 43 percent for five-member households.

The Commission applied this new method and obtained estimates for absolute poverty thresholds for 1997.

Using the monthly threshold obtained for 1997, the Commission then computed the money value of the

baskets for 1995 and 1996 by deflating the corresponding values using the consumer price index. The

following tables presents the poverty lines under the new definition (absolute line) and compares them to

the old definition (relative line):

Absolute and Relative Poverty Lines by Household Size, 1995-1997

(current lire per month)

 ___________________________________________ ________________________________

___________

Family Size Absolute Poverty Line Relative Poverty Line 

 

 1995 1996 1997 1995 1996 

 1997 

1 member 625,254 650,264 663,270 684,870

 712,974

 739,064

2 members 937,286 974,778 994,273 1,143,3551,190,273

1,233,829

3 members 1,331,305 1,384,557 1,412,249 1,526,3791,589,014

1,647,162

4 members 1,685,885 1,753,321 1,788,388 1,865,9551,942,526

2,013,609

5 members 2,124,848 2,209,842 2,254,040 2,178,0912,267,470

2,350,444

6 members 2,449,018 2,546,979 2,597,918 2,458,2132,559,087

2,652,732

7 members or more 2,763,528 2,874,069 2,931,550 2,745,1952,857,845

2,962,423

________________________________________________________________________________________________________

__________

Source: ISTAT, Household Budget Survey.

Incidence of Absolute and Relative Poverty by Household Size, 1995-1997
9

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 75.

10 The estimate is referenced as originating from Eurostat, Poverty Statistics in the Late 1980s: Research Based

on Micro-Data (Luxembourg: Office for Official Publications of the European Communities, 1994), p. 414. The study was

conducted for Eurostat by Aldi J.M. Hagenaars, Klass de Vos, and M. Asghar Zaidi and was based on the Survey of

Family Consumption (ISTAT). The study uses household expenditure per adult equivalent (OECD equivalence scales)

with the poverty line set at 50 percent of the mean of this variable. Equivalence scales were used to compensate for

differences due to family size. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of

Data, p. 137.

II-91

(percentage of households that are poor)

__________ ________________________ ________________________

Family Size Incidence of Absolute Poverty Incidence of Relative Poverty

 1995 1996 1997 1995 1996 1997

1 member 7.3 6.6 8.1 9.6 9.0 11.6

2 members 5.7 5.0 4.3 10.6 9.8 9.2

3 members 4.5 4.2 4.8 7.1 7.4 9.0

4 members 5.8 6.7 5.6 8.5 9.6 8.4

5 members or more 22.4 20.1 22.1 23.1 21.1 24.1

 All households 7.7 7.2 7.5 10.6 10.3 11.2

______________________________________________________________________________

Source: ISTAT, Household Budget Survey.

Incidence of Absolute Poverty by Type of Household, 1997

(percentage of household that are poor)

Household Type Incidence of Absolute Poverty

Single member, less than 65 years of age 5.2

Couple, head of household less than 65 1.4

Single member and Couple, 

 head of household 65 or older 9.4

Couple with one child 4.5

Couple with 2 children 5.5

Couple with 3 or more children 23.9

Single parent 6.3

Households with at least one child underage 10.1

_____________________________________________________________

Source: ISTAT, Household Budget Survey.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization9 reports for 1988 that 24.2 percent of the Italian population was below the poverty line of 50

percent of national mean equivalent expenditure.10 A more recent study, using a slightly different definition,

reported for 1986 that 10.6 percent and for 1991 that 6.5 percent of the Italian population was below the
11 Timothy M. Smeeding, Financial Poverty in Developed Countries: The Evidence from LIS, Final Report to

the UNDP, Working Paper No. 155, Maxwell School of Citizenship and Public Affairs, Syracuse, NY (April 1997),

Appendix Table A-4.

II-92

poverty line of 50 percent of median disposable income.11

MEETING WORKERS’ NEEDS WAGE

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Italy meet workers’ basic needs. The U.S. Embassy did not identify any information

on living wage studies in Italy.
1Unless noted otherwise, information presented here is from American Embassy—Kingston, unclassified

telegram No. 579 (February 25, 1999).

II-92

JAMAICA1

MINIMUM WAGE

Jamaica has two minimum wages, one for industrial security guards and one for unskilled and semi-skilled

workers. A tripartite Minimum Wage Advisory Commission—consisting of representatives from

employers, unions, and the government—advises the Minister of Labor on all matters relating to minimum

wages. In determining the minimum wage, the government considers the cost of a selected market basket

the ability of employers to pay.

The following is a list of the current minimum wages for industrial security guards (basic pay for industrial

security guard, effective January 1997): for work within a normal 8 hour day or 40 hour week—40.60

Jamaican dollars (J$) per hour; for work in excess of an 8 hour day or 40 hour week—J$60.75 per hour;

and for work on public holidays or rest days—J$81.00 per hour.

The following is a list of the current minimum wages for general workers (unskilled and semi-skilled,

effective July 1996): for work within a normal 8 hour day or 40 hours week—J$20 per hour; for work

done in excess of an 8 hour day or 40 hour week—J$30 per hour; and for work on public holidays or rest

days—J$40 per hour.

A normal workweek for household workers is up to 44 hours. However, it should be noted that the wage

rates offered/demanded exceed the minimum wage. The minimum wage generally serves as a base

guideline for employers. According to the Ministry of Labor, a new minimum wage proposal is presently

under consideration.

PREVAILING OR AVERAGE WAGE

In the apparel sector, workers are paid a base rate, based upon a given quantitative level and time frame,

which varies from company to company and items produced. The base rate is generally above the

minimum wage. In addition to the base rate, workers are also paid a piece rate for items produced above

the quantity stipulated under the base rate.

The following is a sample of average net annual earnings for various occupational groups in the Jamaican

apparel sector for 1998:
2

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 737.

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Occupational Net Annual Earnings

Group or Position (U.S. dollars—US$)

Plant Manager 15,000 - 28,200

Production Manager 10,000 - 22,500

Cutting Manager 10,000 - 19,800

Engineer 10,000 - 22,500

Skilled Cutting Labor 4,100 - 5,000

Quality Inspector 3,700 - 4,100

Machine Operator 1,800 - 3,000

General Labor 1,800 - 2,250

The table below presents available data from the International Labor Organization (ILO) on average

weekly earnings (direct wages per worker) in Jamaica for all employees in the manufacturing sector; data

were not available for the apparel and footwear industries. Earnings data include pay for time worked,

paid leave, bonuses, and other benefits paid directly to the employee, but not the cost of social insurance

programs.2 Average hours worked per week by all employees in manufacturing were 38.6 for the years

1990 through 1992.3 Current average earnings, which are reported by the ILO in the national currency,

were converted to US$ using the annual average exchange rate published in the International Monetary

Fund’sInternational Financial Statistics (March 1999). To track changes in real earnings (i.e., earnings

adjusted for inflation), a real earnings index was computed by deflating current earnings in the national

currency with the annual average national consumer price index as published in the International Monetary

Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Weekly Earnings in All Manufacturing

Year All Manufacturing Real Earnings Index (J$; 1990=100)

 (J$) (US$) All Manufacturing

1990 451 63 100 

1991 701 58 103

1992 895 39 74

1993 na na na

1994 na na na

1995 na na na

1996 na na na

1997 na na na 
4

 Social Security Administration,Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 192-193.

5

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 63.

II-94

_______________________________________________________

Note: na = not available

Source: ILO, Yearbook of Labour Statistics, 1998, p. 890.

NON-WAGE BENEFITS

Government mandated non-wage benefits include the following: sick and annual leave; statutory deductions

which include the employers contribution to national housing trust—3 percent of gross salary; national

insurance scheme—2.5 percent; education tax—3 percent; and a pension which is 5 - 7 percent of every

worker’s income. Most employers also provide other benefits to certain categories of workers such as

transportation allowances, rent allowances (a portion of which is taxable), uniform and laundry allowances,

and recreation allowances. While these benefits vary from company to company in the apparel industry,

the most common benefits offered are transportation and meal allowances.

A U.S. Social Security Administration survey4 elaborates on three non-wage benefit programs in which

employers in Jamaica participate on behalf of their employees: (1) old age, disability, and death benefits,

begun in 1958, are part of a social insurance program in which the insured person pays 2.5 percent of their

earnings (up to J$250,000 per year), the employer pays 2.5 percent of wages (up to J$250,000 per year),

and the government covers administrative expenses; (2) sickness and maternity benefits, begun in 1979,

are part of the social insurance program with the same contributions as for pensions above; (3) work injury

benefits, begun in 1937, are also part of the social insurance system and the insured person pays nothing,

the employer pays as in pension coverage above, and the government, as an employer, only contributes

for its own employees. 

ASSESSING BASIC NEEDS: THE POVERTY LINE

According to the Planning Institute of Jamaica, an individual or household is considered poor if unable to

attain a level of real consumption expenditure at or above an appropriate poverty line on the basis of

personal income and assets. In 1997, the poverty line was set at consumption levels below J$126,922

(US$3,567) per annum for a family of five. According to reports, 20 percent of the population is below

the poverty level in Jamaica.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization5 reports several sets of measures of a national poverty line for Jamaica:
6

 The estimate is referenced as originating from R. Urzua, Caracterización, Dimensiones y Evolución de la

Pobreza Rural [Characterization, Dimensions and Evolution of Rural Poverty], FAO Studies on Rural Poverty (Rome:

FAO, 1984). No further information is provided in the ILO compendium regarding the estimate.

7

 The estimate is referenced as originating from Elaine K. Chan, “A Compendium of Data on Poverty and

Income Distribution,” Background Paper for the World Development Report 1990, Mimeographed (Washington: World

Bank, 1990), p. 44. The estimate is uses data from the household Survey of Living Conditions 1988 conducted by the

Statistical Institute of Jamaica and the World Bank, Preliminary Report on Living Conditions Survey, Jamaica (Kingston:

World Bank, no date), Table 3.1. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium

of Data, p. 162.

8

 The estimates are referenced as originating from George Psacharopoulos, Samuel Morely, Ariel Fiszbein,

Haeduck Lee, and Bill Wood,Poverty and Income Distribution in Latin America: The Story of the 1980s, Latin America

and the Caribbean Technical Department, Regional Studies Program, Report No. 27 (Washington: World Bank, 1993),

Table 13.1 and pp. 62-69. The study is based on national-level household surveys compiled by the Economic

Commission for Latin America and the Caribbean (ECLAC) and the World Bank. The poverty lines, in 1985 purchasing

power parity adjusted US$, were converted into national currencies, but were not provided in the ILO compendium. See

Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 138.

9

 World Bank, World Development Report 1998/99 (New York: Oxford University Press, 1999), p. 196.

II-95

! for 1980, 51 percent of the rural Jamaican population was below the poverty line.6

! for 1985, 5.9 percent of the Jamaican population was below the poverty line of US$31 per capita

per month, based on 1985 purchasing power parity adjusted US$ (J$74).7

! for 1989, 18.3 percent of the rural and 4.4 percent of the urban Jamaican population were below

the poverty line of US$60 per capita per month, based on 1985 purchasing power parity adjusted

US$; the national poverty rate was 12.1 percent.8

The World Bank reports9 that, in 1992, 34.2 percent of the Jamaican population was below the countryspecific poverty line; the same source reports that, in 1993, 24.9 percent of the Jamaican population was

below the international poverty line of US$2 per person per day and that 4.3 percent of the population was

below the international poverty line of US$1 per person per day, both in 1985 purchasing power parity

adjusted US$. 

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Jamaica meet workers’ basic needs. The U.S. Embassy noted that the following

studies have been done on wages in Jamaica:

Jamaica Employers Federation, “Salary and Fringe Benefits for Supervisory, Clerical and

Production (1997),” a biannual report published by the Federation;
II-96

Planning Institute of Jamaica, “Standard of living conditions,” published annually by the Jamaican

government; and

Statistical Institute of Jamaica, “Employment, Earnings and Hours Worked in Large

Establishments,1996-1997,” published by the Jamaican government.
1 Unless noted otherwise, information presented here is from American Consul—Hong Kong, unclassified

telegram No. 1192 (February 26, 1999).

2

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U. S.

Government Printing Office, April 1999), p. 985.

3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 753.

II-96

MACAU1

MINIMUM WAGE

Macau has no minimum wage. According to a senior economic official, the Legislative Council considered

a minimum wage bill in 1998, but postponed final action pending an improvement in the economic situation.

Labor legislation provides for a 48-hour workweek, an 8-hour workday, and overtime; the law also

requires a 24-hour rest period for every 7 days of work.2

PREVAILING OR AVERAGE WAGE

The average monthly wage for workers in the garment industry in 1995 was 4,026 patacas (P), about 520

U.S. dollars (US$); P3,900 (US$504) in 1996; P4,177 (US$540) in 1997; and P4,096 (US$529) in 1998

(through the third quarter). For the footwear industry, data are only available for 1997 (P3,516 or about

US$454 per month) and 1998 (P3,252 or about US$420 per month).

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Macau for all employees in the manufacturing sector and

in the apparel and footwear industries. They include pay for time worked, paid leave, bonuses, and other

benefits paid directly to the employee, but not the cost of social insurance programs.3 Average hours

worked per week by production workers were 48.3 in all manufacturing for the years 1990 through 1997,

and 52.5 in the apparel industry and 49.7 in the footwear industry for the years 1990 through 1992.4

Current average earnings, which are reported by the ILO in the national currency, were converted to US$

using the annual average exchange rate published in annual editions of the Central Intelligence Agency’s The

World Factbook. To track changes in real earnings (i.e., earnings adjusted for inflation), a real earnings

index was computed by deflating current earnings in the national currency with the annual average national

consumer price index as published in annual editions of the Central Intelligence Agency’s The World

Factbook, indexed to 1990 = 100.
5

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U. S.

Government Printing Office, April 1999), p. 985.

6

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U. S.

Government Printing Office, April 1999), p. 985.

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Average Monthly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (P; 1990=100)

 (P) (US$) (P) (US$) (P) (US$) Manuf. Apparel Footwear

1990 2,058 256 na na na na 100 na na

1991 2,232 278 na na na na 100 na na

1992 2,509 315 na na na na 105 na na

1993 2,926 364 na na na na 113 na na

1994 3,111 387 na na na na 112 na na

1995 3,210 400 na na na na 106 na na

1996 3,124 392 na na na na 98 na na

1997 3,323 416 4,465 559 3,601 451 101 na na

__________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 910.

NON-WAGE BENEFITS

Workers in the apparel and footwear industry—as with other sectors of the Macau economy—receive only

severance pay, if laid off, and paid annual holidays. In the absence of any statutory minimum wage or

publicly administered social security programs, some large companies provide private welfare and security

packages.5

ASSESSING BASIC NEEDS: THE POVERTY LINE

Macau has not determined an official poverty line, and does not publish data on median income, household

income, or the percentage of households/workers that fall under various income categories.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Macau meet workers’ basic needs. Some information from U.S. Department of State

or American Consul reports indicates more generally that average wages generally provide a decent

standard of living for a worker and family in Macau.6 The American Consul reported that Macau officials

were unaware of any studies on the issue of the living wage.
1Unless noted otherwise, information presented here is from American Embassy—Kuala Lumpur, unclassified

telegram No. 788 (April 6, 1999).

2 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1004.

3

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1004.

4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

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MALAYSIA1

MINIMUM WAGE

There is no national minimum wage in Malaysia. A government-prescribed minimum wage was abandoned

more than twenty years ago and is not viewed as necessary due to Malaysia’s chronically tight labor

market and resulting upward pressure on wages.

The Wage Councils Act provides for a minimum wage in those sectors and regions of the country where

a need exists.2 Under the law, workers who believe they need the protection of a minimum wage may

request that a wage council be established. However, few workers are now covered by minimum wages

set by wage councils and the government prefers to let market forces determine wage rates. 

Under the employment Act of 1955, working hours may not exceed 8 hours per day or 48 hours per

workweek of 6 days and provisions are made for overtime; each workweek must include one 24-hour rest

period.3

PREVAILING OR AVERAGE WAGE

The U.S. Embassy was not able to provide any information on prevailing wages in the footwear and apparel

industries.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Malaysia for all employees in the manufacturing sector and

in the apparel and footwear industries. They include pay for time worked, paid leave, bonuses, and other

benefits paid directly to the employee, but not the cost of social insurance programs.4 No data were

available from the ILO for average hours worked per week by all employees in manufacturing or in the

apparel or footwear industries. Current average earnings, which are reported by the ILO in the national

currency, were converted to US$ using the annual average exchange rate published in the International
5

Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 231-232.

II-99

Monetary Fund’s International Financial Statistics (March 1999). To track changes in real earnings

(i.e., earnings adjusted for inflation), a real earnings index was computed by deflating current earnings in

the national currency with the annual average national consumer price index as published in the International

Monetary Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Monthly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (RM; 1990=100)

(RM) (US$) (RM) (US$) (RM ) (US$) Manuf. Apparel Footwear

1990 660 244 493 182 458 169 100 100 100

1991 719 261 525 191 573 208 104 102 120

1992 794 312 600 236 529 208 110 111 106

1993 848 329 636 247 765 297 114 114 148

1994 928 354 706 269 789 301 120 122 147

1995 1,002 400 742 296 807 322 123 122 143

1996 na na na na na na na na na

1997 na na na na na na na na na

____________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 911.

NON-WAGE BENEFITS

There are no government-mandated non-wage benefits or tax credits for workers in the apparel and

footwear industries other than those in the Employment Act and the Workmen’s Compensation Act, which

apply to all industries.

A U.S. Social Security Administration survey5 elaborates on two non-wage benefits programs in which

employers in Malaysia must participate on behalf of their employees: (1) old age, disability, and death

benefits, begun in 1951, are provided through a provident fund and a social insurance dimension was

added in 1969. The insured person contributes 11 percent of their earnings to the provident fund and 0.5

percent to the disability fund according to 24 wage classes, employers contribute 12 percent of the payroll

to the provident fund and 0.5 percent of payroll to the disability fund according to the 24 wage classes,

and the government pays nothing. For sickness and maternity benefits, medical care is available in

government dispensaries and hospitals, and a nominal fee is charged to persons able to pay; (2) work injury

benefits, begun in 1929, are financed entirely by employers who pay 1.25 percent of the payroll according

to 24 wage classes.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The most recent data available regarding the poverty line is based on the 1995 Household Income Survey
6

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 37-38.

7

 The estimates are referenced as originating from the Government of Malaysia, Mid-term Review of the Fourth

Malaysia Plan, 1981-1985 (Kuala Lumpur, 1984), Mid-term Review of the Fifth Malaysia Plan , 1986-1990 (Kuala

Lumpur, 1989), and Sixth Malaysia Plan, 1991-1995 (Kuala Lumpur, 1991). The government studies appear to have

estimated the incidence of poverty by calculating a poverty line income and then comparing it to the actual income

reported in income surveys to determine the number of households with incomes below the poverty line income. The

World Bank has raised some questions about the methods which relate to coverage, consistency over time, and the use

of indirect income estimates. The poverty line income is adjusted annually for inflation, but not for cost of living

differences in rural and urban areas. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium

of Data, p. 151.

8

 The estimate is referenced as originating from Elaine K. Chan, “A Compendium of Data on Poverty and Income

Distribution,” Background Paper for the World Development Report 1990 (Washington: World Bank, 1990), pp. 45-46.

Income data from the Household Income and Expenditure Survey 1984 were converted into expenditures by assuming

a national savings rate of 33 per cent (to ensure comparability between poverty estimates in Malaysia and other

countries). An absolute poverty line, defined as an expenditure level below which basic needs cannot be satisfied, was

arbitrarily set 35 percent higher than the Indian poverty line for rural areas which at that time was considered to be more

representative of many developing countries. The poverty line corresponded to US$31 after adjustment for purchasing

power parity had been made to the 1985 official exchange rate. The purchasing power parity poverty line was converted

into the national currency using estimates from Robert Summers and Alan Heston, “A New Set of International

Comparisons of Real Product and Price Levels: Estimates for 130 Countries, 1950-1985,” Review of Income and Wealth,

II-100

(HIS). The 1995 HIS identifies the following poverty line incomes: 425 ringgit Malaysia (RM) per month

for a household size of 4.6 in peninsular Malaysia and RM601 per month for a household size of 4.8 in

Sarawak, East Malaysia. The 1995 HIS estimates the incidence of poverty among Malaysian citizens at

370,200 households, or about 8.9 percent of the total number of households.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization6 reports several sets of measures of a national poverty line for Malaysia:

! For 1980, 37.4 percent of the rural and 12.6 percent of the urban Malaysian households were

below the official poverty line (RM270 per household per month in 1978 prices), with a national

poverty rate of 29.0 percent;

for 1987, 22.4 percent of the rural and 8.3 percent of the urban households were below the official

poverty line (RM350 per household per month in 1987 prices), with a national poverty rate of 17.3

percent; and

for 1989, 19.3 percent of the rural and 7.3 percent of the urban households were below the official

poverty line, with a national poverty rate of 15.0 percent.7

! for 1985, 6.7 percent of the Malaysian population was below the poverty line of US$31 per

capita per month in 1985 purchasing power parity adjusted US$ (or RM39).8
Series 34, No. 1 (March 1988), pp. 1-25. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, pp. 136; 151.

9

 The estimate is referenced as originating from Shashou Chen, Gaurav Datt, and Martin Ravallion, “Is Poverty

Increasing in the Developing World?” Policy Research Working Paper WPS 1146 (Washington: World Bank, 1993).

This study uses essentially the same methodology as the World Bank’s World Development Report 1990, but with

updated purchasing power parity rates. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 137.

10 World Bank, World Development Indicators 1999 (Washington: World Bank, 1999), p. 67.

11 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1004.

II-101

! for 1989, 6.4 percent of the Malaysian population was below the poverty line of US$30.42 per

capita per month (i.e., US$1 per day) in 1985 purchasing power parity adjusted US$.9

The World Bank reports10 that, in 1989, 15.5 percent of the Malaysian population was below the countryspecific poverty line. The same source reports that, in terms of international poverty measures, in 1995,

26.6 percent of the Malaysian population was below the international poverty line of US$2 per person per

day and 5.6 percent of the population was below the international poverty line of US$1 per person per day,

both in 1985 purchasing power parity adjusted US$. 

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Malaysia meet workers’ basic needs. Some information from U.S. Department of

State or U.S. Embassy reports indicates more generally that minimum wages set by wage councils generally

do not provide for a decent standard of living for a worker and family; however, prevailing wages, even

in the sectors covered by the wage councils, are higher than the minimum wages set by the wage councils

and do provide a decent living.11 The U.S. Embassy did not identify any studies on the living wage in

Malaysia.
1

 Unless noted otherwise, information presented here is from American Embassy—Port Louis, unclassified

telegram No. 996 (May 6, 1999).

2

 For more information on the minimum wage in Mauritius, see International Labour Organization (ILO),

“Minimum Wage Fixing in Mauritius,” Labour Law and Labour Relations Branch (LEG/REL) Briefing Note No. 6 (Geneva:

International Labour Office, 1997), which is also available on the ILO’s web site:

<http://www.ilo.org/public/english/80relpro/legrel/papers/brfnotes/minwages/mauriti3.htm>.

3

 A “factory worker” (in contrast to an “unskilled worker”) is a worker who performs manual tasks requiring a

particular skill or aptitude and includes a person who is required to attend to or operate a machine. See Government of

Mauritius, Government Notice No. 65 of 1987, The Industrial Relations Act, Regulations made by the Minister under

section 96 of the Industrial Relations Act, cited as the Export Enterprises (Remuneration Order) (Amendment)

Regulations 1987.

4

 At the current exchange rate of MRs25 to US$1.

II-102

MAURITIUS1

MINIMUM WAGE

The National Remuneration Board (NRB) is the agency responsible for the setting of minimum wages and

other conditions of employment with respect to various categories of workers in the private sector in

Mauritius, including the apparel and footwear industry. The NRB is a joint consultative/negotiating body

comprised of workers and employers representatives. Although it technically operates under the Ministry

of Labor and Industrial Relations, it is an independent body. Minimum wages are fixed on the basis of

occupation and industry.2

When unions believe there is a case for reviewing the minimum wage and other non-wage benefits in a

particular sector of activity or for a certain category of employees, they submit their request to the Minister

of Labor who then refers the case to the NRB for review. The various parties concerned are then invited

to hearing sessions to present and defend their proposals. On the basis of these sessions, the NRB

prepares a technical report which is submitted to its chairman. The report analyzes the impact of the

union’s demands on such factors as the industry’s profitability, investment, employment, productivity, etc.

Based on the findings of the report, the NRB’s chairman will make recommendations to the Minister of

Labor. Unions and employers are given fourteen days to transmit their comments on the report. The

comments, and counter-proposals, are then reviewed by the NRB and the Minister. A final report is

compiled and the recommendations are presented to the Council of Ministers for approval. These

recommendations form the basis of the remuneration orders which are enacted by the government.

The prescribed minimum wage for factory workers3 in the export processing zone (EPZ), including the

apparel and footwear industry, is 348.36 Mauritian rupees (MRs), or 13.90 U.S. dollars (US$),4 per week
5

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 282.

6

 See Government of Mauritius, Government Notice No. 191 of 1984, the Industrial Relations Act, Regulations

made by the Minister under section 96 of the industrial Relations Act, cited as the Export Enterprises (Remuneration

Order) Regulations 1984.

II-103

for the first year of employment. For subsequent years, the minimum wage is MRs366.11 (US$14.60) per

week. For administrative purposes, however, workers are generally paid on a fortnightly or monthly basis.

The standard legal workweek in the industrial sector is 45 hours. In the EPZ, an employee may work an

additional 10 hours per week, although at a higher hourly wage.5 For the purpose of determining

remuneration due for extra work, the weekly basic rate of a monthly paid worker (other than a watchman)

is deemed to be three-thirteenths of the monthly basic rate; the basic rate per hour is deemed to be one

forty-fifth of the weekly basic rate.6

PREVAILING OR AVERAGE WAGE

Official statistics published by the government show that in March 1998 the average monthly earnings of

employees in the apparel industry amounted to MRs6,452 (US$258) compared to MRs5,156 (US$286)

in 1995. In the footwear industry, the average monthly earnings amounted to MRs9,210 (US$368) in

March 1998 compared to MRs7,332 (US$407) in 1995.

 Average Earnings by Selected Industrial Group in the Export Processing Zone, March 1994-March 1998

Employees exclusively on monthly rates of pay (rupees per month)

Industrial Group 1994 1995 1996 1997 1998

All Sectors 4,955 5,257 5,497 5,787 6,422

 Manufacturing 4,954 5,250 5,493 5,777 6,403

 Textiles 5,072 5,452 5,632 5,951 6,733

 Wearing apparel 4,956 5,156 5,463 5,758 6,452

 Footwear and Leather Products 6,170 7,332 8,288 8,394 9,210

 Non-Manufacturing 5,020 5,707 5,902 6,527 8,100

Employees exclusively on daily rates of pay (rupees per day)

Industrial Group 1994 1995 1996 1997 1998

All Sectors 111 117 125 137 145

 Manufacturing 112 118 125 137 146

 Textiles 132 134 165 176 194

 Wearing apparel 109 111 119 134 143

 Footwear and Leather Products 112 131 137 137 136

 Non-Manufacturing 98 108 108 89 98

_______________________________________________________________

Source: Based on official Mauritian government statistics conveyed by the American Embassy, Port Louis.
7

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour Office,

1998), p. 805.

II-104

Employers in the apparel industry report that, in practice, workers can earn two or three times the minimum

wage. This is mainly due to a labor shortage and employers, which have driven up wages, and to other

factors such as overtime work (workers may be required to perform extra hours of work for up to ten

hours a week for which they are paid a higher rate), productivity and attendance bonuses, and wage

compensation granted as a result of an increase in the cost of living.

The table below presents available data from the International Labor Organization (ILO) on average daily

earnings (direct wages per worker) in Mauritius for production workers in the manufacturing sector and

in the apparel and footwear industries. They include pay for time worked, paid leave, bonuses, and other

benefits paid directly to the employee, but not the cost of social insurance programs.7 No data were

available from the ILO for average hours worked per week by production workers in all manufacturing or

in the apparel or footwear industries. Current average earnings, which are reported by the ILO in the

national currency, were converted to US$ using the annual average exchange rate published in the

International Monetary Fund’s International Financial Statistics (March 1999). To track changes in real

earnings (i.e., earnings adjusted for inflation), a real earnings index was computed by deflating current

earnings in the national currency with the annual average national consumer price index as published in the

International Monetary Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Daily Earnings in All Manufacturing, Apparel and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (MRs; 1990=100)

 (MRs) (US$) (MRs) (US$) (MRs) (US$) Manuf. Apparel Footwear

1990 60.48 4.07 52.65 3.54 79.00 5.32 100 100 100

1991 84.00 5.37 75.00 4.79 85.00 5.43 130 133 101 

1992 93.00 5.98 82.00 5.27 97.00 6.23 137 139 110

1993 109.00 6.18 91.00 5.16 99.00 5.61 146 140 101

1994 122.00 6.79 108.00 6.01 109.00 6.07 152 154 104

1995 132.00 7.59 110.98 6.38 120.73 6.94 155 150 109

1996 137.00 7.63 117.99 6.57 122.34 6.82 151 149 103

1997 148.74 7.23 132.00 6.42 137.92 6.71 153 156 109

_____________________________________________________________________________________________

Source: ILO, Yearbook of Labour Statistics, 1998, p. 879.

NON-WAGE BENEFITS

The main government-mandated non-wage benefits for EPZ workers (including apparel and footwear

industries) are: (a) annual leave: after one year of service, workers are entitled to sixteen days’ leave on

full pay if they are employed on a six-day week or fourteen days if employed on a five-day week; (b) sick

leave: after one year of service, workers employed on a six-day week are entitled to twenty one days’ sick

leave and a further period of fourteen days’ sick leave on full pay for prolonged illness; (c) maternity

benefits: female workers who have been employed for twelve months preceding their confinement are
8

 Social Security Administration,Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 241-242.

9

 Task Force on Country Studies on Globalization, Studies on the Social Dimensions of Globalization:

Mauritius (Geneva: International Labour Office, March 1999). Copy sent by the American Embassy is on file.

II-105

entitled to twelve weeks’ leave on full pay; (d) attendance bonus: workers who during a period of one

month and have not been absent on any day on which they are required to work are entitled to a bonus of

not less than five percent of the basic wage earned for that month; (e) end of year bonus: workers who

have been employed for one year are entitled to a bonus equivalent to one twelfth of their earnings for that

year; (f) transport benefits and facilities: workers are entitled to free transport or are paid the return bus

fare where no free transport is available, if the distance between their residence and the place of work

exceeds 3.2 km; (g) subsistence allowance: when a worker, after having completed a normal day’s work,

is required to work after 7:00 p.m., he or she must be provided with a meal allowance of MRs10

(US$0.40) ; and (h) death grant: on the death of a worker who has been employed for not less than

twelve continuous months, the employer must make a one-time payment of MRs1,000 (US$40) to his/her

spouse.

A U.S. Social Security Administration survey8 elaborates on several different non-wage benefit programs

in which employers are required to participate for their employees: (1) old age, disability, death is a dual

universal (for all residents) and social insurance program (earnings-related for all employees), begun in

1951, in which the insured person pay nothing for the universal pension and 3 percent of earnings for the

earnings-related pension, employers pay nothing toward the universal pension and 6 percent of payroll for

the earnings-related pension, and the government pays the entire cost of the universal pension and any

deficit for the earnings-related pension; (2) sickness and maternity benefits, first legislated in 1975, require

employers to provide up to 21 days of sick leave or 12 weeks of maternity leave (6 weeks before and 6

weeks after confinement) to employees; free medical services are available to the population in government

dispensaries and hospitals, and financial assistance is available to needy persons; (3) work injury benefits,

initiated in 1931 as part of the a social insurance system, cover all employees and the employer pays the

entire cost as part of their contributions to the social insurance program; and (4) the Unemployment

Hardship Relief Act of 1983 provides means-tested benefits to heads of households under age 60 after 30

days’ registered unemployment; and (5) a program of family allowances for needy families with 3 or more

children is supported entirely by the government.

ASSESSING BASIC NEEDS: THE POVERTY LINE

There are no official data on the poverty line in Mauritius. However, a recent ILO report9 indicates that

in terms of abject poverty—as measured by the World Bank’s US$1 per person per day poverty

line—poverty is undoubtedly low in Mauritius. In 1997, the government conducted a study on poverty in

Mauritius, but for political reasons, the report was not released. Also the government is currently

undertaking a study with a view to putting in place a series of poverty alleviation programs for Mauritius.
10 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 19.

11 The estimate is referenced as originating from the World Bank, Social Indicators of Development 1987

(Washington: World Bank, 1987). The poverty estimates are based upon an estimated absolute poverty income level

below which a minimal nutritionally adequate diet plus essential non-food requirements are not affordable. According

to the UN’s Food and Agriculture Organization (FAO), The Impact of Development Strategies on the Rural Poor (Rome:

FAO, 1988), p. 7, the poverty lines were determined by: (1) identifying the food basket consumed by low-income groups

in the country (taken to be the 20th percentile of the household income distribution); (2) estimating the quantities of that

food basket necessary to provide the minimum calories and proteins required for nutritional needs; (3) costing the

minimum food basket at appropriate retail market prices; and (4) adding the estimated monetary equivalent of essential

non-food needs (clothing, shelter, etc.). See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 139.

12 World Bank, World Development Indicators 1999 (Washington: World Bank, 1999), p. 67.

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A compendium of poverty and income distribution statistics prepared by the International Labor

Organization10 reports for 1979 12 percent of the Mauritian population was below the poverty line of

annual per capita income of US$190.11

The World Bank reports that, in 1992, 10.6 percent of the Mauritian population was below the national

poverty line.12

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear or

apparel industries in Mauritius meet workers’ basic needs. More general information from the U.S.

Embassy indicates that labor unions claim that EPZ workers have to work extra hours in order to earn

enough to meet their basic needs. They also claim that, based on the actual cost of living, the minimum

living wage should be at least MRs6,000 (US$250) per month. However, no formal study has been done

on this issue to date. There is legislation which provides for the payment of an additional remuneration to

workers in the private sector, including the EPZ, to compensate them for the annual increase in the cost of

living. The compensation granted is based primarily on the rate of inflation in the previous year.
1Unless noted otherwise, information presented here is from American Embassy—Mexico City, unclassified

telegram No. 1941 (March 4, 1999).

2

 For more information on the minimum wage in Mexico, see International Labour Organization (ILO),

“Minimum Wage Fixing in Mexico,” Labour Law and Labour Relations Branch (LEG/REL) Briefing Note No. 11

(Geneva: International Labour Office, 1998), which is also available on the ILO’s web site:

<http://www.ilo.org/public/english/80relpro/legrel/papers/brfnotes/minwages/mexico3.htm>.

II-107

MEXICO1

MINIMUM WAGE

The minimum wage is set annually by the tripartite (labor, management, and government) National

Minimum Wage Commission (CNSM) during the first week of December. Normally, the increase in

the minimum wage authorized by the CNSM is set to begin on January 1 of the following year.

However, the increase for 1999 became effective on December 3, 1998. For a decade, until 1997,

the decision of the CNSM followed tripartite deliberations in October in the context of an annual

Pacto Económico between labor, business, and government to keep inflation in check. Since 1997,

the Pacto has been replaced by the annual congressional deliberations on the federal budget.2

The country is divided into three geographic areas for purposes of the minimum wage, with the most

industrially developed areas in Zone A and the least developed in Zone C. For each of these three

geographic areas, there are 88 different occupational minima. The general minimum wage covers all

employees not covered by separate occupational minima, all of which are higher than the general

minimum. The minimum wage is for a day’s work of eight hours; however, workers who are

employed by the week are paid for seven days (six days of work and one day of rest). For 1999, the

minimum wage rates are: Zone A, 34.45 pesos (M$) per day, roughly 3.50 U.S. dollars (US$); Zone

B, M$31.90 per day, roughly US$3.24; and Zone C, M$29.70 per day, roughly US$3.02. A table at

the end of this country summary presents the general daily minimum wage rates by geographic area

with a national average since 1990.

PREVAILING OR AVERAGE WAGE

The following table presents average monthly wages in the apparel and footwear industries, based on

official statistics from the Mexican government’s National Institute of Statistics, Geography and

Informatics (Instituto Nacional de Estadística, Geografía e Informática–INEGI) and provided to

the U.S. Department of Labor by the U.S. Embassy. The wage estimates are referenced by INEGI as

covering only production workers, but appear to be high compared with data from other sources and

may include executives as well as production workers.
3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 739.

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Average Monthly Wages in the Apparel and Footwear Industry, 1995-98

(in US$ converted at average annual exchange rate of the Bank of Mexico)

--------------------------------------------------------------------------------------

Sector 1995 1996 1997 1998

--------------------------------------------------------------------------------------

Apparel 

Hosiery 794.26 986.80 1,207.35 1,091.68

Sweaters 299.34 328.57 380.24 358.47

Men's clothes 1,452.74 1,972.54 2,587.91 2,537.88

Women’s clothes 611.99 725.70 798.43 736.09

Shirts 588.13 642.82 760.76 705.03

Uniforms 335.27 372.29 443.31 447.02

Children’s clothes 466.98 550.08 699.23 613.33

Footwear 

Leather 2,653.52 3,360.87 3,782.13 3,828.90

Non-leather 690.00 940.49 1,142.38 976.29

________________________________________________________

Note: Based on a 48-hour workweek; 1998 figures only through May.

Source: INEGI

On March 1, 1999, the American Apparel Manufacturers Association and the Cámara Nacional de

la Industria del Vestido (Chamber of the Mexican Apparel Industry) held a briefing in Mexico City

to promote a pilot of the “Responsible Apparel Production Program” (RAPP). Ten firms in Mexico

volunteered to be monitored to determine whether they are in compliance with the industry code of

conduct, including worker rights, established by the apparel industry.

The table below presents available data from the International Labor Organization (ILO) on average

hourly earnings (direct wages per worker) in Mexico for production workers in the manufacturing

sector and in the apparel and leather footwear industries. They include pay for time worked, paid

leave, bonuses, and other benefits paid directly to the employee, but not the cost of social insurance

programs.3 Average hours worked per week by all employees were 45.1 in all manufacturing for the

years 1990 through 1997, and 42.2 in apparel and 40.4 in footwear and leather goods for the years

1990 through 1995.4 Current average earnings, which are reported by the ILO in the national currency,

were converted to US$ using the annual average exchange rate published in the International Monetary

Fund’s International Financial Statistics (March 1999). To track changes in real earnings (i.e.,

earnings adjusted for inflation), a real earnings index was computed by deflating current earnings in

the national currency with the annual average national consumer price index as published in the

International Monetary Fund’s International Financial Statistics (March 1999), indexed to 1990 =

100.

Average Hourly Earnings in All Manufacturing, Apparel, and Footwear
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Year All Manufacturing Apparel Footwear Real Earnings Index (M$: 1990=100)

 (M$) (US$) (M$) (US$) (M$) (US$) Manuf. Apparel Footwear

1990 4.15 1.48 2.85 1.01 3.92 1.39 100 100 100

1991 5.22 1.73 3.65 1.21 5.03 1.67 103 104 105

1992 6.39 2.06 4.35 1.41 6.72 2.17 109 108 121

1993 6.53 2.10 5.54 1.78 6.02 1.93 101 125 99

1994 7.21 2.14 4.91 1.45 6.28 1.86 104 103 96

1995 8.29 1.29 5.38 0.84 6.63 1.03 89 84 75

1996 10.16 1.34 6.40 0.84 7.85 1.03 81 74 66

1997 12.10 1.53 na na na na 80 na na

______________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 892.

NON-WAGE BENEFITS

The Mexican government, through the Federal Labor Law (LFT), requires all employers to make the

following non-salary payments to, or on behalf of the employee: annual bonus (15 days wages);

vacation premium on salary (25 percent of daily wages for vacation days); transport bonus (subsidized

transportation to and from work); performance bonus; seniority bonus; third shift bonus; Sunday bonus;

punctuality bonus; quarterly bonus; and periodic payments in kind (basic foodstuffs).

The following table presents average monthly fringe benefits for workers in the apparel and footwear

industries, based on official statistics from INEGI and provided to the U.S. Department of Labor by

the U.S. Embassy. The fringe benefits estimates are referenced by INEGI as covering only production

workers, but appear to be high compared with data from other sources and may include executives as

well as production workers.

Average Monthly Fringe Benefits, 1995-98

(in US$ converted at average annual exchange rate of the Bank of Mexico)

--------------------------------------------------------------------------------------------

Sector 1995 1996 1997 1998

--------------------------------------------------------------------------------------------

Apparel 

Hosiery 612.82 580.08 680.97 601.30

Sweaters 178.04 187.28 205.75 224.69

Men's clothes 588.97 760.45 991.89 944.69

Women’s clothes 264.17 277.49 322.66 270.93

Shirts 242.15 256.92 211.10 200.67

Uniforms 119.43 149.30 151.82 143.11

Children’s clothes 225.82 230.53 245.85 227.47

Footwear 

Leather 1,499.02 1,526.36 1,578.08 1,514.77

Non-leather 409.45 446.72 494.62 494.49

_____________________________________________________________

Note: Based on a 48-hour workweek; 1998 figures only through May.

Source: INEGI

Legislation retroactive to October 1, 1993, established a negative income tax (or devolution) of 7.5

to 10.8 percent for workers earning the minimum wage. This devolution is paid with each paycheck

by employers, who may subtract the amount from any taxes owed the federal government. Combining

this with the minimum-wage increase, minimum-wage earners received an increase in their incomes
5

 U. S. State Department, Country Reports on Human Rights Practices for 1997 (Washington: U.S.

Government Printing Office, March 1998), p. 590.

6

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 243-245.

II-110

of 14.5 to 17.8 percent from 1993 to 1994. The same legislation eliminated income taxes on those

earning up to two times the minimum wage and reduced them for those earning less than four times the

minimum. In 1995, the fiscal subsidy was increased by three percent. From 1996 through 1998, the

fiscal subsidy was 14 percent.5

A U.S. Social Security Administration survey6 elaborates on five non-wage benefit programs that

employers in Mexico are required to participate in on behalf of their employees: (1) old, age,

disability, and death benefits, first established in 1943 and revised in 1997, in which insured persons

contribute 1.125 percent of earnings for old age benefits and 0.625 percent of earnings between 15

and 25 times the minimum wage for disability and survivors’ insurance, employers pay 2 percent of

payroll for employees with earnings up to 5 times the minimum wage and 3.15 percent of payroll for

those with earnings between 15 and 25 times the minimum wage and an addition 1.75 percent of

payroll for disability and survivors’ insurance and 5 percent for the housing fund, and the government

pays 10.14 percent of the employers’ contributions and guarantees a minimum pension equal to 5.5

percent of the minimum daily wage; (2) sickness and maternity benefits, also established in 1943, in

which the insured pays 3.125 pays of earnings, employers pay 8.75 percent of payroll, and the

government contributes 0.625 percent of payroll; (3) work injury benefits in which the employer pays

0.348-10.035 percent of payroll, according to risk; (4) unemployment benefits, the Labor Law requires

employers to pay a lump sum equal to 3 months’ pay plus 20 days’ pay for each year of service; and

(5) family allowances program in which employers pay 1 percent of payroll up to a ceiling of 25 times

the minimum wage in Federal District (around Mexico City) for child care programs.

ASSESSING BASIC NEEDS: THE POVERTY LINE

Methodology for determining the levels of poverty varies. The most sophisticated system employed

is that developed for the Mexican government’s anti-poverty program, Progresa. This program is

aimed at the abject poor, who are principally rural and indigenous and total about 26 million people

(out of a total rural and indigenous population in excess of 31 million). Since the program is centered

on education and health, the detailed field census employed to identify persons eligible for benefits

factors in not only income levels, but also access to public education and health care.

Based upon a less rigorous methodology, a variety of government agencies conclude that about 40

million Mexicans live below a less well-defined poverty line. The difference between the 26 million

and 40 million figures could generally be considered the working urban poor, many of whom are found

in the growing informal economy, and who largely work without the protection of the LFT. A 1999

UN Population Fund study asserted that 78 percent of the Mexican population could be considered not

prosperous, and that the number of poor people increased by 10.6 million between 1994 and 1996.

The study further asserted that 51 million Mexicans are very poor and 26 million live in abject poverty
7

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 63-64.

8

 The estimates are referenced as originating from George Psacharopoulos, Samuel Morely, Ariel Fiszbein,

Haeduck Lee, and Bill Wood, Poverty and Income Distribution in Latin America: The Story of the 1980s, Latin

America and the Caribbean Technical Department, Regional Studies Program, Report No. 27 (Washington: World

Bank, 1993), Table 13.1. The study is based on national-level household surveys compiled by the Economic

Commission for Latin America and the Caribbean (ECLAC) and World Bank. The poverty lines, in 1985 purchasing

power parity adjusted US$, were converted into national currencies, but were not provided in the ILO compendium.

See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 138.

9

 The estimates are referenced as originating from special tabulations prepared for the ILO in 1995 by the

Economic Commission for Latin America and the Caribbean (ECLAC), which updated previous estimates in ECLAC,

II-111

(a figure identical to that used by the Mexican government).

The Mexican Secretariat of Labor computes on a quarterly basis the daily and monthly cost of a

minimum 4.6-person family consumption basket (canasta de consumo familiar mínimo). For the first

quarter of 1999, the cost of the minimum family consumption basket was M$168.04 (US$17.09) per

day, or M$36.53 (US$3.71) per person per day. The following table presents the components of the

consumption basket and the daily and monthly costs for a family for the first quarter of 1999 (March

1999):

 Minimum Cost for Family

Item Share of Total Cost Daily (M$) Monthly (M$)

 Total 100.0 168.04 5,041.14

Food 38.3 64.32 1,929.68

Clothing 7.3 12.19 365.66

Goods and Services 30.1 50.64 1,519.10

Household furnishings 6.9 11.54 346.34

Personal services 2.7 4.54 136.29

Transportation 10.6 17.80 534.00

Education and entertainment 4.2 7.00 210.07

___________________________________________________________________________________

Source: Informe de Política Laboral de la Direccíon Ejecutiva de Estudios del Trabajo (DEET), No. 10 

(México, DF: Secretaría del Trabajo y Previsíon Social (STPS), May 15, 1999), pp. 1-2; copy provided 

in public submission by the Chicago Religious Leadership Network on Latin America (CRLN) in response

to the U.S. Department of Labor’s Federal Register notice of June 30, 1999. 

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization7 reports several sets of measures of the national poverty line for Mexico:

! for 1989, 31.6 percent of the Mexican rural population and 9.1 percent of the Mexican urban

population were below the poverty line of US$60 per capita per month in 1985 purchasing

power parity adjusted US$, with a national poverty rate of 17.7 percent.8

! for 1984, 54 percent of the Mexican rural population and 36 percent of the Mexican urban

population were below the poverty line, with a national poverty rate of 43.0 percent; for 1992,

55 percent of the rural population and 37 percent of the urban population were below the

poverty line, with the national poverty rate of 44 percent.9
Magnitud de la Pobreza en América Latina en los Años Ochenta (Santiago: ECLAC, 1990). The tabulations are

based on household surveys and use a methodology that sets poverty lines based on the minimum per capita foodenergy needs for age- and sex-specific minima as recommended by the FAO/WHO. The composition of the food

basket takes into account the prevailing national dietary habits. The cost of the minimum food basket is evaluated using

retail prices for the lowest quality varieties in the capital city or its metropolitan area (prices prevailing in other cities

and in rural areas were generally unavailable). Minimum food budgets for other urban areas are set at 5 percent below

the capital's, and for rural areas at 25 percent below the capital's. Averages for urban areas and at the nation level are

calculated using population weights. To reflect minimum expenditures on non-food needs, the urban poverty line is

set at double the corresponding minimum food budget, and the rural poverty line at 75 percent above the cost of the

rural minimum food basket. The poverty lines in national currencies were not provided in the ILO compendium. The

ECLAC methodology is discussed more fully in J.C. Feres and A. León, “The Magnitude of Poverty in Latin America,”

CEPAL Review, No. 41 (August 1990), pp. 133-151. See Tabatabai, Statistics on Poverty and Income Distribution:

An ILO Compendium of Data, p. 137.

10 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 197.

11 See Sweatshop Watch, web page: <http://www.sweatshopwatch.org>.

12 David Schilling, “Maquiladora Workers Deserve a Sustainable Living Wage,” Interfaith Center on

Corporate Responsibility Brief, Vol. 23, No. 10 (1995), pp. 3a-3d.

II-112

The World Bank reports10 that, in 1988, 10.1 percent of the Mexican population was below the

country-specific poverty line. The same source also reports that, in 1992, 40.0 percent of the Mexican

population was below the international poverty line of US$2 per person per day and 14.9 percent of

the population was below the international poverty line of US$1 per person per day, both in 1985

purchasing power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in Mexico meet workers’ basic needs. More general information from the U.S.

Embassy indicates that while minimum wage is supposed to provide support for an average sized

family, a recent study commissioned by the Labor Congress (CT), the labor umbrella organization,

reported that the basic basket of goods and services reached M$3,000 per month, or more than three

times the minimum wage. The minimum wage is one of several economic references in collective

bargaining negotiations, along with prevailing rates in the industry, the economic condition of the

firms, and productivity.

Ruth Rosenbaum of the Center for Reflection, Education and Action estimated a living wage for

Mexico for 1994 using the Purchasing Power Index method.11 The Interfaith Center for Corporate

Responsibility undertook an informal market basket survey (1995) that found that wages for maquila

workers were one-half of what they needed to be to purchase a market basket of the items “they

need.”12
II-113

General Minimum Wage by Geographic Area, 1990-99

(in M$ and US$ per day)

Period National Average

Geographic Areas

 A B C

1990 (Avg/Jan-Dec)

Jan 1 – Nov 15

Nov 16 – Dec 31

9.35 (US$3.32)

9.14

10.79

10.31 (US$4.85)

10.08

11.90

9.54 (US$3.39)

9.33

11.00

8.60 (US$3.06)

8.41

9.92

1991 (Avg/Jan-Dec)

Jan 1 – Nov 10

Nov 11 – Dec 31

10.97 (US$3.63)

10.79

12.08

12.10 (US$4.01)

11.90

13.33

11.18 (US$3.70)

11.00

12.32

10.09 (US$3.34)

9.92

11.12

1992 (Jan-Dec) 12.08 (US$3.90) 13.33 (US$4.31) 12.32 (US$3.98) 11.12 (US$3.59)

1993 (Jan-Dec) 13.06 (US$4.19) 14.27 (US$4.58) 13.26 (US$4.26) 12.05 (US$3.87)

1994 (Jan-Dec) 13.97 (US$4.14) 15.27 (US$5.52) 14.19 (US$4.20) 12.89 (US$3.82)

1995 (Avg/Jan-Dec)

Jan 1 – Mar 31

Apr 1 – Dec 3

Dec 4 – Dec31

16.43 (US$2.56)

14.95

16.74

18.43

17.96 (US$2.80)

16.34

18.30

20.15

16.68 (US$2.60)

15.18

17.00

18.70

15.15 (US$2.36)

13.79

15.44

17.00

1996 (Avg/Jan-Dec)

Jan 1 – Mar 31

Apr 1 – Dec 2

Dec 3 – Dec 31

20.39 (US$2.68)

18.43

20.66

24.30

22.30 (US$2.93)

20.15

22.60

26.45

20.67 (US$2.72)

18.70

20.95

24.50

18.81 (US$2.48)

17.00

19.05

22.50

1997 (Jan-Dec) 24.30 (US$3.07) 26.45 (US$3.34) 24.50 (US$3.10) 22.50 (US$2.84)

1998 (Avg/Jan-Dec)

Jan 1 -- Dec 2

Dec 2 -- Dec31

28.30 (US$3.10)

27.99

31.91

30.54 (US$3.34)

30.20

34.45

28.31 (US$3.10)

28.00

31.90

26.34 (US$2.88)

26.05

29.70

1999 (Jan 1– ) 31.91 (US$3.24) 34.45 (US$3.50) 31.90 (US$3.24) 29.70 (US$3.02)

Notes: The national average is a weighted average of the three geographic areas. Annual averages are weighted averages of daily rates. Mexican pesos are converted

to US$ using the annual average exchange rate from the International Monetary Fund’s International Financial Statistics. The geographic areas are

defined as follows:

Area A (Mexico City and surrounding industrial area, Acapulco, and most border export-processing and petroleum producing and processing areas, among

others); specifically, the municipalities in the following states: Baja California and Baja California Sur (all municipalities); Chihuahua (Guadalupe,

Juárez, Praxedis G., and Guerrero); Distrito Federal (all delegations); Guerrero (Acapulco de Juárez); Estado de México (Atizapán de Zaragoza,

Coacalco, Cuautitlán, Cuautitlán Izcalli, Ecatepec, Naucalpan de Juárez, Tlalnepantla de Baz, and Tultitlán); Sonora (Agua Prieta, Cananea, Naco, Nogales,

Plutarco Elias Calles, Puerto Peñasco, San Luis Río Colorado, and Santa Cruz); Tamaulipas (Camargo, Guerrero, Gustavo Díaz Ordaz, Matamoros, Mier,

Miguel Alemán, Nuevo Laredo, Reynosa, Río Bravo, San Fernando, and Valle Hermoso); and Veracruz (Agua Dulce, Coatzacoalcos, Cosoleacaque, Las

Choapas, Ixhuatlán del Sureste, Minatitlán, Moloacan, Nanchital de Lázaro and Cárdenas del Río).

Area B (Guadalajara, Monterrey, and most of the rest of Chihuahua, Sonora, and Tamaulipas, among others); specifically, the municipalities in the

following states: Jalisco (Guadalajara, El Salto, Tlajomulco, Tlaquepaque, Tonalá, and Zapopan); Nuevo León (Apodaca, Garza García, General

Escobedo, Guadalupe, Monterrey, San Nicolás de los Garza, and Santa Catarina); Sonora (Altar, Atil, Bácum, Benjamín Hill, Caborca, Cajeme, Carbó,

La Colorada, Cucurpe, Empalme, Etchojba, Guaymas, Hermosillo, Imuris, Magdalena, Navojoa, Opodepe, Oquitoa, Pitiquito, San Miguel de Horcasitas,

Santa Ana, Sáric, Suaqui Grande, Trincheras, Tubutama, and Huatabampo); Tamaulipas (Aldama, Altamira, Antiguo Morelos, Cd. Madero, Gómez

Farías, González, Mante, Nueavo Morelos, Ocampo, Tampico, and Xicoténcati); and Veracruz (Coatzintla, Poza Rica de Hidalgo, and Tuxpan).

Area C (the rest, mostly less-developed parts of the country); specifically, all the municipalities in the following states: Aguascalientes, Coahuila, Colima,

Chiapas, Durango, Guanajuato, Hidalgo, Michoacán, Morelos, Nayarit, Oaxaca, Puebla, Querétaro, Quintana Roo, San Luis Potosi, Sinaloa, Tabasco,

Tlaxcala, Yucatán, Zacatecas, and all the municipalities not mentioned under Area A or B in the states of Chihuahua, Guerrero, Jalisco, México, Nuevo

León, Sonora, Tamaulipas, and Veracruz.

Source: National Minimum Wages Commission (Comisión Nacional de Salarios Mínimos, CONASAMI) and Banco de México.
1

 Unless noted otherwise, information presented here is from American Embassy—Managua, unclassified

telegram No. 1286 (May 10, 1999).

2

 The North Atlantic and South areas are excluded.

3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

II-115

NICARAGUA1

MINIMUM WAGE

The minimum wage is set through tripartite (business, government, and labor) negotiations and must

be approved by the National Assembly. A new minimum wage scale took effect in November 1997,

the first increase since 1991. The minimum wage differs from sector to sector, and is highest among

construction workers who receive at least 1,200 córdobas (C$) per month (or 97.60 U.S. dollars

(US$) per month, at an exchange rate of C$12.30 per US$). The minimum wage in the manufacturing

sector, which includes footwear and apparel, is C$600 (US$48.80) per month. The lowest paid

workers are in agriculture and livestock, earning a minimum of C$450 (US$36.60) per month plus

meals. Labor law stipulates a 8-hour workday; the legal standard workweek is a maximum of 48

hours, with 1 day of rest weekly.

PREVAILING OR AVERAGE WAGE

Nicaragua’s labor force, an estimated 1.63 million workers, is largely rural-based and largely

unskilled. An estimated 43 percent of the employed population is working in the agricultural sector,

13 percent in manufacturing, and 44 percent in services. The majority of urban workers, including

apparel workers, earn well above the minimum rates.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Nicaragua2 for all employees in the manufacturing

sector and the apparel industry; data were not available for the footwear industry. Earnings data

include pay for time worked, paid leave, bonuses, and other benefits paid directly to the employee,

but not the cost of social insurance programs.3 Data were not available from the ILO for average

weekly hours worked by production workers in manufacturing or in the apparel or footwear industries.

Current average earnings, which are reported by the ILO in the national currency, were converted to

US$ using the annual average exchange rate published in the International Monetary Fund’s

International Financial Statistics (March 1999). To track changes in real earnings (i.e., earnings

adjusted for inflation), a real earnings index was computed by deflating current earnings in the national

currency with the annual average national consumer price index as published in the International

Monetary Fund’s International Financial Statistics (March 1999), indexed to 1991 = 100.
4 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington:

U.S. Government Printing Office, August 1997), pp. 261-262.

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Average Monthly Earnings in All Manufacturing and Apparel

Year All Manufacturing Apparel Real Earnings Index (C$; 1991=100)

 (C$) (US$) (C$) (US$) Manufacturing Apparel

1991 1,141 267 658 154 100 100

1992 1,951 390 1,140 228 138 140

1993 2,150 383 1,183 210 127 121

1994 2,282 340 1,243 185 126 119

1995 2,444 324 1,432 190 122 123

1996 2,672 317 1,621 192 119 125

1997 2,724 288 1,636 173 na na

__________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 893.

NON-WAGE BENEFITS

The 1996 Labor Code states that severance pay shall be from 1 to 5 months’ pay, depending on the

duration of employment and the circumstances of separation. However, persons separated for cause

may be denied severance pay through a process requiring employers to demonstrate proof of worker

misconduct. The code also mandates an employer to provide housing for employees who are assigned

temporarily to areas beyond commuting distance.

A U.S. Social Security Administration survey4 elaborates on four different non-wage benefit programs

in which employers in Nicaragua must participate for their employees: (1) old age, disability, and

death benefits are part of a social insurance program, begun in 1955, in which the insured person pays

1.75 percent of their earnings, employers pay 3.5 percent of their payroll, and the government pays

0.25 percent of payroll; (2) sickness and maternity benefits, first legislated in 1955, are a dual social

insurance system and universal medical system, with insured persons paying 2.25 percent of their

earnings, employers paying 6 percent of their payroll, and the government paying 0.25 percent of

earnings (plus employer contributions for public employees); (3) work injury benefits have been a part

of the Labor Code since 1930 and now are part of the social insurance system with contributions being

borne entirely by employers who contribute 1.5 percent of their payroll; and (4) family allowances

are a means-tested social insurance system which cover needy families and is supported by the same

sources as for old age, disability, and death benefits.

ASSESSING BASIC NEEDS: THE POVERTY LINE

In January, the National Minimum Salary Commission determined that a Nicaraguan family with a

combined income of less than C$1,200 (US$104) is below the poverty line. The Commission meets

annually and determines the income required for the canasta básica (basic needs basket), the

Nicaraguan equivalent of a poverty line. The formula used by the Commission is based on national

surveys of price and availability of basic food and clothing, plus transportation and medical costs.

The Commission then averages these and determines what a typical family of four needs to survive.
5

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 64.

6

 The estimates are referenced as originating from the World Bank, Republic of Nicaragua Poverty

Assessment, Vol. I: Main Report and Vol. II: Annexes, Report No. 14038-NI (Washington: World Bank, 1995), Vol.

I, pp. 2-4. The study is based upon data from the World Bank, Nicaragua Living Standards Measurement Survey 1993,

and equivalence scales are used to translate basic needs of children into adult-equivalents. See Tabatabai, Statistics

on Poverty and Income Distribution: An ILO Compendium of Data, p. 162.

7

 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 197.

II-117

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization5 reports that for 1993, 76.1 percent of the rural, 31.9 percent of the urban, and 50.3

percent of the Nicaraguan population were below a poverty line of a monthly per capita expenditure

(2,226 calories per adult equivalent) of 214.47 córdobas.6

The World Bank reports7 that, in 1993, 50.3 percent of the Nicaraguan population was below the

country-specific poverty line, with 31.9 percent of the urban population and 76.1 percent of the rural

population living below the poverty line. For the same year, the same source reported that 74.5

percent of the Nicaraguan population was below the international poverty line of US$2 per person per

day and that 43.8 percent of the population was below the international poverty line of US$1 per

person per day, both in 1985 purchasing power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in Nicaragua meet workers’ basic needs. More general information from the

U.S. Embassy indicates that the current minimum wage falls below government estimates of what an

urban family must spend each month for a basic basket of goods (C$1,200), but no studies were

identified on the living wage in Nicaragua.
1

 Unless noted otherwise, information presented here is from American Embassy—Islamabad, unclassified

telegram No. 1697 (March 1, 1999).

2

 U.S. Department of State, Country Reports on Human Rights Practices for 1996 (Washington: U.S.

Government Printing Office, February 1997), p. 1482.

3 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1963.

4 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1963.

5

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

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PAKISTAN1

MINIMUM WAGE

Pakistan has a federal minimum wage for unskilled workers. It applies only to industrial and

commercial establishments employing 50 or more workers and is determined by the National

Minimum Wage Commission and requires approval by Parliament. At present, it is 1,950 Pakistani

rupees (PRs)—about 38 U.S. dollars (US$)—per month. When first instituted in July 1992, it was

PRs1,500 (about US$50 at that time) per month; in 1996, it was raised to PRs1,650 (about US$47)

per month.2

The minimum wage for skilled workers is set by the provinces, and specific information is only

available from each provincial labor regulatory body.

Minimum wages practically apply only to workers in the formal sector and do not affect agricultural

workers.3 Labor law, applicable nationally but to only firms with 10 or more workers, provides for

a maximum workweek of 54 hours for seasonal factories and a maximum workweek of 48 hours for

other industrial workers as well as for rest periods during the workday.4

PREVAILING OR AVERAGE WAGE

The U.S. Embassy reported that information on prevailing wages in the apparel and footwear

industries was not available from government sources.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Pakistan for all employees in the manufacturing sector

and in the combined apparel and footwear industries. They include pay for time worked, paid leave,

bonuses, and other benefits paid directly to the employee, but not the cost of social insurance

programs.5 No data were available from the ILO for average hours worked per week by all
6

 Social Security Administration, Social Security Programs Throughout the World-1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 272-273.

II-119

employees in manufacturing or in the apparel or footwear industries. Current average earnings, which

are reported by the ILO in the national currency, were converted to US$ using the annual average

exchange rate published in the International Monetary Fund’s International Financial Statistics

(March 1999). To track changes in real earnings (i.e., earnings adjusted for inflation), a real earnings

index was computed by deflating current earnings in the national currency with the annual average

national consumer price index as published in the International Monetary Fund’s International

Financial Statistics (March 1999), indexed to 1990 = 100.

Average Monthly Earnings in All Manufacturing and Apparel and Footwear

Year All Manufacturing Apparel & Footwear Real Earnings Index (PRs; 1990=100)

(PRs) (US$) (PRs) (US$) Manuf. Apparel & Footwear

1990 1,735 80 1,812 83 100 100

1991 na na na na na na

1992 na na na na na na

1993 1,502 54 1,798 64 64 74

1994 1,956 64 1,932 63 75 70

1995 na na na na na na

1996 na na na na na na

1997 na na na na na na

_____________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 913. 

NON-WAGE BENEFITS

Additional benefits required by the federal labor code include official government holidays, overtime

pay, annual and sick leave, health and safety standards in the workplace, health care, workers’

children education, social security, employees old age benefits, and a workers welfare fund. Required

non-wage benefits are numerous, but compliance and resources for compliance are unconfirmed and

questionable.

A U.S. Social Security Administration survey6 elaborates on four non-wage benefit programs in which

employers in Pakistan participate in on behalf of their employees: (1) old age, disability, and death

benefits are part of a social insurance system, begun in 1972 and applicable only to firms with 10 or

more workers, in which employers contribute 5 percent of their payroll and the government contributes

subsidies as needed; (2) sickness and maternity benefits, begun in 1965 and now part of the social

insurance system but applicable only to workers earning PRs3,000 or less per month in selected

industries, in which employers make the entire contribution of 7 percent of payroll; (3) work injury

benefits, begun in 1923 and now part of the social insurance system but available only to workers in

firms in selected industries with 10 or more employees earning PRs3,000 or less per month, into

which employers make the entire contribution; and (4) unemployment insurance, a compulsory system,

in which the Labor Code requires employers with 20 or more employees to pay severance equal to

the last 30 days’ wages for each year of employment.
7

 Planning Commission, Report of the Working Group on Poverty Alleviation, Ninth Five Year Plan (1998-

2003) (Islamabad: Government of Pakistan, April 1998).

8

 Based on estimates from S.M. Younas Jafri, “Paper Prepared for Working Group on Poverty Alleviation for

the Ninth Five Year Plan (1998-2003)” (August 1997) in Planning Commission, Report of the Working Group on

Poverty Alleviation, Ninth Five Year Plan (1998-2003) (Islamabad: Government of Pakistan, April 1998), pp. 37-42.

II-120

ASSESSING BASIC NEEDS: THE POVERTY LINE

Pakistan does not have an official poverty line. Federal income taxes are not leveled on persons

earning less than PRs60,000 per year according to Labor Ministry officials.

Estimates of Pakistan’s poverty line vary greatly. Some officials state that the more widely accepted

figure for Pakistan’s poverty line is the figure of PRs332 (US$6.39) per person per month contained

in the World Bank’s World Development Report 1998. According to an April 1998 report of the

Pakistan Planning Commission Working Group on Poverty Alleviation,7 more than 29 million persons

(about 22.3 percent of the total population) are unable to meet the minimum nutritional norm. The

Planning Commission also reports on more comprehensive poverty measures which are based on

access to basic needs. Over 60 percent of the population is deprived of basic amenities such as safe

drinking water, sewage facilities, health, and education. The following summarizes the different

poverty lines for Pakistan which were estimated by the Commission’s Working Group:8

! To estimate a food poverty line, the Working Group first established norms for the minimum

daily per adult-equivalent calorie intake: 2,550 calories for rural areas and 2,230 calories for

urban areas. Then the Working Group estimated a calorie-food consumption function, using

linear regression methods to determine the food expenditure level at which the required

calorie intake is satisfied. For 1992/93, the minimum monthly per capita money value of a

food basket consistent with the daily recommended level of calorie intake, or the food poverty

line, was PRs214.13 for all Pakistan, PRs217.72 for rural areas, and PRs 221.53 for urban

areas; 22.3, 26.2, and 21.7 percent of the respective populations were below the food poverty

line.

! The Working Group also estimated poverty lines based on the cost of basic needs method (i.e.,

the minimum expenditure required to obtain a basket of basic needs consisting of food,

clothing, housing, health services, education, transportation, and social and recreational

activities. The cost of food items was estimated as the average expected food expenditure

required to meet the recommended per adult-equivalent daily calorie intake (the food poverty

line). The cost of non-food items was based on the cost of non-food expenditures of those

whose income group consumed more than the cost of required daily calorie intake. The food

and non-food costs for 1992/93 were added together to obtain the cost of basic needs poverty

line: per capita monthly expenditures of PRs399.14 for all Pakistan, PRs367.89 for rural

areas, and PRs462.56 for urban areas. Income and consumption measures were used to

determine the percentage of the population below the basic needs poverty line. If neither

income nor consumption expenditures were sufficient to meet basic needs, the Working Group

identified this segment of the population as “real” poor. For 1992/93, the income-based
9

 World Bank, Poverty Assessment, Report 14397-PAK, Country Operations Division, Country Department

I, South Asia Region (Washington: World Bank, September 25, 1995), pp. 3; 52.

10 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 39-41.

11 The estimates are referenced as originating from Sohail J. Malik, “Poverty in Pakistan, 1984-85 to 1987-

88,” in Michael Lipton and Jacques van der Gaag (eds.), Including the Poor, Proceedings of a Symposium Organized

by the World Bank and the International Food Policy Research Institute (Washington: World Bank, 1993), pp. 487-

502. The study uses data from household income and expenditure surveys from the Federal Bureau of Statistics. The

poverty line is based on an estimated relationship between household expenditure and calorie intake. Households are

considered poor if the expenditure per adult equivalent is below that which assures a daily intake of 2,550 calories per

adult equivalent. The calorie intake standard is the same as that suggested by the Nutrition Cell of the Planning and

Development Division of Pakistan. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

II-121

estimates showed 45.4 percent of the national, 49.1 percent of the rural, and 41.8 percent of

the urban population were below the basic needs poverty line; the consumption-based

estimates showed 39.5 percent of the national, 37.5 percent of the rural, and 41.0 percent of

the urban population were below the basic needs poverty line; and the “real” poverty (incomeand consumption-based) estimates showed 33.1 percent of the national, 32.0 percent of the

rural, and 34.4 percent of the urban population were below the basic needs poverty line.

A recent poverty assessment by the World Bank presents some poverty estimates for Pakistan.9 The

World Bank staff poverty estimates are based on data from the Household and Income Expenditures

Surveys (1984/85, 1987/88, and 1990/91) and use a cost of basic needs basket of goods and services,

taking into account differences in family size and cost of living between rural and urban areas, to

estimate a reference poverty lines: in rural areas, PRs296 consumption expenditures per person per

month in 1991/92 rural prices, and, in urban areas, PRs334 consumption expenditures per person per

month in 1991/92 urban prices. The poverty rates (percent of population below the poverty line) are

summarized in the following table:

Period Rural Urban

 Areas Areas

 (percent) (percent)

 National

(percent) (millions of

 persons)

1984/85

1987/88

1990/91

 49.3 38.2

 40.2 30.7

 36.9 28.0

 46.0 43.6

 37.4 38.8

 34.0 38.7

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization10 reports several measures of a national poverty line for Pakistan: 

! For 1984/85, 21.1 percent of rural and 18.3 percent of the urban Pakistani households were

below the poverty line (expenditures consistent with a daily intake of 2,550 calories per adultequivalent), with a national poverty rate of 18.3 percent of all households;

for 1987/88, 15.5 percent of the rural and 6.8 percent of the urban households were below the

same poverty line, with a national poverty rate of 13.1 percent of all households.11
Compendium of Data, pp.152-153.

12 The estimates are referenced as originating from Ehtisham Ahmad and Steven Ludlow, “Poverty, Inequality

and Growth in Pakistan,” Pakistan Development Review, Vol. 28, No. 4, Part II (Winter, 1989), pp.831-848. The

authors make no attempt to establish poverty lines, but consider a range of alternative expenditure levels that

encompass poverty lines in several other studies. Two alternative lines for the rural and urban population are given in

the ILO compendium. The lines are adjusted using the GDP deflator to derive equivalent lines for other time periods.

The incidence figures are derived by applying the “poverty lines” to household expenditure data ranked by per capita

expenditure. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 152.

13 The estimate is referenced as originating from Elaine K. Chan, “A Compendium of Data on Poverty and

Income Distribution,” Background Paper for the World Development Report 1990 (Washington: World Bank, 1990),

pp. 49-52. The estimate is based upon Household Income and Expenditure Survey 1984/85 data from the Central

Statistical Office, but the estimation procedure did not adjust for varying household size and the poverty incidence may

be understated. An absolute poverty line, defined as an expenditure level below which basic needs cannot be satisfied,

was arbitrarily set 35 percent higher than the Indian poverty line for rural areas which at that time was considered to

be more representative of many developing countries. The poverty line corresponded to US$31 after adjustment for

purchasing power parity had been made to the 1985 official exchange rate. The purchasing power parity poverty line

was converted into the national currency using estimates from Robert Summers and Alan Heston, “A New Set of

International Comparisons of Real Product and Price Levels: Estimates for 130 Countries, 1950-1985,” Review of

Income and Wealth, Series 34, No. 1 (March 1988), pp. 1-25. See Tabatabai, Statistics on Poverty and Income

Distribution: An ILO Compendium of Data, pp. 136; 152.

14 The estimate is referenced as originating from Shashou Chen, Gaurav Datt, and Martin Ravallion, “Is Poverty

Increasing in the Developing World?” Policy Research Working Paper WPS 1146 (Washington: World Bank, 1993).

This study uses essentially the same methodology as the World Bank’s World Development Report 1990, but with

updated purchasing power parity rates. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 137.

15 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 197.

II-122

! For 1979, 30 percent of the rural Pakistani population was below a poverty line–PL/1

(expenditures of PRs100 per capita per month in 1979 prices) and 38 percent of the rural

population was below a poverty line–PL/2 (expenditures of PRs110 per capital per month

in 1979 prices); 23 percent of the urban population was below PL/2 and 29 percent was

below a poverty line–PL/3 (expenditures of PRs120 per capital per month in 1979 prices);

for 1984/85, 24 percent of the rural population was below PL/1 and 31 percent was below

PL/2; 20 percent of the urban population was below PL/2 and 25 percent of the urban

population was below PL/3.12

! For 1985, 26.3 percent of the Pakistani population was below the poverty line of US$31 per

capita per month in 1985 purchasing power parity adjusted US$ (or PRs184).13

! For 1991, 11.4 percent of the Pakistani population was below the poverty line of US$30.42

per capita per month (i.e., US$1 per day) in 1985 purchasing power parity adjusted US$.14

The World Bank reports15 that, in 1991, 34.0 percent of the Pakistani population was below the
16 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1963.

II-123

country-specific poverty line, with 28.0 percent of the urban population and 36.9 percent of the rural

population living below the poverty line; for the same year, the same source reports that 57.0 percent

of the Pakistani population was below the international poverty line of US$2 per person per day and

11.6 percent of the population was below the international poverty line of US$1 per person per day,

both in 1985 purchasing power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in Pakistan meet workers’ basic needs. Some information from U.S. Department

of State or U.S. Embassy reports indicates more generally that the minimum wage is usually

inadequate to provide a decent standard of living to support workers and their families, since families

tend to be large.16

The U.S. Embassy provided the U.S. Department of Labor the following studies on labor policy and

poverty alleviation in Pakistan:

! Government of Pakistan Planning Commission, “Draft Chapter on Poverty Alleviation for the

Ninth Five Year Plan (1998-2003),” December 1998.

! Government of Pakistan Planning Commission, “Ninth Five Year Plan (1998-2003) Report

of the Working Group on Poverty Alleviation,” April 1998.

! Government of Pakistan Task Force on Poverty Eradication, “Overcoming Poverty: Report

of the Task Force on Poverty Eradication,” May 30, 1997.

! World Bank, “Pakistan Poverty Assessment,” Report no. 14397-PAK, World Bank Country

Operations Division, Country Department I, South Asia Region, September 25, 1995.
1

 Unless noted otherwise, information present here is from American Embassy—Lima, unclassified telegram

No. 1287 (March 2, 1999).

2 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 761.

3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

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PERU1

MINIMUM WAGE

The 1993 Constitution provides that workers should receive a “just and sufficient” wage. The

Constitution also provides for a 48-hour workweek and a weekly day of rest.2 The current minimum

wage is 345 nuevo soles (S/.)—about 100 U.S. dollars (US$)—per month that was set by emergency

decree in July 1997.

The minimum wage is determined by the government in consultation with labor and business

representatives. In the absence of a rigid formula for determining the minimum wage, the informal

process for setting the minimum wage takes into consideration the prevailing rate of inflation and,

more importantly, the need to avoid raising the minimum wage so high that it would trigger layoffs and

reduce overall employment.

PREVAILING OR AVERAGE WAGE

The vast majority of workers in the apparel and footwear industries are subject to the general

minimum wage of S/.345 a month. Since, for the most part, these workers perform their jobs along

assembly lines and, therefore, have no opportunity to increase their individual productivity, the actual

pay they receive also amounts to S/.345 a month.

There is a relatively small number of workers in the apparel and footwear industries who do not work

along assembly lines, but rather in small, self-contained teams of six or eight individuals and,

accordingly, are better able to influence their individual or group productivity and, in turn, their actual

compensation. Such productivity increases may, at best, generate no more than 10-15 percent extra

pay, over and above the minimum wage and prevailing pay of S/.345 a month.

The table below presents available data from the International Labor Organization (ILO) on average

hourly earnings (direct wages per worker) in metropolitan Lima, Peru for production workers in the

manufacturing sector and in the apparel and footwear industries. They include pay for time worked,

paid leave, bonuses, and other benefits paid directly to the employee, but not the cost of social

insurance programs.3 Average hours worked per week by production workers were 47.0 in
4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 740.

5

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 740.

6

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 280-282.

II-125

manufacturing for the years 1990 through 1995,4 and 41.6 in the apparel industry and 41.7 in the

footwear industry for the years 1990 through 1997.5 Current average earnings, which are reported by

the ILO in the national currency, were converted to US$ using the annual average exchange rate

published in the International Monetary Fund’s International Financial Statistics (March 1999). To

track changes in real earnings (i.e., earnings adjusted for inflation), a real earnings index was

computed by deflating current earnings in the national currency with the annual average national

consumer price index as published in the International Monetary Fund’s International Financial

Statistics (March 1999), indexed to 1990 = 100.

Average Daily Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (S/.; 1990=100)

 (S/.) (US$) (S/.) (US$) (S/.) (US$) Manuf. Apparel Footwear

1990 0.27 1.44 0.19 1.05 0.23 1.22 100 100 100

1991 5.98 7.74 3.74 4.84 5.48 7.09 434 372 469

1992 10.07 8.08 6.43 5.16 7.47 6.00 422 369 369

1993 14.77 7.43 5.84 2.94 8.68 4.37 416 226 288

1994 21.88 9.97 7.25 3.30 10.25 4.67 498 226 275

1995 23.90 10.61 na na na na 490 na na

1996 22.58 9.21 12.10 4.93 15.23 6.21 415 305 330

1997 24.45 9.18 15.13 5.68 16.09 6.04 414 351 321

___________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 894.

NON-WAGE BENEFITS

Normal non-wage benefits in the apparel and footwear industries are few. Besides granting their

workers one month of vacation annually, employers contribute an amount equal to 11 percent of each

worker’s wages toward social security. In addition, a worker’s regular annual pay for 12 months of

work is boosted by three extra monthly payments: one just before Christmas, a second just before

Peru’s independence day on July 28, and a third for the year of service they have just completed. This

latter year-of-service related bonus is deposited by the employer in an interest-bearing savings

account which may normally may be drawn from only upon termination of employment.

A U.S. Social Security Administration survey6 elaborates on several non-wage benefit programs in

which employers in Peru must participate on behalf of their employees: (1) old age, disability, death

benefits, begun in 1936 as an individual private pension program and now comprised of a social

insurance system (SNP) for wage and salary employees and an individual private pension system
7

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 65-66.

8

 The following currency changes have occurred since the estimate was made: in 1985, 1 inti =1,000 soles

and in 1991, 1 nuevo sol = 1,000,000 intis.

9

 The estimates are referenced as originating from the Economic Commission for Latin America and the

Caribbean (ECLAC), Magnitud de la Pobreza en América Latina en los Años Ochenta (Santiago: ECLAC, 1990),

pp. 24; 115; 116. The tabulations are based on household surveys and use a methodology that sets poverty lines based

on the minimum per capita food-energy needs for age- and sex-specific minima as recommended by the FAO/WHO.

The composition of the food basket takes into account the prevailing national dietary habits. The cost of the minimum

food basket is evaluated using retail prices for the lowest quality varieties in the capital city or its metropolitan area

(prices prevailing in other cities and in rural areas were generally unavailable). Minimum food budgets for other urban

areas are set at 5 percent below the capital's, and for rural areas at 25 percent below the capital's. Averages for urban

areas and at the nation level are calculated using population weights. To reflect minimum expenditures on non-food

needs, the urban poverty line is set at double the corresponding minimum food budget, and the rural poverty line at 75

percent above the cost of the rural minimum food basket. The ECLAC methodology is discussed more fully in J.C.

Feres and A. León, “The Magnitude of Poverty in Latin America,” CEPAL Review, No. 41 (August 1990), pp. 133-151.

See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 137.

II-126

(SPP) into which, under either system, the insured person pays about 13 percent of their earnings,

employers contribute nothing, and the government guarantees a minimum pension; (2) sickness and

maternity benefits are provided under either SNP or SPP and the insured pays 3-9 percent of their

earnings, employers contribute 6 percent of their payroll, and the government contributes only as an

employer; and (3) work injury benefits, begun in 1911, the insured pays nothing, the employer pays

1.0-12.2 percent of their payroll according to risk (with the average being about 2 percent), and the

government contributes only as an employer.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The poverty line is determined on the basis of Living Standards Measurement Surveys (LSMS)

conducted annually or bi-annually. The most recent LSMS was carried out in November 1997, as a

result of which the poverty line was set at S/.157, or approximately US$47 per month. This poverty

line is about one-half of the current minimum wage of S/.345 a month (approximately US$100).

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization7 reports several sets of measures of a national poverty line for Peru:

! for 1979, 79.7 percent of the rural Peruvian population was below the rural poverty line of

a monthly per capita budget of 7,910 intis8 in second half of the year 1988 prices and 38.4

percent of the urban population was below the urban poverty line of a monthly per capita

budget of 11,741 intis in second half of the year 1988 prices, with a national poverty rate of

52.9 percent; for 1986, 72.1 percent of the rural population was below the same rural poverty

line and 52.3 percent of the urban population was below the same urban poverty line, with a

national poverty rate of 59.9 percent.9
10 The estimate is referenced as originating from Elaine K. Chan, “A Compendium of Data on Poverty and

Income Distribution,” Background Paper for the World Development Report 1990 (Washington: World Bank, 1990),

p. 55. The data used for the study are from the World Bank, Peru Living Standards Measurement Survey 1985-86. An

absolute poverty line is defined as the expenditure level below which basic needs cannot be satisfied. See Tabatabai,

Statistics on Poverty and Income Distribution: An ILO Compendium of Data, pp. 136; 162.

11 World Bank, World Development Indicators 1999 (Washington: World Bank, 1999), p. 67.

12 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 761.

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! for 1985, 15.3 percent of the Peruvian population was below the poverty line of US$31 per

capita per month, in 1985 purchasing power parity adjusted US$ (113 intis).10

The World Bank reports11 that, in 1997, 49.0 percent of Peru’s population was below the countryspecific poverty line, with 40.4 percent of the urban population and 64.7 percent of the rural

population living below the poverty line; corresponding figures for 1994 are 53.5, 46.1, and 67.0

percent, respectively.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in Peru meet workers’ basic needs. Some information from U.S. Department of

State or U.S. Embassy reports indicates more generally that the minimum wage is generally considered

to be inadequate to provide a decent standard of living for a worker and family. According to some

estimates, as much as half the workforce earns the minimum wage or below. 12 The U.S. Embassy did

not identify any studies on the issue of a living wage in Peru.
1

 Unless noted otherwise, information presented here is from American Embassy—Manila, unclassified

telegram No. 2512 (February 19, 1999).

2

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1047.

3

 Daily minimum wage rates set by the Manila wage board (National Capital Region) since 1990 are as

follows: P118 in 1990, P145 in 1993, P165 in 1996, and P185 in 1997. See U.S. Department of State, Country

Reports on Human Rights Practices (Washington: U.S. Government Printing Office), various years (1993, p. 724;

1995, p. 708; 1996, p. 763; and 1997, p. 890).

4

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1047.

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PHILIPPINES1

MINIMUM WAGE

The Wage Rationalization Act of 1988 gives authority to tripartite (government, industry, and labor)

regional wage boards to set minimum wages. Regional wage board orders cover all private sector

workers except domestic helpers and those employed in the personal services of another. Boards

outside the metropolitan Manila area have exempted some employers because of factors such as

establishment size, industry sector, involvement with exports, financial distress, and level of

capitalization.2 Although there are many exemptions from minimum wage rules, the large Philippine

garment factories in the export sector generally meet the legal minimum wage requirements; however,

there is widespread non-compliance in the informal sector.

Minimum wages were last adjusted on a regional basis in late 1997 and early 1998. The wage board

in Manila set the daily minimum at 198 pesos (P)—about 5.00 U.S. dollars (US$)—in January 1998.3

The standard legal workweek is 48 hours for most categories of industrial workers and 40 hours for

government workers, with an 8 hour per day limit. The law mandates a full day of rest weekly.

However, there is no legal limit on the number of overtime hours an employer may require. An

overtime rate of 125 percent of the hourly wage rate is mandated on ordinary workdays and 130

percent on rest days and holidays.4

PREVAILING OR AVERAGE WAGE

The garment industry’s prevailing wage rate is roughly the same as the minimum wage. The abundant

pool of semi-skilled garment workers in Manila and other areas allows industry to pay a low

prevailing wage, which is sometimes below the minimum.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in the Philippines for all employees in the manufacturing
5

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

6

International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 753-754.

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sector and in the apparel and footwear industries. They include pay for time worked, paid leave,

bonuses, and other benefits paid directly to the employee, but not the cost of social insurance

programs.5 Average hours worked per week by all employees were 44.4 in total manufacturing for

the years 1990 through 1997, and 48.9 for production workers in apparel and 46.6 for production

workers in footwear for the years 1990 through 1993.6 Current average earnings, which are reported

by the ILO in the national currency, were converted to US$ using the annual average exchange rate

published in the International Monetary Fund’s International Financial Statistics (March 1999). To

track changes in real earnings (i.e., earnings adjusted for inflation), a real earnings index was

computed by deflating current earnings in the national currency with the annual average national

consumer price index as published in the International Monetary Fund’s International Financial

Statistics (March 1999), indexed to 1990 = 100.

Average Monthly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (P; 1990=100)

 (P) (US$) (P) (US$) (P) (US$) Manuf. Apparel Footwear

1990 4,263 175 3,098 127 1,780 73 100 100 100

1991 4,831 176 3,513 128 2,066 75 95 95 97

1992 5,386 211 4,005 157 2,371 93 98 100 103

1993 5,584 206 3,910 144 2,591 96 94 91 105

1994 6,272 237 4,332 164 3,229 122 97 92 120

1995 6,654 259 4,692 182 3,505 136 95 92 120

1996 na na na na na na na na na

1997 na na na na na na na na na

_________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 914.

NON-WAGE BENEFITS

Philippine garment workers do not receive any non-wage benefits or tax credits specific to their

industry. However, many are eligible for benefits under the Social Security System (SSS), which is

supported by firms’ and employees’ legally required contributions. The SSS administers loan

programs to allow workers enrolled in SSS to obtain short-term credit for consumer purchases, loans

for education, and loans for purchases of stock in both newly privatized firms and selected “high

grade” company shares. (SSS policy seeks that there be broader worker participation in the stock

ownership of corporations.) In 1998, the SSS liberalized the terms for its short-term credit loans to

assist workers hit by layoffs in the economic crisis.
7

 Social Security Administration, Social Security Programs Throughout the World-1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 283-285.

8

 Under the new methodology adopted in 1992, certain non-food requirements for items not considered basic

(e.g., alcohol beverages, tobacco, recreation, durable furniture and equipment, and miscellaneous expenditures) were

excluded.

9

 Tables of poverty and food thresholds for 1994 and 1997 were provided to the U.S. Embassy by the National

Statistical Coordination Board. See also, National Statistical Coordination Board (NSCB), Philippine Poverty

Statistics (Makati City: NSCB, December 1996) for poverty and food thresholds for the years 1985, 1988, 1991, and

1994 based on the new methodology adopted in 1992.

10 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 41-42.

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A U.S. Social Security Administration survey7 elaborates on three non-wage benefit programs in

which employers in the Philippines must participate on behalf of their employees: (1) old age,

disability, and death benefits, begun in 1954, are part of a social insurance program in which the

insured person pays 3.33 percent of their wages according to 27 wage classes, the employer pays 4.67

percent of their payroll according to 27 wage classes, and the government pays any deficit; (2)

sickness and maternity benefits, begun in 1954, are also part of the social insurance program and

employees pay for sickness according to pension contributions above and contribute nothing for

maternity benefits, employers pay according to pension contributions above and 0.4 percent of payroll

for maternity benefits according to 27 wage classes, and the government covers any deficit; and (3)

work injury benefits, begun in 1974, which are financed entirely by employers who pay 1 percent of

payroll according to 10 wage classes.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The Philippine National Statistical Coordination Board (NSCB) calculates a “poverty threshold”

which is equal to a “food threshold” (2,000 calories per person per day) plus the cost of key non-food

requirements.8 It distinguishes between the poverty threshold figure and that set for the “core poor,”

who cannot meet the cost of even basic food requirements. The NSCB set the most recent annual per

capita poverty threshold in 1997 at P11,388 (about US$315); the food (subsistence) threshold was set

at P7,724 (about US$214). In 1997, 32.1 percent of all Philippine families (18.5 percent of urban

families and 44.4 percent of rural families) had annual per capita income below the annual per capita

poverty threshold; 16.5 percent of all Philippine families (7.2 percent of all urban families and 24.8

percent of all rural families) had annual per capita income below the annual per capita food

(subsistence) threshold.9

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization10 reports several measures of a national poverty line for the Philippines:

! For 1985, 59.4 percent of the rural and 45.2 percent of the urban Philippine households were

below the official poverty line (constant real poverty line established by the government), with

a national poverty rate of 53.9 percent of all households;
11 The estimates are referenced as originating from Arsenio M. Balisacan, “Urban Poverty in the Philippines:

Nature, Causes and Policy Measures,” Asian Development Review, Vol. 12, No. 1(1994), pp.117-152. The study uses

the poverty lines for 1988 which were estimated by the National Statistical Coordination Board’s Technical Working

Group on Poverty Determination. The poverty lines are based on food and non-food components. The food

component is based on evaluations of low-cost menus by region and area that meet 100 percent of the recommended

daily allowance for energy (2,000 kcal) and 80 percent adequacy for other nutrients. The non-food component is based

on estimates of non-food needs using the consumption pattern of a sample of families from the Family Income and

Expenditure Surveys whose incomes fall within 10 percentage points above or below the food threshold. The (food

plus non-food) poverty line is the food threshold divided by the proportion of food to total expenditures for these

sample families. The poverty lines are held fixed in real terms. This method is similar to that used in the official

measure of poverty in the United States. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 153.

12 The estimate is referenced as originating from Elaine K. Chan, “A Compendium of Data on Poverty and

Income Distribution,” Background Paper for the World Development Report 1990 (Washington: World Bank, 1990),

pp. 56-59. The study used family income and expenditure survey data from the National Census and Statistical Office.

Since the survey data did not report family size by income group, an average size of 5.49 was used. An absolute poverty

line, defined as an expenditure level below which basic needs cannot be satisfied, was arbitrarily set 35 percent higher

than the Indian poverty line for rural areas which at that time was considered to be more representative of many

developing countries. The poverty line corresponded to US$31 after adjustment for purchasing power parity had been

made to the 1985 official exchange rate. The purchasing power parity poverty line was converted into the national

currency using estimates from Robert Summers and Alan Heston, “A New Set of International Comparisons of Real

Product and Price Levels: Estimates for 130 Countries, 1950-1985,” Review of Income and Wealth, Series 34, No.

1 (March 1988), pp. 1-25. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of

Data, pp. 136; 153. 

13 World Bank, World Development Indicators 1999 (Washington: World Bank, 1999), p. 67.

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for 1991, 52.4 percent of the rural and 36.7 percent of the urban households were below the

official poverty line, with a nation poverty rate of 44.6 percent of all families.11

! For 1985, 33.7 percent of the Philippine population was below the poverty line of US$31 per

capita per month in 1985 purchasing power parity adjusted US$ (or P215).12

The World Bank reports13 that, in 1997, 37.5 percent of the Philippine population was below the

country-specific national poverty line, with 22.5 percent of the urban population and 51.2 percent of

the rural population living below the poverty line; corresponding figures reported for 1994 are 40.6,

28.0, and 53.1 percent, respectively. The same source also reports that, in 1994, 62.8 percent of the

Philippine population was below the international poverty line of US$2 per person per day and 26.9

percent was below the international poverty line of US$1 per person per day, both in 1985 purchasing

power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in the Philippines meet workers’ basic needs. More general information from
14 In a round table discussion held in February 1998 to review the proposed living wage methodology, Dr.

Arsenio Balisacan, a technical discussant from the University of the Philippines, recognized the difficulty in

determining the non-food basket, but opined that the proposed living wage measure does not capture the labor market,

wage utility processes, and the supply and demand of labor. He recommended that in making the notion of a living

wage operational that it be depoliticized and considered as an aspiration wage. See National Statistical Office (NSO)

and Statistical Research and Training Center (SRTC) under the auspices of the National Wages and Productivity

Commission, Development of Methodology for Estimating Living Wage: Final Report (Manila: Department of

Labor and Employment, 1999), p. 3.

15 National Statistical Office (NSO) and Statistical Research and Training Center (SRTC) under the auspices

of the National Wages and Productivity Commission, Development of Methodology for Estimating Living Wage:

Final Report (Manila: Department of Labor and Employment, 1999), p. 4.

16 See National Statistical Office (NSO) and Statistical Research and Training Center (SRTC) under the

auspices of the National Wages and Productivity Commission, Development of Methodology for Estimating Living

Wage: Final Report (Manila: Department of Labor and Employment, 1999).

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the U.S. Embassy indicates that the 1987 Philippine Constitution enunciates that workers have the right

to a “living wage.” However, the definition of a “living wage” concept has often been the subject

of debate—especially if proponents of raising the legal minimum wage use a “living wage” target

level as the basis for arguing for higher wages.14

The DOLE’s National Wages and Productivity Commission has defined a living wage as:15

the amount of family income needed to provide for the family’s food and non-food expenditures

with sufficient allowance for savings/investments for social security so as to enable the family to

live and maintain a decent standard of human existence beyond here subsistence level, taking into

account all of the family's physiological, social and other needs.

To evaluate family costs in its study, the DOLE used a 1994 Family Income and Expenditure Survey

by the National Statistics Office. The family costs are computed in three categories: food, non-food,

and “other” expenditures. As “non-food” items, the study included expenditures for transportation,

education, and medical care. In the last “other” category, the DOLE study calculated the need for an

additional 10 percent in income for expenditures for savings, taxes, real property, and purchase of

durable goods. DOLE found this was the consistent average expenditure for these categories in the

two family income surveys available (1988 and 1994). The 1999 DOLE study found a correlation

between poverty threshold and the higher living wage levels.16 Based on this, DOLE proposes to use

surveys for fixing the poverty threshold as a basis for also calculating living wages, thus saving the

expense of an additional survey.

The current minimum wage has fallen well behind the rate for a daily living wage, which was

calculated by the Department of Labor and Employment (DOLE) at about P356 pesos (about US$9.00)

for a family of six. Data in the 1999 DOLE study on the living wage indicated that families require

more than one minimum wage earner (more than two in some regions) for their households to earn a

living wage.
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The U.S. Embassy provided the U.S. Department of Labor with the 1999 DOLE study on the living

wage (and an NGO commentary on the living wage). In addition, the U.S. Embassy provided the U.S.

Department of Labor with materials on minimum wage adjustment procedures, the availability of lowwage benefits, and the calculation of the poverty line.
1

 Unless noted otherwise, information presented here is from American Embassy—Singapore, unclassified

telegram No. 551 (February 26, 1999).

2

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1064.

3

 Provided by the U.S. Department of State, Bureau of East Asian and Pacific Affairs, unclassified facsimile

(November 29, 1999).

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SINGAPORE1

MINIMUM WAGE

There is no minimum wage in Singapore. The Employment Act sets the standard legal workweek at

44 hours and provides for one rest day each week.2

PREVAILING OR AVERAGE WAGE

The data in the table below are from the Report on Wages in Singapore published annually by the

Ministry of Manpower and present estimates of the mean and median monthly gross wages of

production workers (as separate from managerial and professional staff) in the manufacturing sector

and, more specifically, in the textile and wearing apparel (including footwear) industry in Singapore.3

“Monthly gross wage” refers to all remuneration received by an employee before deductions of the

employee’s own mandatory pension fund contributions (20 percent of gross wages and bonuses) and

personal income tax. It includes overtime payments, commissions, allowances (e.g., shift, food,

housing, and transport), service points, and other regular cash payments. It excludes the employer’s

mandatory contribution to the employee’s pension fund (currently 10 percent of employee’s gross

wages and bonuses) and productivity or incentive bonuses that normally amount to 1-2 months pay.

The Singapore dollar (S$) figures were converted to U.S. dollars (US$) based on average annual

foreign exchange rates for the respective years provided by the Monetary Authority of Singapore.

Average and Median Monthly Gross Wages of Production Workers in Manufacturing

and the Wearing Apparel and Footwear Industry

Manufacturing Wearing Apparel and Footwear 

Year Average Median Average Median 

S$ US$ S$ US$ S$ US$ S$ US$

1994 1,288 843 1,070 701 952 623 860 563

1995 1,351 953 1,123 792 1,027 725 915 646

1996 1,454 1,031 1,231 873 1,129 801 1,000 709

1997 1,519 1,023 1,261 849 1,161 782 1,066 718

1998 1,555 929 1,313 785 1,367 817 1,267 757

____________________________________________________________________________________

Source: Report on Wages in Singapore, 1994-98 (Manpower Research and Statistics Department,

Ministry of Manpower, Singapore).

The table below presents available data from the International Labor Organization (ILO) on average
4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

5

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 734.

6

 U.S. Department of State, Bureau of East Asian and Pacific Affairs, unclassified facsimile (November 29,

1999).

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monthly earnings (direct wages per worker) in Singapore for all employees in the manufacturing sector

and in the combined textile, apparel, and footwear industries. They include pay for time worked, paid

leave, bonuses, and other benefits paid directly to the employee, but not the cost of social insurance

programs.4 Average hours worked per week by all employees were 49.1 in all manufacturing and

48.1 in the combined textile, apparel, and footwear industries for the years 1990 through 1997.5

Current average earnings, which are reported by the ILO in the national currency, were converted to

US$ using the annual average exchange rate published in the International Monetary Fund’s

International Financial Statistics (March 1999). To track changes in real earnings (i.e., earnings

adjusted for inflation), a real earnings index was computed by deflating current earnings in the national

currency with the annual average national consumer price index as published in the International

Monetary Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Monthly Earnings in All Manufacturing and Textiles, Apparel, and Footwear

Year All Manufacturing Textiles, Apparel, and Footwear Real Earnings Index (S$; 1990=100) 

 (S$) (US$) (S$) (US$) Manuf. Textiles, Apparel, and Footwear

1990 1,395.0 770 861.0 475 100 100

1991 1,551.8 898 953.7 552 108 107

1992 1,686.2 1,035 1,021.3 627 114 112

1993 1,817.8 1,125 1,064.8 659 120 114

1994 1,995.3 1,306 1,162.8 761 128 121

1995 2,157.3 1,522 1,241.8 876 136 127

1996 2,319.5 1,645 1,367.4 970 145 138

1997 2,486.7 1,675 1,477.3 995 152 146

________________________________________________________________________________________

Source: ILO, Yearbook of Labour Statistics, 1998, p. 915. 

NON-WAGE BENEFITS

According to the U.S. Department of State,6 the primary government-mandated non-wage benefit for

all employees in Singapore is the employer’s contribution to the pension fund (Central Provident Fund

or CPF) account for each of their employees. This applies to workers in all industries, including those

in the textile and wearing apparel industry. The current mandated employer contribution is to the CPF

is set at 10 percent of the employee’s gross wages and bonuses. The government has reduced this

amount from 20 percent to 10 percent starting January 1999 as part of its business cost reduction

measures in response to the recent regional economic crisis. It has announced, however, that this

amount will be increased to 12 percent starting in April 2000, and should be restored to the 20 percent

level by 2003.
7

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 318-319.

8

 Contributions are lower if employees are over the age of 55.

9

 U.S. Department of State, Bureau of East Asian and Pacific Affairs, unclassified facsimile (November 29,

1999).

II-136

Although the employer’s annual contribution to the employee’s CPF account is classified here as a

non-wage benefit, CPF regulations permit the employee to use funds in the account for a wide variety

of purposes, including housing, approved investments, insurance, and education. Of the total

contribution of 30 percent (combining employer and employee shares), six percentage points are

allocated to a Medisave account to meet hospitalization and medical expenses, and to buy catastrophic

illness insurance for the employee and his/her immediate family. Apart from this, the government

subsidizes certain classes of hospital wards, which are accessible to workers. Employers are liable

for up to four weeks before and after birth in terms of maternity benefits, and pay the entire cost of a

compulsory liability program for their employees in cases of work injuries, as required by the

Workmen’s Compensation Act.

A U.S. Social Security Administration survey7 elaborates on three non-wage benefits programs which

employers in Singapore contribute for their employees: (1) old age, disability, and death benefits,

begun in 1953, is a provident fund into which employees pay 20 percent of their wages if earning more

than S$200 a month, employers pay 20 percent of employee wage earnings if over S$50 a month, and

the government pays nothing;8 (2) sickness and maternity benefits, begun in 1968, for medical care,

the insured person pays 3-4 percent of their monthly salary, the employer pays 3-4 percent of payroll,

and the government pays no fixed amount since workers are subsidized when using certain classes of

hospital wards and, for maternity benefits, the employer is liable for up to 4 weeks before birth and

4 weeks after birth; and (3) work injury benefits, begun in 1929, which is a compulsory employer

liability program into which the employer pays the entire cost.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The Singapore government has not made available any information regarding its determination of a

poverty line for the country. According to the U.S. Department of State,9 applying a frequently used

poverty line set at 30 percent of mean income, it would appear that approximately 14 percent of the

local working population fell at or below the poverty line in 1998, that is, with gross monthly wages

below S$765 or US$458. This group consists primarily of foreign migrant workers in the domestic

help and construction industry, whose basic housing and work-related transportation needs are

provided by their employers.
10 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 42.

11 The estimate is referenced as originating from the World Bank, World Development Report 1990 (New

York: Oxford University Press, 1990), p. 41. The estimates for individual countries in this source rely on countryspecific poverty lines. Official or commonly used poverty lines have been used when available; in other cases, the

poverty line has been set at 30 percent of mean income or expenditure. No further information on the estimate for

Singapore is provided in the ILO compendium. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 139.

12 U.S. Department of State, Bureau of East Asian and Pacific Affairs, unclassified facsimile (November 29,

1999).

II-137

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization10 reports that, for 1982, 10 percent of Singapore’s population was below the poverty line

of US$860 per capita per month in 1985 purchasing power parity adjusted US$.11

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in Singapore meet workers’ basic needs. However, given the above

approximation of the poverty line suggested by the U.S. Department of State, it would appear that the

wage and non-wage benefits of production workers in textile and wearing apparel industry in

Singapore are adequate to meet their basic living needs.12 The U.S. Embassy was not able to identify

any studies on the living wage in Singapore.
1

 Unless noted otherwise, information presented here is from American Embassy—Seoul, unclassified

telegram No. 1260 (March 2, 1999).

2 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 971.

3

 For more information on the minimum wage in South Korea, see International Labour Organization (ILO),

“Minimum Wage Fixing in South Korea,” Labour Law and Labour Relations Branch (LEG/REL) Briefing Note No.

4(rev) (Geneva: International Labour Office, 1997), which is also available on the ILO’s web site:

<http://www.ilo.org/public/english/80relpro/legrel/papers/brfnotes/minwages/korea3.htm>.

4

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 971.

II-137

SOUTH KOREA1

MINIMUM WAGE

A minimum wage law was implemented in 1988; companies with fewer than 10 employees are exempt

from this law.2 Each year, at the request of the Labor Minister, the Minimum Wage Council submits

a minimum wage proposal based on workers’ living costs and labor productivity. The Labor Minister

makes a final decision on the minimum wage and the new level is applied the next year.3 As of

September 1998, the national minimum wage was raised to its current rate of W1,525 (US$1.27) per

hour.

Amendments to the Labor Standards Law passed in 1989 brought the maximum regular workweek to

44 hours, with provision for overtime to be compensated at a higher wage; the law also provides for

a 24-hour rest period each week.4 Labor laws were revised in 1997 to establish a flexible hours

system in which employers could require employees to work up to 48 hours during some weeks

without paying overtime as long as the average weekly hours for two-weeks did not exceed 44; with

union permission, management could ask employees to work up to 56 hours in a given week. The

legislation established a daily cap on the working day of 12 hours.

PREVAILING OR AVERAGE WAGE

The prevailing wage in the footwear industry is W1,118,027 per month (US$932), and the prevailing

wage in the apparel industry is W872,349 per month (US$727).

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Korea for all employees in the manufacturing sector

and in the apparel and footwear industries. They include pay for time worked, paid leave, bonuses,
5

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

6

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 734.

7

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 207-208.

II-138

and other benefits paid directly to the employee, but not the cost of social insurance programs.5

Average hours worked per week by all employees were 48.9 in all manufacturing, 49.2 in apparel,

and 51.1 in footwear for the years 1990 through 1997.6 Current average earnings, which are reported

by the ILO in the national currency, were converted to US$ using the annual average exchange rate

published in the International Monetary Fund’s International Financial Statistics (March 1999). To

track changes in real earnings (i.e., earnings adjusted for inflation), a real earnings index was

computed by deflating current earnings in the national currency with the annual average national

consumer price index as published in the International Monetary Fund’s International Financial

Statistics (March 1999), indexed to 1990 = 100.

Average Monthly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (W; 1990=100)

 (W) (US$) (W) (US$) (W) (US$) Manuf. Apparel Footwear

1990 590,800 834.7 383,100 541.3 394,800 557.8 100 100 100

1991 690,300 941.3 447,500 610.2 462,300 630.4 107 107 107

1992 798,600 1,022.9 536,700 687.5 532,600 682.3 116 121 116

1993 885,400 1,103.1 582,800 726.1 626,400* 780.4 123 125 130

1994 1,022,500 1,272.6 690,100 858.9 688,500 856.9 134 139 135

1995 1,123,900 1,457.2 762,100 988.1 763,800 990.3 141 147 143

1996 1,261,200 1,567.8 852,500 1,059.7 871,200 1,083.0 151 157 156

1997 1,326,200 1,394.1 892,400 938.1 952,900 1,001.7 152 157 163

__________________________________________________________________________________________

Note: * denotes a break in series due to a change in classification; beginning in 1993, includes other leather products.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 908.

NON-WAGE BENEFITS

The government offers no industry-specific tax credits. However, workers whose income is below

W1,000,000 per month (US$833) do not pay taxes on overtime, night, holiday, and weekend income.

Individual firms offer non-wage benefits such as extra pay for overseas work, accident compensation,

and subsidies for school expenses.

A U.S. Social Security Administration survey7 elaborates on three non-wage benefits programs into

which employers contribute for their employees: (1) old age, disability, and death benefits, a social

insurance program begun in 1973, in which the insured pays 3 percent of their earnings, employers pay

6 percent of employee earnings, and the government pays part of the administrative program costs; (2)

medical and sickness benefits, begun in 1963, in which the insured person and the employer each pay

1-4 percent of their wages (averaging 1.52 percent) and the government pays a portion of the

administrative costs; and (3) work injury benefits, a compulsory insurance program begun in 1953,
8

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 36.

9

 The estimates are referenced as originating from the World Bank, Social Indicators of Development 1987

(Washington: World Bank, 1987). The poverty estimates are based upon an estimated absolute poverty income level

below which a minimal nutritionally adequate diet plus essential non-food requirements are not affordable. According

to the UN’s Food and Agriculture Organization (FAO), The Impact of Development Strategies on the Rural Poor

(Rome: FAO, 1988), p. 7, the poverty lines were determined by: (1) identifying the food basket consumed by lowincome groups in the country (taken to be the 20th percentile of the household income distribution); (2) estimating

the quantities of that food basket necessary to provide the minimum calories and proteins required for nutritional

needs; (3) costing the minimum food basket at appropriate retail market prices; and (4) adding the estimated monetary

equivalent of essential non-food needs (clothing, shelter, etc.). See Tabatabai, Statistics on Poverty and Income

Distribution: An ILO Compendium of Data, p. 139.

10 The estimates are referenced as originating from Sang Mok Suh, Economic Growth and Changes in Income

Distribution: The Korean Case, Working Paper No. 8508 (Seoul: Korea Development Institute, 1985) and Sang Mok

Suh and H.C. Yeon, Social Welfare During the Structural Adjustment Period in Korea, Working Paper No. 8604

(Seoul: Korea Development Institute, 1986). The food cost portion of the poverty line is first estimated for a

household of five members (a couple with three children) for 1973 by: (a) constructing a “standard” household based

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in which employers pay 0.6 to 29.9 percent of payroll according to risk (averaging 1.6 percent) and

the government pays the cost of administration.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The government uses a market basket to determine the poverty line. This includes expenses related

to food, housing, health and medical care, culture and recreation, clothing and footwear, commuting,

utilities, and furniture. The Minister of Health and Welfare announces the poverty line every

December, based on inflation and the results of a market basket survey carried out every five years.

The most recent survey was in 1994. The poverty line for 1998, based on the 1994 survey and

subsequent increases in the cost of living, was W218,000 per month (US$182).

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization8 several measures of a national poverty line for Korea:

! For 1978, 11 percent of the rural Korean population was below the rural poverty line (annual

per capita income of US$270) and 18 percent of the urban Korean population was below the

urban poverty line (annual per capita income of US$320), with a national poverty rate of 16

percent.9

! For 1980, 9.0 percent of the rural and 10.4 percent of the urban Korean population were

below the poverty line (W121,000 per month per 5-member family household in 1981 prices),

with a national poverty rate of 9.8 percent;

for 1984, 4.4 percent of the rural and 4.6 percent of the urban Korean population were below

the same poverty line, with a national poverty rate of 4.5 percent.10
on results from the 1975 Population and Housing Census; (b) estimating the energy level required for normal daily

activities by members of the standard household (2,100 kilocalories per person); (c) calculating the quantities of food

required to meet the estimated energy level, based on actual food consumption patterns of “poor” households; and (d)

estimating the minimum food expenditures for urban and rural areas using the results of (c) and appropriate retail

prices. Minimum non-food expenditures are estimated by: (a) dividing consumption expenditures into 5 categories

(food, housing, light and fuel, clothing, and “others”); (b) estimating the Engel curve for each consumption category;

(c) deriving the income required to consume the food minimum, based on the estimated Engel curve for food and the

minimum food expenditure estimated above; (d) applying this income to each Engel curve to obtain the “minimum”

expenditure for each consumption category; and (e) adding up the minimum expenditures over the categories to

calculate the 1973 poverty line. Deflators for private consumption in the national accounts are used to estimate

poverty lines for other years. Poverty lines for households of different sizes are calculated on the basis of adjustment

factors from Statistics Canada. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium

of Data, p. 150.

11 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 971.

II-140

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in South Korea meet workers’ basic needs. Some information from U.S.

Department of State or U.S. Embassy reports indicates more generally that the Federation of Korean

Trade Unions (FKTU) and other labor unions assert that the current minimum wage does not meet the

basic requirements of urban workers. In fact, a worker earning minimum wage would have difficulty

in providing a decent standard of living for himself and his family, despite the fringe benefits, such

as transportation expenses, with which companies normally supplement salaries. However, the money

an average blue-collar worker takes home in overtime and bonuses significantly raises the total

compensation package.11 The U.S. Embassy was not aware of any studies on the living wage in Korea.
1Unless noted otherwise, information presented here is from American Embassy—Madrid, unclassified

telegram No. 1895 (February 24, 1999).

2

 Prior to 1998, there was a lower minimum wage for workers 16-17 years of age. For example, in 1997, the

minimum wage for workers 16-17 years old was Ptas1,971 per day; for workers 18 and older, the minimum wage was

Ptas2,221 a day. The minimum wage for domestic employees 16-17 years of age was Ptas459 per hour; for domestic

employees 18 and over, the minimum wage was Ptas517 per hour. See U.S. Department of State, Country Reports

on Human Rights Practices for 1997 (Washington, D.C., March 1998) p. 1307. In 1998, the youth minimum wage

was eliminated by Royal Decree 2817/98.

3

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1520.

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SPAIN1

MINIMUM WAGE

In December of each year, the Spanish Legislature fixes the minimum wage for the following calendar

year. When formulating the minimum wage, the government takes into account the consumer price

index, the median level of national productivity, the increase of labor’s participation in the national

income, and general economic conditions. Maintaining a low inflation rate and promoting job growth

are two important considerations.

For calendar year 1999, the minimum wage for all workers,2 whether in the agricultural, industrial,

or service sector, is 2,309 pesetas (Ptas) per day, or about 15.92 U.S. dollars (US$) per day, or

Ptas69,270 (US$477.72) per month. The law stipulates that a minimum amount of additional monetary

compensation—in the form of a bonus in July and December, each equal to a month’s pay—be

included when calculating the annual minimum salary which is Ptas969,780 (US$6,688 per year). The

law sets a 40-hour workweek with an unbroken rest period of 36 hours after each 40 hours worked.3

The table on the next page presents the daily minimum wage rates for workers 18 and older since

1990.

For professional temporary activities not exceeding 120 days, the minimum daily salary is Ptas3,283

(US$22.64 per day), and for domestic or temporary workers the hourly wage is Ptas538 (US$3.71 per

hour).
4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

5

International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 764.

II-143

Daily Minimum Wage Rates for Workers 18 and Over, 1984-1999

Effective Date Ptas US$

March 1990 1,667 16.35

January 1991 1,775 17.08

January 1992 1,876 18.32

January 1993 1,951 15.33

January 1994 2,019 15.07

January 1995 2,090 16.76

January 1996 2,164 17.09

January 1997 2,221 15.17

January 1998 2,268 15.18

January 1999 2,309 15.92

_________________________________

Source: American Embassy-Madrid, Foreign Labor Trends: Spain, 1993-1994

(Washington: U.S. Department of Labor, Bureau of International Labor Affairs, 1995), p. 6,

and U.S. Department of State, Country Reports on Human Rights Practices: Spain

(Washington: U.S. Government Printing Office, various years), section 6.e

PREVAILING OR AVERAGE WAGE

The median monthly wage for the industrial manufacturing sector in the first three quarters of 1998

was Ptas225,808 per month (US$l,486 per month or US$17,832 per year). The average hourly wage

in the manufacturing sector for this same time period was Ptasl,551 (US$10.20 per hour). Moreover,

the median monthly income inthe apparel industry for the first three quarters of 1998 was Ptas232,367

(US$1,529 per month or US$18,348 per year). These average monthly and hourly incomes for the

apparel industry include both blue and white collar workers.

The table below presents available data from the International Labor Organization (ILO) on average

hourly earnings (direct wages per worker) in Spain for all employees in the manufacturing sector and

in the apparel and leather footwear industries. They include pay for time worked, paid leave,

bonuses, and other benefits paid directly to the employee, but not the cost of social insurance

programs.4 Average hours worked per week by all employees were 36.7 in all manufacturing, 35.6

in apparel, and 36.5 in footwear and leather goods for the years 1990 through 1997.5 Current average

earnings, which are reported by the ILO in the national currency, were converted to US$ using the

annual average exchange rate published in the International Monetary Fund’s International Financial

Statistics (March 1999). To track changes in real earnings (i.e., earnings adjusted for inflation), a real

earnings index was computed by deflating current earnings in the national currency with the annual

average national consumer price index as published in the International Monetary Fund’s

International Financial Statistics (March 1999), indexed to 1990 = 100.
6

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 330-332.

II-144

Average Hourly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (Ptas; 1990=100)

(Ptas) (US$) (Ptas) (US$) (Ptas) (US$) Manuf. Apparel Footwear

1990 902 8.85 551 5.41 612 6.00 100 100 100

1991 994 9.57 636 6.12 671 6.46 104 109 104

1992 1,080 10.55 680 6.64 710 6.93 107 110 103

1993 1,159 9.11 716 5.63 762 5.99 110 111 106

1994 1,221 9.11 749 5.59 762 5.69 110 111 101

1995 1,263 10.13 794 6.37 796 6.38 109 112 101

1996 1,311 10.35 843 6.66 907* 7.16 109 115 111

1997 1,372 9.37 903 6.17 932 6.37 112 121 112

____________________________________________________________________________________________

Note: * indicatesa break in series due to a change in classificaton; beginning 1996, includes other leather products.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 930.

NON-WAGE BENEFITS

There are two basic employee benefits mandated by Spanish law. Spanish firms are required to pay

a percentage of the social security tax for each employee. Each employee must also contribute a

percentage. The other government-mandated benefit (which is in the form of monetary compensation)

is a pair of yearly bonuses each equal to a month’s pay. Thus, when calculating annual income, a

worker’s actual monthly pay should be multiplied by fourteen, not twelve. The statistics for monthly

income in the section on the prevailing wage include these bonuses.

A U.S. Social Security Administration survey6 elaborates on five non-wage benefit programs that

employers in Spain make contributions on behalf of their employees: (1) old age, disability, and death

benefits, first established in 1919, in which employees pay 4.7 percent of covered earnings based on

wage classes according to 11 occupational classes, employers pay 23.6 percent of employee earnings

according to 11 occupational classes, and the government pays an annual subsidy; (2) sickness

(created in 1942) and maternity (created in 1929) insurance is part of the social insurance system and

the contributions are included in the old age, disability, death benefits contributions above; (3) work

injury benefits, begun in 1900, are entirely financed by the employer who pays 0.81 to 16.2 percent

of payroll according to risk (the average rate is 1.98 percent); (4) unemployment benefits, begun in

1919, in which the employee pays 1.6 percent of covered earnings according to 11 occupational

classes, the employer pays 6.2 percent of payroll according to 11 occupational classes, and the

government provides variable subsidies; (5) income-tested family allowance benefits for disability

are covered under the old age, disability, and death benefits insurance and the government pays for

non-contributory pensions from general revenues.

ASSESSING BASIC NEEDS: THE POVERTY LINE

In Spain there is no official measure of a poverty line or its equivalent.
7

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 76.

8

 The estimate is referenced as originating from Eurostat, Poverty Statistics in the Late 1980s: Research

Based on Micro-Data (Luxembourg: Office for Official Publications of the European Communities, 1994), p. 414.

The study was conducted for Eurostat by Aldi J.M. Hagenaars, Klass de Vos, and M. Asghar Zaidi and was based on the

Survey of Family Consumption (ISTAT). The study uses household expenditure per adult equivalent (OECD

equivalence scales) with the poverty line set at 50 percent of the mean of this variable. Equivalence scales were used

to compensate for differences due to family size. See Tabatabai, Statistics on Poverty and Income Distribution: An

ILO Compendium of Data, p. 137.

9

 Timothy M. Smeeding, Financial Poverty in Developed Countries: The Evidence from LIS, Final Report

to the UNDP, Working Paper No. 155, Maxwell School of Citizenship and Public Affairs, Syracuse, NY (April 1997),

Appendix Table A-4.

10 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1520.

II-145

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization7 reports for 1988 that 20.8 percent of the Spanish population was below the poverty line

of 50 percent of national mean equivalent expenditure.8 A more recent study, using a slightly different

definition, reported for 1980 that 12.2 percent and for 1990 that 10.4 percent of the Spanish population

was below the poverty line of 50 percent of median disposable income.9

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in Spain meet workers’ basic needs. Some information from U.S. Department

of State or U.S. Embassy reports indicates more generally that the legal minimum wage is considered

sufficient to provide a decent standard of living for a worker and family. The rate is revised every

year in line with the consumer price index and is enforced effectively by the Ministry of Labor and

Social Affairs.10 The U.S. Embassy did not provide any information on the living wage.
1

 Unless noted otherwise, information presented here is from American Embassy—Colombo, unclassified

telegram No. 548 (February 26, 1999).

2

 At the exchange rate of one U.S. dollar to 69 rupees in late February 1999. 

3

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1982.

II-146

SRI LANKA1

MINIMUM WAGE

In Sri Lanka, there is no national minimum wage. The Wages Board Ordinance regulates wages and

other emoluments for persons employed in 39 different trades and sectors. The current minimum

wages for the garment manufacturing trade, last increased in April 1998, are: 2,000 rupees

(SLRs)—about 29.00 U.S. dollars2 (US$)—per month for trainees and helpers (for 156 days only,

after which such employees are expected to be promoted to the next category); SLRs2,525 (US$36.60)

per month for unskilled workers (first year); and SLRs2,575 (US$37.30) per month for sewing

machine operators and iron operators (first year). The minimum wage in the footwear industry is

SLRs1,500 (US$21.70) per month for trainees and ranges between SLRs2,000 (US$29.00) and

SLRs2,050 (US$29.70) per month for workers (depending on skill and seniority). In addition, the

Board of Investment, in consultation with industry associations, dictates minimum wage levels for

factories located in the two major export processing zones as follows: SLRs2,750 (US$39.90) per

month for trainees; SLRs2,850 (US$41.30) per month for unskilled workers; and SLRs3,000

(US$43.50) per month for skilled workers.

Most permanent full-time workers are covered by laws that prohibit them from working regularly

more than 45 hours per week (a 51⁄2 day workweek).3

The following table, based on data supplied to the U.S. Embassy by the Statistics Department of the

Sri Lankan Labor Ministry and reported in the annual Country Reports on Human Rights Practices

published by the U.S. Department of State, summarizes the average minimum wage rates (in rupees

and U.S. dollars at current exchange rates) by economic sector since 1994:

Year Agriculture Industry, Commerce, Garments

(per day) and Services (per month)

(per month)

SLRs US$ SLRs US$ SLRs US$

1994 72 1.50 1,550 32.00 [Industry&Commerce] 2,000 41.00

1,450 30.00 [Services]

1995 75 1.50 2,000 40.00 2,000 40.00

1996 75 1.40 2,000 36.00 2,000 36.00

1997 75 1.27 2,000 34.00 2,000 34.00

1998 95 1.44 2,000 34.00 2,500 38.00

1999 95 1.40 2,000 29.00 2,500 36.20

_____________________________________________________________________

PREVAILING OR AVERAGE WAGE
4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

5

International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 756.

II-147

Although no reliable statistics are available for prevailing wage levels, workers in the garment sector,

particularly those working in the export processing zones, receive wages above the minimum wage

levels due to labor scarcity.

The table below presents available data from the International Labor Organization (ILO) on average

gross hourly earnings in Sri Lanka for wage earners in the manufacturing sector; similar data were not

available from the ILO for the apparel and footwear industries. The earnings data include pay for

time worked, overtime, and paid leave, but not bonuses or employer costs of social insurance

programs and other benefits paid directly to the employee.4 Average weekly hours paid for wage

earners in manufacturing were 51.1 for the years 1990 through 1997.5 Comparable data for weekly

hours worked in the apparel and footwear industries were not available from the ILO. Current

average earnings, which are reported by the ILO in the national currency, were converted to US$ using

the annual average exchange rate published in the International Monetary Fund’s International

Financial Statistics (March 1999). To track changes in real earnings (i.e., earnings adjusted for

inflation), a real earnings index was computed by deflating current earnings in the national currency

with the annual average national consumer price index as published in the International Monetary

Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Hourly Earnings in All Manufacturing

Year All Manufacturing Real Earnings Index (SLRs; 1990=100)

(SLRs) (US$) Manufacturing

1990 9.49 0.24 100

1991 11.20 0.27 105

1992 11.83 0.27 100

1993 13.65 0.28 103

1994 15.08 0.31 105

1995 16.52 0.32 107

1996 17.90 0.32 100

1997 18.15 0.31 92

__________________________________________________________

Source: ILO, Yearbook of Labour Statistics, 1998, p. 916.

NON-WAGE BENEFITS

The government requires employers to contribute to retirement plans (the employees’ provident fund

and the employees’ trust fund). Garment factories set up under the “200 Garment Factories Program”

in the early 1990s are required by the government to provide free breakfast to employees.
6

 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington: U.S.

Government Printing Office, August 1997), pp. 333-334.

7

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 43-44.

8

 The estimates are referenced as originating from Development Alternatives, Inc., The Socioeconomic

Dimensions of Poverty in Sri Lanka and Policy Implications (Washington, 1990) and Leslie Gunaratne,

II-148

A U.S. Social Security Administration survey6 elaborates on several non-wage benefit programs

which employers in Sri Lanka must participate in on behalf of their employees: (1) old age, disability,

and death benefits are provided through a provident fund system, begun in 1958, into which the

employee pay 8 percent of their wages and the employers pay 12 percent of their payroll; (2) sickness

and maternity benefits are available to all with medical care being available free of charge in

government health centers and hospitals and women in certain sectors being entitled to paid maternity

leave; (3) work injury benefits, begun in 1934, are financed entirely by employers at rates ranging

from 1 to 7.5 percent of payroll according to risk; (4) unemployment insurance, begun in 1990, is

being implemented in stages with the government paying the entire cost; and (5) family allowance

program, begun in 1990, is also being implemented in stages with the government paying the entire

cost.

ASSESSING BASIC NEEDS: THE POVERTY LINE

There is no officially accepted or defined poverty line. A World Bank consultant economist in a

recent study on poverty in Sri Lanka used two poverty thresholds. The lower poverty line

(SLRs717.09 per person per month), called the “reference poverty line,” was connected with

minimum consumption (of essential nutrition, clothing, and shelter) needs. The higher poverty line

(SLRs860.51 per person per month) denotes the minimum consumption level necessary to have a

standard of living that includes small amounts of discretionary spending for transport, communications,

and health services. These amounts are based on consumption data from 1995-96 (the most recent

available); in recent years, the annual rate of inflation has been 15.9 percent (1996), 9.6 percent

(1997) and 9.4 percent (1998). For purposes of its “samurdhi” social welfare scheme, the government

defines the qualifying threshold as SLRs1,000 per family per month (family size is not defined)—the

government provides SLRs500 to qualifying families to raise the income level to SLRs1,500 per

month.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization7 reports several measures of a poverty line for Sri Lanka:

! For 1978/79, 22.7 percent of the rural and 16.0 percent of the urban Sri Lankan population

were below the poverty line (food expenditures of SLRs70 per capita per month in 1978/79

prices), with a national poverty rate of 19.5 percent;

for 1986/87, 32.4 percent of the rural and 12.3 percent of the urban population were below

the same poverty line, with a national poverty rate of 27.4 percent.8
“Measurement of Poverty in Sri Lanka,” mimeographed, 1985. The poverty line is defined by a level of all-island per

capita monthly food expenditure of SLRs70, which is based on the per capita monthly food expenditure of the bottom

40 percent of households. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of

Data, p. 154.

9

 The estimate is referenced as originating from Elaine K. Chan, “A Compendium of Data on Poverty and

Income Distribution,” Background Paper for the World Development Report 1990 (Washington: World Bank, 1990),

pp. 64-67. It is based on data from the Labor Force Survey 1985/86 conducted by the Department of Census and

Statistics. Per capita income levels and distributions were tabulated by the World Bank and converted into

expenditures assuming a national savings rate of 12 percent. An absolute poverty line, defined as an expenditure level

below which basic needs cannot be satisfied, was arbitrarily set 35 percent higher than the Indian poverty line for rural

areas which at that time was considered to be more representative of many developing countries. The poverty line

corresponded to US$31 after adjustment for purchasing power parity had been made to the 1985 official exchange rate.

The purchasing power parity poverty line was converted into the national currency using estimates from Robert

Summers and Alan Heston, “A New Set of International Comparisons of Real Product and Price Levels: Estimates for

130 Countries, 1950-1985,” Review of Income and Wealth, Series 34, No. 1 (March 1988), pp. 1-25. See Tabatabai,

Statistics on Poverty and Income Distribution: An ILO Compendium of Data, pp. 136; 154.

10 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 197.

11 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1982.

II-149

! For 1985, 24.1 percent of the Sri Lankan population was below the poverty line of US$31 per

capita per month in 1985 purchasing power parity adjusted US$ (or SLRs155).9

The World Bank reports10 that, in 1990-91, 35.3 percent of the Sri Lankan population was below the

country-specific national poverty line, with 28.4 percent of the urban population and 38.1 percent of

the rural population living below the poverty line; comparable figures reported for 1985-86 are 40.6,

26.8, and 45.5 percent, respectively. The same source also reports that, in 1990, 41.2 percent of the

Sri Lankan population was below the international poverty line of US$2 per person per day and 4.0

percent of the population was below the international poverty line of US$1 per day, both in 1985

purchasing power parity adjusted US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in Sri Lanka meet workers’ basic needs. Some information from U.S.

Department of State or U.S. Embassy reports indicates more generally that the minimum wages are

insufficient to provide a decent standard of living for a worker and the standard family of five, but the

vast majority of families have more than one breadwinner.11 The U.S. Embassy did not identify any

studies on the living wage in Sri Lanka.
1 Unless noted otherwise, information presented here is from American Institute in Taiwan—Taipei,

unclassified telegram No. 569 (February 25, 1999).

2

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 896.

3

 Data, which were originally provided by AIT—Taipei in February 1999, have been updated with more recent

and revised data provided by the U.S. State Department’s Taiwan Coordination Staff and reflect data revisions made

by Taiwan’s Directorate General of Budget and Statistics in May 1999. See U.S. Department of State, Bureau of East

Asian and Pacific Affairs, unclassified facsimile (December 1, 1999).

II-150

TAIWAN1

MINIMUM WAGE

Following its Labor Standards Law, which covers all salaried employees, Taiwan uses the “basic

wage” as the de facto minimum wage. The Basic Wage Review Committee of the Council of Labor

Affairs (CLA) sets the “basic wage” level based on several factors. These factors include the state

of the economy, the wholesale and retail price index, national income and per capita income levels,

labor productivity and employment rates, prevailing wages in various industries, and a statistical

survey of household income and expenditure. The CLA submits the Basic Wage Review Committee's

conclusions to the Executive Yuan for approval and ratification. Usually, the CLA will invite

representatives from both employers and organized labor to discuss the Basic Wage Review

Committee’s conclusions before forwarding them to the Executive Yuan.

The Executive Yuan has made no basic wage adjustment since 1997. Taiwan’s basic wage is 15,840

new Taiwan dollars (NT$) per month, or 500 U.S. dollars (US$). Based on the monthly basic wage

rate, the daily basic wage is NT$528 (or US$17), while the basic hourly wage is NT$66 (or US$2).

The law limits the workweek to 48 hours (8 hours per day, 6 days per week) and requires 1 day off

in every 7 days.2

PREVAILING OR AVERAGE WAGE

Due to increasing labor costs, apparel and footwear are no longer major Taiwan exports to the United

States. Over the past decade, many of Taiwan’s apparel producers and footwear firms have moved

their production lines to mainland China and Southeast Asia. Reflecting this shift to off-island

manufacturing, the number of workers in the apparel and footwear industries has dropped from

272,804 persons in 1990 to 144,000 in 1997.

For apparel and footwear industries, current prevailing monthly wages average NT$22,932 and

NT$26,503, respectively, much lower than general average of NT$33,736 in the manufacturing sector

as a whole—based on the most recent data published by the Directorate General of Budget,

Accounting and Statistics for August 1999.3
4

 U.S. Bureau of Labor Statistics, International Comparisons of Hourly Compensation Costs for

Production Workers In Manufacturing, 1975-1997 (Washington: U.S. Department of Labor, May 1999). 

II-151

The table below presents data from the U.S. Bureau of Labor Statistics on hourly compensation costs

in Taiwan for production workers in the manufacturing sector and the apparel and leather products

industries. They include pay for time worked, paid leave, bonuses, and other benefits paid directly

to the employee, including the cost of social insurance programs.4 No data were available for average

hours worked per week by production workers in all manufacturing or in the apparel or footwear

industries. Current hourly compensation costs, which are reported by the U.S. Bureau of Labor

Statistics in the national currency, were converted to US$ using the annual average exchange rate

published in the International Monetary Fund’s International Financial Statistics (March 1999). To

track changes in real compensation (i.e., compensation adjusted for inflation), a real compensation

index was computed by deflating current compensation in the national currency with the annual

average national consumer price index as published in the International Monetary Fund’s

International Financial Statistics (March 1999), indexed to 1990 = 100.

Hourly Compensation Costs in All Manufacturing, Apparel, and Leather Products

Year All Manufacturing Apparel Leather Products Real Compensation Index (NT$; 1990=100)

(NT$) (US$) (NT$) (US$) (NT$ ) (US$) Manuf. Apparel Leather Products

1990 105.68 3.93 76.42 2.84 85.74 3.18 100 100 100

1991 116.66 4.36 81.94 3.06 91.80 3.43 107 103 103

1992 128.02 5.09 86.39 3.43 97.72 3.88 112 104 105

1993 138.27 5.23 93.96 3.56 111.26 4.21 117 110 116

1994 146.79 5.55 102.11 3.86 118.43 4.47 120 115 119

1995 156.83 5.92 107.60 4.06 125.57 4.74 123 117 122

1996 162.87 5.93 109.82 4.00 132.37 4.82 124 116 125

1997 169.48 5.89 na na na na na na na

_____________________________________________________________________________________________

Note: na = not available.

Source: U.S. Department of Labor, Bureau of Labor Statistics, International Comparisons of Hourly Compensation 

Costs for Production Workers in Manufacturing, May 1999.

NON-WAGE BENEFITS

Like workers in other industries, workers in the apparel and footwear industry are eligible to receive

the following government-mandated non-wage benefits:

• Labor Insurance Program: In Taiwan’s Labor Insurance Program, workers pay 20 percent

of the overall premium. Employers and the government pay 70 percent and 10 percent,

respectively. The program provides injury, disability, maternity, unemployment and life

insurance coverage for workers. In addition, the program offers a lump-sum payment equal

to 45 months insured wage to the employee upon retirement. At present, the premium is set

at 6.5 percent of an employee’s salary.

• National Health Insurance Program: Taiwan initiated its National Health Insurance Program

(NHIP) in March 1995. The NHIP premium is set at 4.25 percent of an employee’s salary for

each family member. The worker’s portion of the above premium is 30 percent. Employers

and the government pay 60 percent and 10 percent, respectively, of the premium for workers.
5

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 896.

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The program mainly offers medical care to workers and their family members.

• Labor retirement payments: In addition to the lump-sum payment (maximum of 45 months’

insured wage) to the employee upon retirement offered under the labor insurance program,

employers are also required to make a lump-sum retirement payment (maximum of 45 months

wage) to an employee upon retirement. This requirement is set out in Taiwan's Labor

Standards Law.

• Tax deductions: Taiwan's income tax law allows all wage earners to declare an individual

deduction on their taxable income. In 1999, the individual deduction for each wage earner

was NT$60,000 (or US$1,800).

ASSESSING BASIC NEEDS: THE POVERTY LINE

The poverty line is set at the level of provinces and municipalities each fiscal year. The level of the

poverty line is based on the minimal living expenses required for each locality. Since November

1997, the formula used for calculating the minimal level of living expenses has been fixed at 60

percent of average per capita expenditure based on the previous year’s economic statistics.

According to the Directorate General of Budget, Accounting and Statistics, minimal living expenses

per person in fiscal year 1999 are: 

• NT$11,625 per month in Taipei City;

• NT$9,152 per month in Kaohsiung City; and 

• NT$7,598 per month in the rest of Taiwan.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in Taiwan meet workers’ basic needs. Some information from U.S. Department

of State or American Institute reports indicates more generally that the minimum wage in Taiwan is

sufficient in cheaper areas, but is less than what is needed to assure a decent standard of living for a

worker and family in metropolitan areas such as Taipei. However, the average manufacturing wage

is more than double the legal minimum wage, and the average for service industry employees is even

higher.5 The American Institute in Taiwan reports that there are no studies in English available on the

issue of the living wage in Taiwan.
1Unless noted otherwise, information presented here is from American Embassy—Bangkok, unclassified

telegram No. 3594 (March 8, 1999).

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THAILAND1

MINIMUM WAGE

Minimum wage setting process in Thailand is handled through a National Wage Committee, as

prescribed by the Labor Protection Act B.L. 2541 (1998). The daily minimum wage is now

determined according to region, not by type of industry. The National Wage Committee is a tripartite

unit, appointed by the cabinet. The Committee consists of the permanent Secretary of Labor and

Social Welfare (chairman), four representatives of the government, five employers’ representatives,

and five employees’ representatives. The law requires that in fixing the minimum wage, the Wage

Committee study and consider the impact of the current minimum wage and other factors. These other

factors include the consumer price index, inflation rate, standard of living, cost of production, prices

of goods, affordability to businesses, quality of work performed by labor, gross domestic products,

and economic and social conditions. Under the 1998 Labor Relations Act, after the National

Committee sets the minimum wage, tripartite provincial committees can review the wage situations

and recommend a higher wage be set for the individual provinces. The Ministry of Labor and Social

Welfare relies on the Department of Business Economics, Ministry of Commerce, to calculate all

figures and indexes necessary to evaluate decisions on the minimum wage. Wages in the apparel and

footwear industries are determined by the minimum wage set for all industries.

The following table presents data on Thai minimum wages since 1993. The rates set in 1998 are still

applicable in 1999 as the Wage Committee decided on October 13, 1999 to delay any wage

adjustment until Thailand's economic recovery. In August 1998, the government mandated a uniform

workweek of 48 hours, with a limit on overtime of 35 hours per week.

Minimum Wage Rates in Thailand, 1993-98

[in baht (B) per day]

------------------------------------------------------------------------------------------------------------

 1993 1994 1995 1996 1997 1998

Effective date April 1 Oct 1 July 1 Oct 1 Jan 1

------------------------------------------------------------------------------------------------------------

Bangkok and 6 125 135 145 157 157 162

Provinces*

Ranong, Pang-Nga, 110 118 126 137 137 140

Chonburi, Saraburi,

Nakorn Ratchasima,

and Chiangmai

The rest of 63 102 110 118 128 128 130

provinces______________________________________________________________

Note: * including Samut Prakarn, Nonthaburi, Pathumthani, Nakornpathom,

 Samut Sakorn, and Phuket.

PREVAILING OR AVERAGE WAGE
2

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 757.

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Annual incomes for workers in the apparel and footwear industries in 1998 averaged B52,560, about

1,273 U.S. dollars (US$). Trainees may receive wages lower than the minimum wage and long-time

workers frequently receive higher remuneration. Ministry of Labor and Social Affairs officials state

that the large number of sub-contractors in apparel and footwear industries do not fall under the

minimum wage system because their work, primarily piece work, is paid for on a lump sum basis and

so does not fall under the legal definition of the minimum wage.

The table below presents available data from the International Labor Organization (ILO) on average

monthly earnings (direct wages per worker) in Thailand for total employees in the manufacturing

sector and in the apparel and footwear industries. They include pay for time worked, paid leave,

bonuses, and other benefits paid directly to the employee, but not the cost of social insurance

programs.2 Average hours worked per week by all employees in all manufacturing were 48.3 for the

years 1990 through 1997, and average hours worked per week by production workers were 48.3 in

the apparel industry and 49.2 in the footwear industry for the years 1990 through 1994.3 Current

average earnings, which are reported by the ILO in the national currency, were converted to US$ using

the annual average exchange rate published in the International Monetary Fund’s International

Financial Statistics (March 1999). To track changes in real earnings (i.e., earnings adjusted for

inflation), a real earnings index was computed by deflating current earnings in the national currency

with the annual average national consumer price index as published in the International Monetary

Fund’s International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Monthly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (B; 1990=100)

 (B) (US$) (B) (US$) (B) (US$) Manuf. Apparel Footwear

1990 3,357 134 2,545 101 2,428 97 100 100 100

1991 3,688 145 3,022 119 3,207 126 104 112 124

1992 3,986 157 3,467 137 3,230 127 108 124 121

1993 4,138 163 4,031 159 3,628 143 108 139 131

1994 4,229 168 4,152 165 3,662 146 105 137 126

1995 4,994 200 4,352 175 4,046 162 118 135 132

1996 5,502 217 na na na na 122 na na

1997 5,935 189 na na na na 125 na na

___________________________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 917.

NON-WAGE BENEFITS

The government does not specifically mandate non-wage benefits for workers in the apparel and

footwear industries. Workers who join the government's Social Security Fund are entitled to
4

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), pp. 45-46.

5

 The estimates are referenced as originating from Suganya Hutaserani and P. Tapwong, “Urban Poor

Upgrading: Analyses of Poverty Trend and Profile of the Urban Poor in Thailand,” Background Paper No. 6.2 prepared

for the National Economic and Social Development Board (NESDB) project on national urban development policy

framework, October 1990. The study uses a standard method to estimate poverty lines, based on valuing at

representative prices a minimum nutritional diet consisting of foods typically consumed within the country. Non-food

expenditures are calculated from the ratio of food to total expenditures for the lowest quintile from the 1975/76

Socio-Economic Survey and added to the cost of the minimum food basket to determine the minimum expenditure

requirement at the poverty line. In the current Thai economic statistics, urban areas consist only of municipalities and

rural areas consist of villages and sanitary districts. See Tabatabai, Statistics on Poverty and Income Distribution:

An ILO Compendium of Data, p. 155.

II-155

compensation from the fund in case of injury or sickness, child delivery, disability, death, child

welfare, and old age. There are no tax credits for workers in the apparel or footwear industries,

however, most workers do not need to pay income tax since their net income is less than the minimum

annual income requirement, B100,000 (US$2,421 at the 1998 the exchange rate of US$1 to B41.3).

In general, workers in large plants, especially those located in industrial estates, receive non-wage

benefits such as housing, uniforms, subsidized meals, and a year-end bonus. 

ASSESSING BASIC NEEDS: THE POVERTY LINE

A study on the impact of the economic crisis on employment, unemployment and real income, by the

National Economic and Social Development Board (NESDB) and the Asian Development Bank

(ADB) in September 1998 set the poverty line in Thailand at an average income of B906 (US$22) per

person per month. This amount is determined by the cost of a basket of items necessary for a person

to survive for one month. The basket of goods is weighted 60 percent for food and 40 percent for nonfood items. According to the study, as of the second quarter of 1998, 7.6 million (out of population

of 61.0 million) Thai people live under the poverty line, compared with 6.8 million (out of population

of 59.9 million) in 1996.

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization4 reports several measures of a poverty line for Thailand:

! For 1980/81, 27.3 percent of persons in villages and 13.5 percent of persons in sanitary

districts were below the poverty line (income of B1,981 per capita per year in 1976 prices;

or B3,454 in current prices) and 7.5 percent of persons in municipalities were below the

poverty line (income of B2,961 per capita per year in 1976 prices; or B5,151 in current

prices), with a national poverty rate of 23.0 percent;

for 1988/89, 29.4 percent of persons in villages, 13.2 percent of persons in sanitary districts,

and 6.7 percent of persons in municipalities were below the same respective poverty lines,

with a national poverty rate of 23.7 percent.5

! For 1988, 10.4 percent of the Thai population was below the poverty line of US$30.42 per
6

 The estimate is referenced as originating from Shashou Chen, Gaurav Datt, and Martin Ravallion, “Is Poverty

Increasing in the Developing World?” Policy Research Working Paper WPS 1146 (Washington: World Bank, 1993).

This study uses essentially the same methodology as the World Bank’s World Development Report 1990, but with

updated purchasing power parity rates. See Tabatabai, Statistics on Poverty and Income Distribution: An ILO

Compendium of Data, p. 137.

7

 World Bank, World Development Report 1998-99 (New York: Oxford University Press, 1999), p. 197.

8

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1080.

II-156

capita per month (i.e., US$1 per day) in 1985 purchasing power parity adjusted US$.6

The World Bank reports7 that, in 1992, 13.1 percent of the Thai population was below the countryspecific national poverty line, with 10.2 percent of the urban population and 15.5 percent of the rural

population living below the poverty line; in 1990, 18.0 percent of the Thai population was below the

country-specific poverty line. The same source also reports that, in 1992, 23.5 percent of the Thai

population was below the international poverty line of US$2 per person per day and less than 2.0

percent was below the international poverty line of US$1 per person per day, both in 1985 purchasing

power parity US$.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in Thailand meet workers’ basic needs. Some information from U.S. Department

of State or U.S. Embassy reports indicates more generally that the minimum wage in Thailand is not

adequate to provide a decent standard of living for a worker and family. With extended family

members' financial contributions, the minimum wage provides the basis for a marginally adequate

overall standard of living. Nationwide, however, more than half of the workers receive less than the

minimum wage, especially in rural provinces. Unskilled migrant workers, as well as illegal aliens,

often work for wages significantly less than the minimum wage. The minimum wage does not apply

to undocumented hill tribe members, who are likewise not protected by other labor laws.8

Thai laborers employed in the apparel and footwear industries live far above the poverty line

determined by the government. Annual incomes for workers in the apparel and footwear industries

averaged B52,560 (US$1,273), compared with the annual poverty level income of B10,872 (US$264).

Nevertheless, income disparities in Thailand have sharpened in recent years. Thai per capita income

in 1998 is estimated at B79,425 (US$1,923). According to the NESDB and ADB's study, the income

share of the wealthiest top 20 percent of Thailand increased from 55.3 percent in 1996 to 56.2 percent

in the first two quarters of 1998, while income shares in all other quintiles decreased.
1Unless noted otherwise, information presented here is from American Embassy—Ankara, unclassified

telegram No. 2564 (March 19, 1999).

2

 Reportedly, in developing the minimum wage increase, the wage commission took into account the minimum

calorie intake needed for basic health, which the government has set at 3,540 calories per worker per day. The

minimum wage rates were converted to US$ at the January 1999 average market rate of US$1=TL321,910.

3

 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1568.

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TURKEY1

MINIMUM WAGE

The Labor Ministry is obliged legally to set minimum wages at least every two years through a

Minimum Wage Board, a tripartite government-industry-trade union commission. In recent years, the

minimum wage has been adjusted annually. The monthly gross minimum wage rates, which became

effective on August 8, 1998, were 47.8 million Turkish lira (TL), approximately 174 U.S. dollars

(US$), for workers older than age 16 and TL40.7 million (about US$148) for workers under age 16.

Minimum wage rates for the first and second halves of 1999 were set on December 29, 1998.2 For

workers over 16, the gross minimum wage was set at TL78.07 million (about US$243) for the first

six months of 1999 and TL93.60 million (about US$291) for the second half of 1999. For workers

under the age of 16, the gross minimum wage was set at TL66.36 million (about US$206) for the first

half of 1999 and TL79.56 million (about US$247) for the last half. The labor law set a 45-hour

workweek, although unions have bargained for fewer hours; the law prescribes a weekly rest day and

limits the number of overtime hours to 3 a day for up to 90 days in a year.3 Recent trends in monthly

minimum wage rates since 1993 are given the following table.

Monthly Minimum Wage Rates, 1993-99 (millions of Turkish liras)

Date Workers under 16 years of age Workers 16 or older

1993-August 1.12 1.56

1994-September 2.33 2.76

1995-September 7.09 8.46

1996-September 14.40 17.01

1997-August 29.93 35.44

1998-January 37.41 44.30

 -August 40.70 47.84

1999-January 66.36 78.07

 -July 79.56 93.60

___________________________________________________________________

Source: U.S. Department of State, Country Reports on Human Rights Practices,

Turkey, section 6e (Washington: U.S. Government Printing Office, various years). 

PREVAILING OR AVERAGE WAGE
4

 The State Institute of Statistics (SIS) issued a report, Employment and Wage Structure, in November 1994

which provides survey information on employment and wages by industry and occupation; the next report is not

scheduled until the year 2000. SIS maintains a web site <http://www.die.gov.tr> with a Turkish and English language

menu which is updated every two months and contains all of its statistical publications on labor statistics, including

wages and wage structures by sectors. The average market exchange rate for January 1999 of US$1=TL321,910 was

used to convert TL to US$.

5

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

6

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 795.

II-159

In Turkey, the apparel industry is considered together with textiles, while the footwear industry is

separate and more closely associated with the leather industry. Accordingly, the wage structures for

these industries are determined differently.4

(1) Prevailing Hourly Wage in the Textile and Apparel Industry, 1999 (estimated average)

Prevailing hourly wage (take home pay) TL550 thousand (US$1.71)

Non-wage benefits TL254 thousand (US$0.79)

Total TL804 thousand (US$2.50)

Plus 4 bonuses per year, equaling one month’s salary each.

(2) Prevailing Monthly Wage in the Leather Industry, 1999 (estimated average)

Public Sector Wages

Prevailing monthly wage (take home pay) TL147 million (US$457)

Social package TL30 million (US$93)

Total TL177 million (US$550)

Plus 4 bonuses per year, equaling one month’s salary each.

Private Sector Wages

Prevailing monthly wage (take home pay) TL130 million (US$404)

Non-wage benefits TL40 million (US$124)

Total TL170 million (US$528)

Plus 4 bonuses per year, equaling one month’s salary each.

The table below presents available data from the International Labor Organization (ILO) on average

daily earnings (direct wages per worker) in Turkey for all employees in the manufacturing sector and

in the apparel industry. They include pay for time worked, paid leave, bonuses, and other benefits

paid directly to the employee, but not the cost of social insurance programs.5 Average hours worked

per week by production workers were 35.0 in manufacturing and 39.1 in the apparel industry for the

years 1990 through 1995.6 Current average earnings, which are reported by the ILO in the national

currency, were converted to US$ using the annual average exchange rate published in the International

Monetary Fund’s International Financial Statistics (March 1999). To track changes in real earnings

(i.e., earnings adjusted for inflation), a real earnings index was computed by deflating current earnings

in the national currency with the annual average national consumer price index as published in the
II-160

International Monetary Fund’s International Financial Statistics (March 1999), indexed to 1990 =

100.

Average Daily Earnings in All Manufacturing and Apparel

Year All Manufacturing Apparel Real Earnings Index (TL; 1990=100)

 (TL) (US$) (TL) (US$) Manuf. Apparel 

1990 30,582 11.72 19,091 7.32 100 100

1991 61,620 14.77 39,700 9.52 121 125

1992 88,144 12.83 65,501 9.53 102 122

1993 135,236 12.31 103,529 9.42 94 116

1994 191,119 6.45 164,677 5.56 65 89

1995 na na na na na na

1996 757,277 9.30 660,045 8.11 75 105

1997 na na na na na na 

__________________________________________________________________________

Note: na = not available.

Source: ILO, Yearbook of Labour Statistics, 1998, p. 962.

NON-WAGE BENEFITS

In both the textile and apparel and leather industries, government mandated benefits include statutorilyrequired social security premiums. Tax credits are not applicable. Workers covered by the labor

law, who constitute about one-third of the total labor force, also receive a hot meal or daily food

allowance and other fringe benefits that—according to statistics of the Turkish Employers'

Association—make basic wages alone account for only about 37.3 percent of total compensation for

the textiles and apparel industry in 1997 and 39.4 percent for the leather industry in 1996 (most recent

statistics available). 

The average percentage composition of the total value of the non-wage benefits or social package,

which is usually negotiated through collective agreements, is:
7 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington:

U.S. Government Printing Office, August 1997), pp. 359-360.

II-161

Non-Wage Benefit Percent of total package

Statutory social security premiums 29.4

Severance pay 18.1

Meals 17.8

Transportation 10.9

Forced savings fund 6.2

Heating pay 5.0

Work clothing, protective materials 3.1

Holiday and additional holiday pay 2.8

Notification indemnity 1.6

Family, children and education allowance 1.3

Health services, day nursery 0.6

Birth, death, marriage allowances 0.3

Payments to private insurance schemes 0.3

Other 2.6

A U.S. Social Security Administration survey7 elaborates on four non-wage benefit programs that

employers in Turkey contribute to on behalf of their employees: (1) old age, disability, and death

benefits, begun in 1949, in which the insured person pays 9 percent of their earnings, employers pay

11 percent of the payroll (13 percent for arduous employment), and the government contributes

nothing; (2) sickness and maternity benefits, begun in 1945, in which the insured person pays 5 percent

of their earnings, employers pay 6 percent of the payroll for sickness and 1 percent for maternity, and

the government contributes nothing; (3) work injury benefits, begun in 1945, which are entirely funded

by the employer who pays 1.5-7.0 percent of payroll according to risk (the average is 2.5 percent);

and (4) unemployment benefits are compulsory under the labor code and the employer is required to

pay a dismissal indemnity of 30-days wages per year of service.

ASSESSING BASIC NEEDS: THE POVERTY LINE

Turkey has not established an official poverty line for the nation. According to the Turkish Institute

of Statistics (SIS) and local labor and employers’ confederations, various institutions (e.g., trade

unions, employers, and academics) have developed their own estimates of a poverty line, generally

based on data from SIS. These institutions bring their calculations to government wage commission

sessions, where they are factored into minimum wage decisions for the period under consideration.
8

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 70.

9

 The estimate is referenced as originating from Idriss Jazairy, Mohiuddin Alamgir, and Theresa Panuccio,

The State of World Rural Poverty: An Inquiry into Its Causes and Consequences (New York: New York University

Press, 1992). The estimates in the study are based upon internal working documents or working papers of the

International Fund for Agricultural Development (IFAD) and are usually provisional and rounded to the nearest

multiple of 5. In many cases, the estimates do not appear to based on household survey data, but were included in the

ILO compendium since they relate to countries for which there were no other available estimates. See Tabatabai,

Statistics on Poverty and Income Distribution: An ILO Compendium of Data, p. 138. 

10 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1568.

II-162

Data from SIS are also generally used to determine the poverty line in labor contract negotiations and

closely approximate minimum wage rates plus associated fringe benefits. For example, the Turkish

Labor Confederation has calculated the monthly poverty line for a family of four in 1999 as follows:

Food for basic health and nutrition (1/3 of total expenses): TL88 million

Other expenses (twice food and basic food expenses): TL176 million

Total TL264 million

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization8 reports for 1988 that 14 percent of the rural Turkish population was below the poverty

line.9

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in Turkey meet workers’ basic needs. Some information from U.S. Department

of State or U.S. Embassy reports indicates more generally that it would be difficult for a single

worker, and impossible for a family, to live on the minimum wage without support from other sources.

Most workers earn considerably more; however, workers covered by the labor law constitute only

about one-third of the total labor force.10 The U.S. Embassy did not identify any studies on the living

wage in Turkey.
1 Unless noted otherwise, information presented here is from American Embassy—Abu Dhabi, unclassified

telegram No. 1308 (March 1, 1999).

2 U.S. Department of State, Country Reports on Human Rights Practices for 1998 (Washington: U.S.

Government Printing Office, April 1999), p. 1829.

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UNITED ARAB EMIRATES1

MINIMUM WAGE

There is no legislatively or administratively set minimum wage in the United Arab Emirates (UAE).

Wages are determined by the free market, based on supply and demand. However, the Ministry of

Labor and Social Affairs reviews all labor contracts and does not approve any contract that stipulates

a clearly unreasonable wage. Contracts are reviewed by the Ministry of Labor and Social Affairs to

ensure that they meet an unwritten and unofficial minimum standard of 500-600 Emirian dirhams (Dh),

or approximately 136-163 U.S. dollars (US$), per month, exclusive of employer-provided benefits.

The standard workday is 8 hours, six-days per week.2

According to officials of the Ministry of Labor and Social Affairs, virtually the entire UAE textile and

apparel labor force is comprised of expatriate workers, mostly Indians, Bangladeshis, Pakistanis, and

Sri Lankans.

PREVAILING OR AVERAGE WAGE

Textile and apparel workers with greater skills and/or in more senior positions will earn a higher

wage—well in excess of the minimum—than unskilled workers.

No data were available for the United Arab Emirates from the Internationa Labor Organization (ILO)

on average wages or hours worked in the manufacturing sector or in the apparel or footwear

industries.

NON-WAGE BENEFITS

As part of their contract, workers in the textile and apparel sector are provided by their employers

with housing, food, and medical care—in addition to their base salaries. Workers at apparel plants

in urban areas are generally assigned apartments, while those who work at factories in the desert are

provided with dormitory style accommodations.

ASSESSING BASIC NEEDS: THE POVERTY LINE

There is no government-determined poverty line. The UAE is a wealthy country; per capita income

is roughly US$16,000 per year. The government has in place an extensive system (for example,

federal government hiring preferences, housing loans, wedding grants, and development projects) for
II-164

re-distributing wealth to the less wealthy northern emirates—Ajman, Fujeirah, Umm al Qaiwain, Ras

al Khaimah—which have little in the way of oil or gas resources. The government has announced the

establishment of an ambitious federally-run program which will provide pensions and death and

disability benefits for UAE nationals. In short, poverty is not an issue for the UAE’s estimated

500,000 citizens. These benefits, however, are available to UAE citizens only. UAE nationals

comprise roughly 80 percent of the total population, and about 90 percent of the labor force.

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in the UAE meet workers’ basic needs. The U.S. Embassy reports that the

Ministry of Labor and Social Affairs claims their review of worker contracts determines that the base

salary is greater than the minimum Dh500-600 per month (plus housing, food, and medical), thus

ensuring that foreign textile and apparel workers earn a living wage and are able to meet their basic

needs. The U.S. Embassy was not aware of any studies available on the issue of the living wage in

the UAE.
1 Unless noted otherwise, information presented here is from American Embassy—London, unclassified

telegram No. 2225 (March 13, 1999).

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UNITED KINGDOM1

MINIMUM WAGE

A national minimum wage was introduced for the first time in the United Kingdom (UK) on April 1,

1999. Up until 1993, minimum wages were set by 26 wages councils, affecting some 2.5 million

workers. The main councils covered retailing, catering, clothing manufacture, and hairdressing.

During this period, 118,000 employees in clothing manufacture were covered and had a minimum

wage of 2.72 British pounds sterling (£) per hour—about 4.39 U.S. dollars (US$).

As of April 1, 1999, the hourly rate for employees aged 22 or over was £3.60 (US$5.81) and £3.00

(US$4.85) for those aged 18-21. There is no statutory rate for employees under the age of 18, but jobs

for this age group do not exist in the textile (apparel) sector. The national minimum wage will be

reviewed within two years of its introduction; at that point, its future level will be assessed.

Analysis provided in the New Earning Survey (NES)—a one percent sample of employees in the UK

conducted by the Office for National Statistics (ONS)—shows that, in April 1998, 13 percent of

employees in textile and textile product manufacturing were paid less than the initial rates for the

minimum wage (deflated to 1998 prices). However, the NES tends to overstate earnings because of

a failure to fully sample employees under the “pay-as-you-earn” tax threshold. The ONS also uses

a strict definition of what firms are involved in textile manufacturing; caution should be taken when

transferring these results to the industry as a whole. Thus, the ONS reports that employer survey

estimates as of November 1998 show that only around 130,000 employees work in textile

manufacturing.

PREVAILING OR AVERAGE WAGE

Figures provided by the British Footwear Association and British Clothing Industry Association

reveal the following weekly wages, based on an adult 18 years or older working 39 hours a week

(US$ figures are based on an exchange rate of £1 to US$1.62):

Footwear Apparel

1995 - £109.71 (US$177.18) 1995 - figures unavailable

1996 - £115.00 (US$185.73) 1996 - £118.00 (US$190. 57) 

1997 - £120.00 (US$193.80) 1997 - £123.30 (US$199.13)

1998 - £123.60 (US$199.61) 1998 - £130.00 (US$209.95)--from January 1, 1999

1999 - £140.40 (US$226.75)-- from April 1, 1999 1999 - £140.40 (US$226.75)--from April 1, 1999

The table below presents available data from the International Labor Organization (ILO) on average
2

 That is, England, Wales, and Scotland, but excluding Northern Ireland.

3

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 805.

4

 International Labour Organization, Yearbook of Labour Statistics, 1998 (Geneva: International Labour

Office, 1998), p. 796.

5 Social Security Administration, Social Security Programs Throughout the World - 1997 (Washington:

U.S. Government Printing Office, August 1997), pp. 368-372.

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hourly earnings (direct wages per worker) in the Great Britain2 for all employees in the manufacturing

sector and in the apparel and leather footwear industries. They include pay for time worked, paid

leave, bonuses, and other benefits paid directly to the employee, but not the cost of social insurance

programs.3 Average hours worked per week by all employees were 41.8 in manufacturing, 39.3 in

apparel, and 41.4 in footwear and leather goods for the years 1990 through 1997.4 Current average

earnings, which are reported by the ILO in the national currency, were converted to US$ using the

annual average exchange rate published in the International Monetary Fund’s International Financial

Statistics (March 1999). To track changes in real earnings (i.e., earnings adjusted for inflation), a real

earnings index was computed by deflating current earnings in the national currency with the annual

average national consumer price index as published in the International Monetary Fund’s

International Financial Statistics (March 1999), indexed to 1990 = 100.

Average Hourly Earnings in All Manufacturing, Apparel, and Footwear

Year All Manufacturing Apparel Footwear Real Earnings Index (£; 1990=100)

 (£) (US$) (£) (US$) (£) (US$) Manuf. Apparel Footwear

1990 6.05 10.79 3.84 6.85 4.52 8.06 100 100 100

1991 6.68 11.81 4.15 7.33 4.77 8.43 104 102 100

1992 7.09 12.52 4.41 7.79 5.07 8.95 107 105 102

1993 7.45 11.19 4.64 6.97 5.66 8.50 110 108 112

1994 7.55 11.57 4.75 7.28 5.64 8.64 109 108 109

1995 7.85 12.39 4.98 7.86 6.33 9.99 110 110 118

1996 8.22 12.83 5.26 8.21 6.25 9.75 112 113 114

1997 8.53 13.97 5.42 8.88 6.02 9.86 112 113 107

_________________________________________________________________________________

Source: ILO, Yearbook of Labour Statistics, 1998, p. 964.

NON-WAGE BENEFITS

There are no government-mandated, non-wage benefits or tax credits for workers in the apparel and

footwear industries.

A U.S. Social Security Administration survey5 elaborates on four non-wage benefits programs that

employers in the UK participate in on behalf of their employees: (1) the Basic State Retirement

Pension program, begun in 1908 and now a compulsory dual social insurance and social assistance

system for old age, disability, and death benefits, in which employees contribute 2 percent of the first

£62 plus 10 percent of wages £62-465 and employers contribute 3-10 percent of employee wages
6

 Robert Twigger, Poverty and the Distribution of Income and Wealth in the UK (London: House of

Commons Library, Economic Policy and Statistics Section, January 12, 1999), p. 2.

7

 Robert Twigger, Poverty and the Distribution of Income and Wealth in the UK (London: House of

Commons Library, Economic Policy and Statistics Section, January 12, 1999), p. 3.

8

 Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data (Geneva:

International Labour Office, 1996), p. 76.

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according to wage bracket (15 percent of these contributions are allocated to the National Health

Service to cover medical care costs); (2) sickness and maternity benefits, begun in 1911 and now part

of the National Health Service, have the same source of funds as for pensions except employers also

pay the full cost of statutory sickness pay and 8 percent of the statutory maternity pay with the

government paying the balance; (3) work injury benefits, begun in 1897, have the same source of funds

as for pensions; (4) unemployment insurance, begun in 1911, has the source of funds is same as for

pensions; and (5) family allowances program, begun in 1945, is a universal system and the government

pays the entire cost; family credit, a social assistance program, is income-tested benefit. 

ASSESSING BASIC NEEDS: THE POVERTY LINE

No formal definition of the poverty line exists in the UK. For example, in an answer to a written

question in 1994, Social Security Minister Alistair Burt stated: “No government in the United

Kingdom have [sic] ever accepted that it is possible to identify a single simple measure to define

poverty in any meaningful way.” More recently, government statisticians commented: “One of the

problems of measuring poverty is that it has no agreed definition and therefore there is little consensus

on how the concept should be translated into a statistical measure.” And, “ There are many ways of

drawing poverty lines and many different interpretations of exactly what poverty is.”6

However, the Department for Social Security (DSS) has, since the mid-1970s, published statistics on

the number of people with relatively low incomes in a publication titled Households Below Average

Income (HBAI). This has been done without specifying what constitutes poverty. In broad terms,

HBAI ranks individuals by their net (after income tax, national insurance, and occupational pension

contributions) per-adult-equivalent household income measured either before or after housing costs.

For example, in 1979, 5.0 million (9 percent of the UK population) was below the poverty line of 50

percent of mean net per-adult-equivalent income (after housing costs). In 1995-97, 14.1 million (24

percent of the UK population) was below the same poverty line. However, if the 1979 poverty line

were adjusted for inflation, then only 5.3 million (9 percent of the UK population) would be below

this poverty line in 1995-97. This illustrates the problems encountered in using a relative poverty

measure to monitor changes in poverty over time.7

A compendium of poverty and income distribution statistics prepared by the International Labor

Organization8 reports for 1988 that 18.7 percent of the UK’s population was below the poverty line
9

 The estimate is referenced as originating from Eurostat, Poverty Statistics in the Late 1980s: Research

Based on Micro-Data (Luxembourg: Office for Official Publications of the European Communities, 1994), p. 414.

The study was conducted for Eurostat by Aldi J.M. Hagenaars, Klass de Vos, and M. Asghar Zaidi and was based on the

Survey of Family Consumption (ISTAT). The study uses household expenditure per adult equivalent (OECD

equivalence scales) with the poverty line set at 50 percent of the mean of this variable. Equivalence scales were used

to compensate for differences due to family size. See Tabatabai, Statistics on Poverty and Income Distribution: An

ILO Compendium of Data, p. 137.

10 Timothy M. Smeeding, Financial Poverty in Developed Countries: The Evidence from LIS, Final Report

to the UNDP, Working Paper No. 155, Maxwell School of Citizenship and Public Affairs, Syracuse, NY (April 1997),

Appendix Table A-4.

11A copy of the whole report can be located on the Internet at <http://www.lowpay.gov.uk>.

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of 50 percent of national mean equivalent expenditure.9 A more recent study, using a slightly different

definition, reported for 1979 that 9.2 percent and for 1991 that 14.6 percent of the UK’s population

was below the poverty line of 50 percent of median disposable income.10

MEETING WORKERS’ NEEDS

There is little conclusive evidence on the extent to which wages and non-wage benefits in the footwear

or apparel industries in the United Kingdon meet workers’ basic needs. The U.S. Embassy relates that

the first report of the Low Pay Commission, which recommended the establishment of the minimum

wage, noted many studies relating to the minimum wage in general and concepts related to a living

wage.11
1

 U.S. Department of Labor, Growth of Labor Law in the United States (Washington: U.S. Government Printing Office,

1967), p. 69.

2

 In chronological order, major enactments of minimum wage legislation by states and other jurisdictions were: 1912:

Massachusetts; 1913: California, Colorado, Minnesota, Nebraska (repealed in 1919), Oregon, Utah, Washington, and

Wisconsin; 1915: Arkansas and Kansas; 1917: Arizona; 1918: District of Columbia (held unconstitutional by the U.S.

Supreme Court in 1923); 1919: North Dakota, Puerto Rico, and Texas (repealed in 1921); and 1923: South Dakota. See U.S.

Department of Labor, Growth of Labor Law in the United States (Washington: U.S. Government Printing Office, 1967),

pp. 93-94.

3

 The Act requires overtime pay at time and one-half the regular rate of pay after 40 hours in a workweek.

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UNITED STATES

MINIMUM WAGE

The first minimum wage legislation in the United States was implemented by the state of Massachusetts

in 1912.1 By 1923, 17 states and other jurisdictions had adopted minimum wage legislation.2 For the most

part, early state minimum wage legislation was limited to women and children working in particularly

vulnerable occupations.

In 1937, the Supreme Court upheld the constitutionality of state minimum wage laws, reversing its decision

made in 1923 which had essentially halted the movement toward more extensive state minimum wage

legislation. In 1938, the U.S. Congress enacted the Fair Labor Standards Act (FLSA) which set a floor

for wages for men and women. As a result, there was increased attention in the states for minimum wage

legislation, with earlier laws amended and others reenacted or created. The major innovations introduced

by the states in the 1950's included hourly statutory minimum rates and the application of the laws to men.

The Fair Labor Standards Act of 1938 contained provisions and standards concerning minimum wage

rates, overtime pay,3 and record keeping requirements as well as restrictions on child labor. The 1938 Act

applied to employees engaged in interstate commerce or in the production of goods for interstate

commerce. The 1961 Amendments extended coverage primarily to employees in large retail and service

enterprises as well as to local transit, construction, and gasoline service station employees. The 1966

Amendments extended coverage to state and local government employees of hospitals, nursing homes, and

schools, and to employees of laundries, dry cleaners, large hotels and motels, restaurants, and farms.

Subsequent amendments extended coverage to federal, state, and local government employees and certain

workers in retail and service trades previously exempted, and to certain domestic workers in private

household employment.
4

 See U.S. Department of Labor, Minimum Wage and Overtime Hours Under the Fair Labor Standards Act, 1998 Report

to Congress required by Section 4(d)(1) of the Fair Labor Standards Act (Washington: U.S. Department of Labor,

Employment Standards Administration, Wage and Hour Division, June 1998), pp. 21-28; 129-137.

5

 Richard Nelson, “State Labor Legislation Enacted in 1998,” Monthly Labor Review, Vol. 122, No. 1 (January 1999), p.

3.

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According to a recent report by the U.S. Department of Labor,4 in 1996, the provisions of the Fair Labor

Standards Act that require workers to receive no less than the minimum wage applied to 79.4 million wage

and salary workers (64.9 percent of the total in the United States). The remaining 42.9 million workers

either were not subject to these provisions (mostly retail trade and service workers not engaged in interstate

commerce and/or in businesses with less than US$500,000 in annual gross receipts) or were exempt from

the minimum wage (and overtime) provisions (almost three-fourths of those exempt were executive,

administrative, and professional employees excluded under Section 13(a) of the Act). Industries with over

80 percent minimum wage coverage included construction, mining, and manufacturing; those below 50

percent coverage included agriculture and services.

Minimum wage law in the United States can be characterized as being a combination of state and federal

law. Eleven states and jurisdictions have minimum wages that are set higher than the federal minimum wage

(Alaska, California, Connecticut, Delaware, the District of Columbia, Hawaii, Massachusetts, Oregon,

Rhode Island, Vermont, and Washington), 27 have rates equal to the federal rate, 9 have set rates below

the federal rate, and 7 have no state minimum wage (see table of state hourly minimum wage rates at the

end of this section). Where the state minimum wage rate is higher than the federal rate, the higher standard

applies. Workers not covered by the FLSA are subject to state minimum wage laws if applicable. Voters

in Washington State approved a ballot measure in 1998 that will adjust minimum wage rates for inflation,

starting in January 2001; this provision marks the first instance in the United States where state minimum

wage rates will be automatically adjusted for inflation.5

The federal minimum wage rate was raised its current level of US$5.15 on September 1, 1997. Under the

current federal law, there are provisions for a subminimum wage of US$4.25 an hour for employees under

20 years of age during the first 90 consecutive calendar days of employment with an employer. The federal

minimum wage is set legislatively by the U.S. Congress and revised irregularly, frequently resulting in the

erosion of its real purchasing power. The table below presents the current dollar and real value of the

federal minimum wage since 1980.
6

 See Jared Bernstein, “The Next Step: The New Minimum Wage Proposal and the Old Opposition,” EPI Issue Brief,

Number 130 (Washington: Economic Policy Institute, April 27, 1999), p. 1.

7

 See Jared Bernstein, “America’s Well-Targeted Raise: Data Show Benefits of Minimum Wage Increase Going to

Workers Who Need It Most,” EPI Issue Brief, Number 118 (Washington: Economic Policy Institute, September 2, 1997),

p. 1.

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Nominal and Real Federal Hourly Minimum Wage Rates, 1980-99

Year Current Value of CPI-U Real Minimum

 Minum Wage 1990=100 Wage (1990 US$)

1980 3.10 63.0 4.92

1981 3.35 69.5 4.82

1982 3.35 73.8 4.54

1983 3.35 76.2 4.40

1984 3.35 79.5 4.21

1985 3.35 82.3 4.07

1986 3.35 83.9 3.99

1987 3.35 86.9 3.86

1988 3.35 90.5 3.70

1989 3.35 94.9 3.53

1990 3.80a 100.0 3.80

1991 4.25 104.2 4.08

1992 4.25 107.3 3.96

1993 4.25 110.6 3.84

1994 4.25 113.4 3.75

1995 4.25 116.6 3.64

1996 4.38a 120.0 3.65

1997 4.88a 122.8 3.97

1998 5.15 124.7 4.13

1999 5.15 126.5b 4.07

______________________________________________________

Note: a = weighted average due to mid-year change in the minimum wage rate.

b

 = based on 6-month average. CPI-U (1990=100) is the consumer price index for

all urban consumers (1982-84=100), rebased to 1990 equal 100.

Source: U.S. Department of Labor.

A recent study by the Economic Policy Institute6 found that 11.8 million workers (10.1 percent of the

workforce) would receive an increase in their hourly wage rate if the federal minimum wage were raised

from its current level of US$5.15 per hour to US$6.15. Workers directly affected by such an increase in

the minimum wage (i.e., workers whose earnings are between their state’s current minimum and US$6.15)

would be mostly female (59.2 percent) and adults age 20 or older (72 percent) who work 35 or more

hours a week (48.2 percent) in nonunion jobs (95.6 percent) in retail trade (43.7 percent). In an earlier

study,7 the Economic Policy Institute found that 9.9 million workers (8.9 percent of the workforce) would

benefit from an increase in the federal hourly minimum wage from US$4.25 to US$5.15 over the period

October 1995-September 1996 (the phase-in period of the last increase); the demographic effects of the

increase were similar to those found in the more recent study.
8

 This paragraph is based on information from U.S. Department of Interior, “Federal-CNMI Initiative on Labor,

Immigration, and Law Enforcement in the Commonwealth of the Northern Mariana Islands: Fourth Annual Report 1998,”

Office of Insular Affairs, Washington, December 30, 1998.

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Regarding the apparel industry, three states (California, New Jersey, and New York) have legislation

providing for civil penalties in the event of labor law violations.

The Commonwealth of the Northern Mariana Islands (CNMI) is a U.S. territory which has control of its

own immigration and minimum wage policies.8 The minimum wage under CNMI law is currently US$3.05

an hour. According to the U.S. Department of Commerce, the CNMI annually ships about a billion dollars

worth of apparel to the United States duty- and quota-free which may bear a “Made in USA” label. About

91 percent of all private sector jobs in the CNMI are held by temporary alien workers (mainly from China,

the Philippines, Bangladesh, and Sri Lanka). Approximately 15,000 alien workers (about a fourth of the

islands’ total population) are employed in the islands’ 31 garment factories, which are almost entirely

dependent on alien workers and where there have been frequent allegations of sweatshop working

conditions and sub-standard housing. Alien workers in the CNMI, who usually must pay substantial fees

to middlemen to secure a job in the CNMI, are indentured because they are in the territory solely by virtue

of their employment contract with a specific employer who is in control of the duration of the stay of the

alien worker. Generally when an alien worker’s contract is terminated, the employee must leave the

CNMI. Local employers are forbidden by CNMI law from paying alien workers more than that stipulated

in their original contract, which is usually, or very close to, the CNMI minimum wage. The prevailing wage

for production workers in the CNMI apparel industry is close to the islands’ minimum wage of US$3.05

an hour since the industry’s production lines are staffed almost entirely by an unlimited supply of alien

contract workers. The Administration supports U.S. legislation which would ultimately apply federal

immigration and minimum wage laws to the islands. 
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Hourly Minimum Wage Rates for States and Other Jurisdictions of the United States

Current Federal Rate Established by the Federal Fair Labor Standards Act : US$5.15

States and Jurisdictions with Rate Above the Federal Rate :

Alaska US$5.65 [set at 50¢ above the federal rate]

California 5.75

Connecticut 5.65 [if fed rate$state rate, set at 1.005 times the federal rate; US$6.15 beginning 01/01/00]

Delaware 5.65 [US$6.15 beginning 10/1/00]

District of Columbia 6.15 [set at US$1.00 above the federal rate]

Hawaii 5.25 [employee with guaranteed compensation of US$1,200 a month is exempt]

Massachusetts 5.25 [US$6.00 beginning 01/01/00; US$6.75 beginning 01/01/01]

Oregon 6.50

Rhode Island 5.65

Vermont 5.25 [US$5.75 beginning 10/01/99]

Washington 5.70 [US$6.50 beginning 01/01/00; indexed rate beginning 01/01/01]

States and Jurisdictions with Rate Equal to the Federal Rate :

Arkansas Nebraska

Colorado Nevada

Guam New Hampshire

Idaho New Jersey

Illinois North Carolina

Indiana North Dakota

Iowa Oklahoma [US$2.00 less than 10 employees or annual gross sales under US$100,000]

Kentucky Pennsylvania

Maine South Dakota

Maryland Utah

Michigan Virginia

Minnesota [US$4.90 annual receipts less than US$500,000] West Virginia

Missouri Wisconsin

Montana [US$4.00 gross annual sales less than US$110,000]

States and Jurisdictions with Rate Below the Federal Rate :

Georgia US$3.25

Kansas 2.65

New Mexico 4.25

New York 4.25

Ohio 4.25 [US$2.80 annual sales under US$150,000; US$3.35 annual sales of US$150,000 to US$500,000]

Puerto Rico 3.61-5.15 [at least 70 percent of the higher of federal or mandatory-decree rate; exemption may be granted]

Texas 3.35

Virgin Islands 4.65 [US$4.30 annual receipts under US$150,000]

Wyoming 1.60

States and Jurisdictions with No Minimum Wage Law:

Alabama Mississippi

Arizona South Carolina

Florida Tennessee

Louisiana

_______________________________________________________________________________________________________

Source: U.S. Department of Labor web site: <http://www.dol.gov/dol/esa/public/minwage/america.htm>, extracted October 8, 1999.
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PREVAILING OR AVERAGE WAGE

The table below presents establishment data from the U.S. Bureau of Labor Statistics on nominal and real

(adjusted for inflation) average hourly earnings (gross hourly earnings or pay for time worked) of

production workers in manufacturing (SIC 20-39); apparel and other textile products (SIC 23);

footwear–except rubber (SIC 314); and rubber and plastics footwear (SIC 302), for the period 1990-

1998. The average weekly hours for production workers over this period were 41.4 in manufacturing,

37.1 in apparel, 37.0 in nonrubber footwear, and 41.2 in rubber footwear.

Average Hourly Earnings of Production Workers in All Manufacturing, Apparel, and Footwear Industries, 1990-98

-------Nominal Wages (current US$)-------- ----------Real Wages (1990 US$)------------

Manufac- Leather Rubber Manufac- Leather Rubber

Year turing Apparel Footwear Footwear turing Apparel Footwear Footwear

1990 10.83 6.57 6.61 6.66 10.83 6.57 6.61 6.66

1991 11.18 6.77 6.80 6.87 10.73 6.50 6.53 6.59

1992 11.46 6.95 7.02 7.21 10.68 6.47 6.54 6.72

1993 11.74 7.09 7.20 7.59 10.62 6.41 6.51 6.87

1994 12.07 7.34 7.48 7.81 10.64 6.47 6.60 6.89

1995 12.37 7.64 7.67 8.44 10.61 6.55 6.58 7.24

1996 12.77 7.96 8.09 9.13 10.64 6.63 6.74 7.61

1997 13.17 8.25 8.49 9.71 10.72 6.72 6.91 7.91

1998 13.49 8.52 8.93 10.06 10.82 6.83 7.16 8.07

___________________________________________________________________________________________

Note: Current dollar earnings are converted to 1990 dollars using the consumer price index for all urban consumers

(CPI-U), rebased to 1990=100.

Source: U.S. Bureau of Labor Statistics; national employment, hours, and earnings; nonfarm payroll statistics from

the National Current Employment Statistics (establishment based).

NON-WAGE BENEFITS

U.S. employers must enroll their employees in the following four non-wage benefit programs: (1) social

security insurance, begun in 1935, provides old age, disability, and death (survivor) benefits; covered

employees contribute 6.2 percent of earnings and employers contribute 6.2 percent of payroll; (2)

medicare, which was first enacted in 1965 as health insurance for the aged and then was expanded in 1972

to include health insurance for the disabled, is funded in equal amounts (1.45 percent of pay) by employees

and employers while the government covers the cost of hospitalization for certain non-insured aged persons;

(3) work injury or workers’ compensation, begun at the federal level in 1908 covering federal employees,

is a compulsory insurance program in all but three states, where it is voluntary; the employer pays all costs

based on risk level (average cost is 2.05 percent of payroll), except in a few states where employees pay

a nominal amount; and (4) unemployment insurance, initiated in 1935, is a compulsory joint federal-state

program that is funded entirely by employers with a contribution of 0.8 percent of taxable payroll to the
9

Social Security Administration, Social Security Programs Throughout the World-1997 (Washington: U.S. Government

Printing Office, August, 1997), pp. 373-376.

10 “Hourly Compensation Costs for Production Workers in Manufacturing, 29 Countries or Areas, 40 Manufacturing

Industries, 1975 and 1986-97,” unpublished data, prepared by the Office of Productivity and Technology, Bureau of

Labor Statistics, U.S. Department of Labor, Washington, DC, May 24, 1999.

11 See William J. Wiatrowski, “Tracking Changes in Benefit Costs,” Compensation and Working Conditions on Line,

vol. 4, no. 1 (Spring 1999), <http://stats.bls.gov/opub/cwc/cwchome.htm>. See also, Bureau of Labor Statistics, Employer

Costs for Employee Compensation, 1986-98, Bulletin 2508 (Washington: U.S. Department of Labor, December 1998).

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federal program and a contribution ranging from 0-10 percent of taxable payroll to the state program.9

To gauge the value of benefits provided to production workers in the manufacturing sector, hourly

compensation can be examined in terms of its components: hourly direct pay and employer social insurance

expenditures and other labor taxes. Hourly direct pay includes all payments made directly to the worker,

before payroll deductions of any kind, and consists of pay for time worked (hourly earnings, i.e., basic

straight-time and piece rates plus overtime premiums, shift differentials, other premiums and bonuses paid

regularly each pay period, and cost-of-living adjustments) and other direct pay (pay for time not worked

such as vacations, holidays, and other leave except sick leave; seasonal or irregular bonuses and other

special payments; selected social allowances; and the cost of payments in kind). Social insurance

expenditures and other labor taxes include employer expenditures for legally required insurance programs

(social security, medicare, and workers’ compensation) and contractual and private benefit plans

(retirement and disability pensions, health insurance, income guarantee insurance and sick leave, life and

accident insurance, occupational injury and illness compensation, unemployment insurance, and family

allowances).

Based on data from the Bureau of Labor Statistics,10 total hourly compensation for production workers in

U.S. manufacturing in 1997 was US$18.24, consisting of US$14.34 (or 78.6 percent) hourly direct pay

and US$3.90 (21.4 percent) employer social insurance expenditures and other labor taxes. Hourly direct

pay included US$13.17 pay for time worked and US$1.17 other direct pay for time not worked (vacations

and holidays). Hourly compensation costs reflect the cost to the employer of employing a worker; some

non-wage benefits provided by employers are deferred benefits to workers and do not immediately

augment a worker’s overall income. From the worker’s standpoint, hourly direct pay does not reflect

required deductions for state and federal income taxes and employee contributions for social security and

medicare or voluntary deductions for health insurance, savings and retirement plans, union dues, or other

payroll deductions. Clearly, compensation costs vary by industry, occupational group, region,

establishment size, and worker characteristics (bargaining status and full-/part-time status).

Other analyses of total compensation in the United States find that the costs and variety of employee

benefits have expanded considerably and the proportion of employer compensation costs has shifted slightly

away from wages and towards health and life insurance, retirement plans, and legally required benefits.11
12 Prior to TANF, the cash assistance program to families was called Aid to Dependent Children (1936-1962) and Aid to

Families with Dependent Children (1962-1996). Under the welfare reform law, the Personal Responsibility and Work

Opportunity Reconciliation Act of 1996 (PRWORA), the program became TANF. For more information on this and other

support programs, see the web site of the Department of Health and Human Services’ Administration for Children and

Families: <http://www.acf.dhhs.gov/programs/opa/facts/majorpr.htm>.

13 The information presented in this paragraph and the next are based on results presented in The Council of Economic

Advisers,Good News for Low Income Families: Expansions in the Earned Income Tax Credit and the Minimum Wage

(Washington: Council of Economic Advisers, December 1998). This report is available on the Council of Economic

Advisers’ web site: <http://www1.whitehouse.gov/WH/EOP/CEA/html/whitepapers.html>.

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Specifically, trends in U.S. employee compensation over the period 1966-98 include a decline in the share

of compensation accounted for by cash payments—primarily in straight-time and overtime pay—to

workers (about 10 percent), relatively stable compensation shares for retirement plans, larger increases in

the share of compensation accounted for by health care and disability benefits, and an increasing share of

compensation accounted for by legally required benefits (social security and medicare, unemployment

insurance and workers’ compensation) with increases in social security costs accounting for most of the

increase. The following table presents the percentage of total employer compensation costs by the major

components of compensation for production and related (blue collar) workers in private manufacturing

establishments in 1966 and 1998:

 Compensation Item 1966 1998

Total Compensation 100.0 100.0

 Wages and salaries 77.7 66.2

 Benefits 22.5 33.8

 Paid leave 5.8 6.7

 Supplemental pay 5.3 5.2

 Insurance 2.8 8.6

 Retirement 2.6 3.4

 Legally required 5.8 9.6

 Other 0.2 0.4

Other major federal or state benefit programs in the form of cash transfers, non-cash transfers, or income

tax reductions which are available to workers subject to an income test, include Temporary Assistance for

Needy Families (TANF),12 Food Stamps, and the Earned Income Tax Credit (EITC). Participation of

eligible low-income families in the EITC is substantially higher than in the TANF and Food Stamps

programs.

Only families that work are eligible for the EITC and the amount of the credit depends on the family’s labor

market earnings.13 In 1998, for every dollar a low-income worker earned up to an established limit brought

as much as 40 cents in added compensation in the form of an income tax credit. The amount of the credit

rises with earnings up to a maximum credit of US$2,271 for a family with one child and US$3,756 for a

family with two or more children. The credit is flat for a range of earnings and then is phased out. About

80 percent of EITC payments offset individual income, social security, and other federal taxes borne by

families receiving the credit.
14 See U.S. Census Bureau, “Definition of Income and Poverty Terms–Poverty Definition,” on the web site:

<http://www.census.gov/hhes/income/defs/poverty.html>. See also, Joseph Dalaker and Mary Naifeh, Poverty in the

United States: 1997, U.S. Bureau of the Census, Current Population Reports, Series P60-201 (Washington: U.S.

Government Printing Office, 1998), p. A2, which is also available on the Internet at

<http://www.census.gov/hhes/www/povty97.html>.

15 Since smaller living units face relatively larger fixed expenses, different procedures were used to set thresholds for oneand two-person units: for two-person families, the cost of the economy food plan was multiplied by a factor of 3.7

(derived from the 1955 survey); and for unrelated individuals, a fixed proportion of the threshold for the two-person units

was used.

16 Prior to 1969, annual updates of the Social Security Administration poverty thresholds were made based on price

changes of items in the economy food plan. Modifications introduced in 1969 based annual adjustments in the

thresholds on changes in the consumer price index, and set the farm thresholds at 85 percent (previously 70 percent) on

the corresponding non-farm thresholds. See Joseph Dalaker and Mary Naifeh, Poverty in the United States: 1997, U.S.

Bureau of the Census, Current Population Reports, Series P60-201 (Washington: U.S. Government Printing Office, 1998),

p. A3.

17 See Bureau of the Budget Circular No. A-46 of 1969; and subsequent Office of Management and Budget Statistical

Policy Directive No. 14, “Definition of Poverty for Statistical Purposes,” May 1978.

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A study by the Council of Economic Advisers found that the EITC has been one of the most successful

programs for fighting poverty and encouraging work. According to the Council’s study, the EITC was

responsible in 1997 for lifting more than 4 million persons out of poverty, reducing the number of children

living in poverty by 2.2 million, and helping to increase single mothers’ labor force participation. The

Council found that the combined effects of the minimum wage and the EITC have dramatically increased

the returns to work for families with children: between 1993 and

1997, families with one child and one income earner who worked full-time at the minimum wage (i.e.,

US$4.72 in 1993 and US$5.15 in 1997, in 1997 dollars) experienced a 14 percent (US$1,402) increase

in their income, after inflation, due to the two policies; families in similar economic conditions with two

children realized a 27 percent (US$2,761) increase in their income.

ASSESSING BASIC NEEDS: THE POVERTY LINE

The official measure of poverty in the United States was developed in the early 1960s by Mollie Orshansky

of the Social Security Administration.14 The original measure provided a range of income cutoffs

(thresholds) which were adjusted for family size, sex of family head, number of children under the age of

18, and farm/non-farm residence. The foundation of the poverty definition was the Department of

Agriculture’s economy food plan (i.e., the least costly of four nutritionally adequate food plans designed

by the Department). Poverty thresholds for families of three or more persons were set at three times the

cost of the economy food plan, based on the findings of a 1955 Department of Agriculture household food

consumption survey that families of three or more persons spent approximately one-third of their after-tax

money income on food.15 In 1969, this poverty measure, with some slight modifications,16 became the

official definition of poverty for statistical use by U.S. government agencies.17 Three modifications in the
18 The official poverty statistics are based upon data from the Current Population Survey which does not interview

persons in Puerto Rico, thus those living there are excluded from the official poverty statistics. The Current Population

Survey is a household survey and thus persons who are homeless and not living in shelters are not included in the

poverty statistics; also excluded are armed forces personnel living on military bases.

19 The CPI-U price deflator, introduced in 1983, uses a rental-equivalence rather than an asset approach to measuring

the value of housing and results in lower poverty rates than one based on an asset-based price deflator. An experimental

price deflator (CPI-U-X1) was developed by the Bureau of Labor Statistics as a measure of the all-items index using an

estimate of rental equivalence from 1967-82.

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“official” poverty definition were introduced in 1981: separate thresholds for farm families and for type of

household head were eliminated, and the detailed poverty threshold matrix was extended to make the

largest family size category “nine persons or more.” 

The U.S. Census Bureau has the responsibility of publishing the official annual poverty statistics on the

number and proportion of the poor. The Census Bureau compares the poverty thresholds to estimates of

families’ cash income (including cash government benefits such as welfare cash payments, but not near-cash

or in-kind benefits) before taxes based on information from the March Current Population Survey.18 The

poverty thresholds are increased each year by the same percentage as the annual average change in the

consumer price index for all urban consumers (CPI-U).19 Thus, the poverty thresholds represent the same

purchasing power as in the year (1963) for which they were originally developed. The table below

presents the average poverty thresholds by size of family unit for 1995-1998.

Average Poverty Thresholds by Size of Family Unit, 1995-98

(in current US$)

Size of Family Unit 1995 1996 1997 1998 

1 person (unrelated individuals) 7,763 7,995 8,183 8,316

 Under 65 years 7,929 8,163 8,350 8,480

 65 years and over 7,309 7,525 7,698 7,818

2 persons 9,933 10,233 10,473 10,634

 Householder under 65 years 10,259 10,564 10,805 10,972

 Householder 65 years and over 9,219 9,491 9,712 9,862

3 persons 12,158 12,516 12,802 13,003

4 persons 15,569 16,036 16,400 16,660

5 persons 18,408 18,952 19,380 19,680

6 persons 20,804 21,389 21,886 22,228

7 persons 23,552 24,268 24,802 25,257

8 persons 26,237 27,091 27,593 28,166

9 persons or more 31,280 31,971 32,566 33,339

___________________________________________________________________________________________________

Notes: For each size of family unit, the weighted average poverty threshold is given. Unrelated individuals are persons

living alone or with non-relatives only.

Source: U.S. Census Bureau web site: <http://www.census.gov/hhes/poverty/threshld.html>.

In addition to the poverty thresholds published annually by the Census Bureau, the Department of Health
20 Joseph Dalaker and Mary Naifeh, Poverty in the United States: 1997, U.S. Bureau of the Census, Current Population

Reports, Series P60-201 (Washington: U.S. Government Printing Office, 1998). Subsequent to the drafting of this study,

the U.S. Bureau of the Census released poverty and income statistics for 1998; see Joseph Dalaker, Poverty in the United

States: 1998, U.S. Bureau of the Census, Current Population Reports, Series P60-207 (Washington: U.S. Government

Printing Office, 1999) issued in September 1999 and available on the Bureau of the Census web site at:

<http://www.census.gov/hhes/www/povty98.html>. 

21 The term “family” refers to a group of two or more persons related by birth, marriage, or adoption who reside together;

all such persons are considered as members of one family. Two or more people living in the same household who are

related to one another, but are not related to the householder (head of household), form an “unrelated subfamily.” Since

1980, “unrelated subfamilies” have been excluded from the count of families and family members and have been reported

separately from “people in families” and “unrelated individuals.” 

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and Human Services issues annual poverty guidelines—which are a simplified version of the poverty

thresholds—for use in administering and determining the eligibility for certain federal programs (e.g., Head

Start, Food Stamp Program, National School Lunch Program, and Low-Income Home Energy Assistance

Program). Poverty guidelines apply to the year that they are issued and only reflect price changes through

the prior year (i.e., the Department of Health and Human Services poverty guidelines issued in a given year

are approximately equal to the Census Bureau’s poverty threshold for the prior year).

In September 1998, the U.S. Census Bureau reported20 that the number of poor people in the United

States in 1997 was 35.6 million (or 13.3 percent of the population). The 1997 poverty rate was not

statistically different from the pre-recessionary rate in 1989. Real (inflation-adjusted) median household

income was US$37,005 in 1997, not statistically different from its 1989 pre-recessionary peak of

US$37,303. In 1997, 41 percent of the poor, or 14.6 million people, were “severely poor,” that is, they

had a total family income less than one-half of their poverty threshold. In addition, there were 12.3 million

people who were “near poor,” that is, their income was 100-125 percent of their poverty threshold.

Further, the income deficit of families in poverty (i.e., the dollar difference between the family’s income and

its poverty threshold) averaged US$6,602 in 1997. In many ways, poverty is inherently a household (or

family) concept, since household (family) members share most common consumption expenditures

(including shelter) and also usually pool income for the common welfare. The table below presents the

poverty status of people in the United States by family relationship21 over the period 1989-1997.

Poverty Status of People in the United States by Family Relationship, 1989-1997

(numbers in thousands; people as of March the following year)

-----------All People----------- --------------------------People in Families----------------------------- ----Unrelated Individuals--

--

----------All Families-------- --Female Head/No Husband--

Below Poverty Below Poverty Below Poverty Below

Poverty

Level Level Level Level

Year Total Number Percent Total Number Percent Total Number Percent Total NumberP

ercent

1997 268,480 35,574 13.3 225,369 26,217 11.6 38,412 13,494 35.1 41,672 8,687 20.8

1996 266,218 36,529 13.7 223,955 27,376 12.2 38,584 13,796 35.8 40,727 8,452 20.8

1995 263,733 36,425 13.8 222,792 27,501 12.3 38,908 14,205 36.5 39,484 8,247 20.9
22 See Joseph Dalaker and Mary Naifeh (eds.), Poverty in the United States: 1997, U.S. Bureau of the Census, Current

Population Reports, Series P60-201 (Washington: U.S. Government Printing Office, 1998), pp. xiii and B1-B3.

23 For estimates of poverty based on a set of consistent changes applied to both the income definitions and the poverty

thresholds, see Kathleen Short, Thesia Garner, David Johnson, and Patricia Doyle, Experimental Poverty Measures:

1990 to 1997, U.S. Census Bureau, Current Population Reports, Consumer Income, Series P60-205 (Washington: U.S.

Government Printing Office, 1999).

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1994 261,616 38,059 14.5 221,430 28,985 13.1 37,253 14,380 38.6 38,538 8,287 21.5

1993 259,278 39,265 15.1 219,489 29,927 13.6 37,861 14,636 38.7 38,038 8,388 22.1

1992 256,549 38,014 14.8 217,936 28,961 13.3 36,446 14,205 39.0 36,842 8,075 21.9

1991 251,179 35,708 14.2 212,716 27,143 12.8 34,790 13,824 39.7 36,839 7,773 21.1

1990 248,644 33,585 13.5 210,967 25,232 12.0 33,795 12,578 37.2 36,056 7,446 20.7

1989 245,992 31,528 12.8 209,515 24,066 11.5 32,525 11,668 35.9 35,185 6,760 19.2

________________________________________________________________________________________________________

_______

Source: Joseph Dalaker and Mary Naifeh, Poverty in the United States: 1997, U.S. Bureau of the Census, Current Population Reports, Series

P60-201 (Washington: U.S. Government Printing Office, 1998), Table C-1, p. C2.

The poverty rate varies by age, race and ethnicity, work experience, family relationship and composition,

nativity, and region of the country, among others. In 1997, for example, it was 19.9 percent for all children

under 18 years of age, 10.9 percent for adults 18 to 64 years of age, and 10.5 percent for persons age 65

and over. Persons in families (poverty rate of 11.6 percent) were less likely to be poor in 1997 than those

in unrelated subfamilies (poverty rate of 46.5 percent) or unrelated individuals (poverty rate of 20.8

percent). While the poverty rate for whites was 11.0 percent in 1997, it was 26.5 percent for blacks, 27.1

percent for those of Hispanic origin, and 14.0 percent for those of Asian and Pacific Islander origin. The

poverty rate inside central cities of metropolitan areas was 18.8 percent in 1997, compared to a rate of 9.0

percent for persons inside metropolitan areas but outside central cities. 

In the early 1980s, the Census Bureau began examining how government noncash benefits affect poverty

and how taxes affect measurement of the income distribution. The 1997 Census poverty report provides

estimates of poverty rates based on a number of alternative definitions of income applied to the same

unchanged set of poverty thresholds. For example, using an alternative definition of income which more

closely approaches the notion of disposable income and adds the value of means-tested noncash transfers

(e.g., food stamps, housing, and medicaid) to net post-tax cash income from private and government

sectors, the report found that the poverty rate would be 10.0 percent (or 26.9 million poor people) in

1997.22 As of 1999, the Census Bureau is no longer publishing those alternative-income-definition

figures.23

Like other important economic indicators, poverty thresholds are evaluated periodically to determine if they

are still serving their intended purpose and whether they can be improved. At the request of Congress, the

National Research Council of the National Academy of Sciences (NAS) established a Panel on Poverty

and Family Assistance to address concerns about weaknesses in the current official poverty measure for
24 Constance F. Citro and Robert T. Michael, Measuring Poverty: A New Approach (Washington: National Academy

Press, 1995), p. 11.

25 Kathleen Short, Thesia Garner, David Johnson, and Patricia Doyle, Experimental Poverty Measures: 1990 to 1997,

U.S. Census Bureau, Current Population Reports, Consumer Income, Series P60-205 (Washington: U.S. Government

Printing Office, 1999).

26 See Bruce W. Klein and Philip L. Rones, “A Profile of the Working Poor,” Monthly Labor Review (October 1989), pp.

3-13.

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the United States. The panel’s report,24 issued in the Spring of 1995, made several observations on the

weaknesses in the definition of the thresholds and income used in the current measure and proposed that

(a) official U.S. poverty thresholds should represent a dollar amount for food, clothing, and shelter

(including utilities), and a small additional amount to allow for other common, everyday needs (e.g.,

household supplies, personal care, and nonwork-related transportation), based on a reference family type

(two adults and two children) using Consumer Expenditure Survey data, adjusted for family size and

composition and for geographical differences in the cost of housing; (b) family resources should be defined

as money income from all sources, plus the value of near-money benefits that are available to buy goods

and services (e.g., food stamps, subsidized housing, school lunches, and home energy assistance), and

minus expenses that divert money from the purchase of goods and services (e.g., income taxes, social

security payroll taxes, child care and other work-related expenses, child support payments to another

household, and household contributions toward the costs of medical care and health insurance premiums);

and (c) the Survey of Income and Program Participation (SIPP) should replace the March income

supplement to the Current Population Survey (CPS) and become the basis for official income and poverty

statistics and that the Consumer Expenditure Survey should be used to improve poverty measurement. The

U.S. Census Bureau released a report25 in June 1999 which provides information regarding the implications

of many of the NAS panel’s recommendations, but makes no recommendations on which new approaches

should be adopted.

For several decades, the U.S. Bureau of Labor Statistics (BLS) has developed operational definitions and

conducted studies of low-wage workers and the “working poor,” using the same data used by the Census

Bureau in their poverty reports. In 1987, BLS modified the definition of low-wage workers that had been

used in prior studies of labor market hardship faced by low-wage workers (full-time, year-round workers

whose yearly earnings fell below the federal minimum hourly wage multiplied by 2,000) to take account of

the fact that many of the working poor faced unemployment and a declining real minimum wage.26 The new

definition adopted by BLS for low-wage workers was for persons who worked or sought work for 27

weeks or more during the year and whose average weekly earnings fell below the 1967-87 average

minimum wage, adjusted for inflation, and multiplied by 40 (i.e., a 40 hour workweek). If a low-wage

worker’s income fell below the poverty line, the worker was termed “working poor.”
27 See Samantha Quan, A Profile of the Working Poor, 1996, Report 918 (Washington: Bureau of Labor Statistics, U.S.

Department of Labor, December 1997).

28 This discussion is based upon an unpublished tabulation, “Persons with work experience during the year by detailed

industry of longest job held and poverty status, CPS March Supplement 1997,” provided by the U.S. Bureau of Labor

Statistics. 

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The most recent BLS analysis examined the working poor in 1996.27 The U.S. Bureau of the Census

reported that 36.5 million persons (or 13.7 percent of the population) lived at or below the official poverty

level in 1996. Although most of the Nation’s poor were children and adults who were not in the labor

force, 1 in 5 (or 7.4 million persons) were classified as working poor who had spent at least 27 weeks in

the labor force working or looking for work, but whose income fell below the official poverty threshold.

The poverty rate for all persons in the labor force for at least 27 weeks was 5.8 percent in 1996. The

majority of the working poor (58 percent) worked full-time. Among persons in the labor force for 27

weeks or more, the poverty rate for those employed full-time was 4.1 percent compared with 12.4 percent

for part-time workers.

During 1996, nearly three-fourths of the working poor who worked during the year were employed in one

of the following three occupational groups: service; technical, sales, and administrative support; and

operators, fabricators and laborers; the poverty rates for these occupational groups were 12.3, 4.3, and

7.8 percent, respectively. Although the total number of men in these occupations outnumbered women by

3 to 1, the poverty rate for women was 3 percentage points higher (10.1 versus 7.1 percent). Similarly,

while three-fourths of the working poor in these occupations were white, their poverty rate was 4.5

percentage points lower than that for blacks (7.1 versus 11. 6 percent).

By industrial division,28 about 92 percent of the working poor who worked during 1996 were employed

in services (34.3 percent), wholesale and retail trade (31.7 percent), manufacturing (10.6 percent),

construction (9.1 percent), or agriculture (6.2 percent). For the working poor in manufacturing (748,000),

about half were employed in the production of durable goods and half employed in the production of

nondurable goods. Over half of the working poor employed in nondurable goods production were

employed in the apparel (108,000) or the food and kindred products (96,000) industries. The poverty rate

for workers in the labor force for 27 weeks or more and with work experience in the apparel industry was

10.7 percent in 1996, over three-times that for all manufacturing (3.5 percent) and about twice that for all

industries (5.5 percent); the corresponding poverty rate for those in the footwear, excluding rubber and

plastic industry was 1.3 percent (1,000 workers under the poverty line) and for those in the other rubber

products, plastics, footwear, and belting industry was 2.0 percent (or 4,000 workers).

MEETING WORKERS’ NEEDS

In the United States, official poverty lines, which are adjusted annually for inflation, establish income

thresholds that indicate a level of income below which may be insufficent to meet the basic needs of persons
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in a family of a given type and size. Living wage proponents often use the poverty thresholds as a floor in

developing proposed living wage levels, i.e., an income that meets basic needs plus some more. The issue

is how much more?

The table on the next page compares over the period 1966 to 1998 the annual earnings of a hypothetical

worker employed at the federal minimum wage rate (without vacations or overtime for a 8-hour day for

52 weeks) with the annual poverty thresholds for families of size one to four persons as established by the

U.S. Bureau of the Census. In ten out of the fourteen years between 1966 and 1979, annual earnings at

the established federal minimum rate exceeded the poverty threshold for a family of three persons; in the

four other years (1966, 1972-73, and 1977), it exceeded the poverty threshold for a family of two. Over

the period 1980 to 1984, annual minimum wage earnings exceeded the poverty threshold for two-person

families. From 1985 to 1996, annual
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Minimum Wage Earnings and Poverty Thresholds by Family Size, 1966-1998

(in current US$)

Minimum Minimum ---Annual Poverty Threshold for Family of-----

 Wage Wage One Two Three Four

Year Hourly Annually* Person Persons Persons Persons

1966 1.25 2,600 1,628 2,107 2,688 3,317

1967 1.40 2,912 1,675 2,166 2,681 3,410

1968 1.60 3,328 1,748 2,262 2,774 3,553

1969 1.60 3,328 1,840 2,383 2,924 3,743

1970 1.60 3,328 1,954 2,625 3,099 3,968

1971 1.60 3,328 2,040 2,633 3,229 4,137

1972 1.60 3,328 2,109 2,724 3,339 4,275

1973 1.60 3,328 2,247 2,895 3,546 4,540

1974 2.00 4,160 2,495 3,211 3,936 5,036

1975 2.10 4,368 2,724 3,608 4,293 5,500

1976 2.30 4,784 2,684 3,711 4,640 5,815

1977 2.30 4,784 3,075 3,951 4,833 6,191

1978 2.65 5,512 3,311 4,249 5,201 6,562

1979 2.90 6,032 3,689 4,725 5,784 7,412

1980 3.10 6,448 4,190 5,363 6,565 8,414

1981 3.35 6,968 4,620 5,917 7,260 9,287

1982 3.35 6,968 4,901 6,281 7,693 9,862

1983 3.35 6,968 5,061 6,483 7,938 10,178

1984 3.35 6,968 5,278 6,762 8,277 10,609

1985 3.35 6,968 5,469 6,998 8,573 10,989

1986 3.35 6,968 5,572 7,138 8,737 11,203

1987 3.35 6,968 5,778 7,397 9,058 11,611

1988 3.35 6,968 6,022 7,704 9,436 12,092

1989 3.35 6,968 6,310 8,076 9,885 12,674

1990 3.80 7,904 6,652 8,509 10,418 13,359

1991 4.25 8,840 6,932 8,865 10,860 13,924

1992 4.25 8,840 7,143 9,137 11,188 14,335

1993 4.25 8,840 7,363 9,414 11,522 14,763

1994 4.25 8,840 7,547 9,551 11,621 15,141

1995 4.25 8,840 7,763 9,933 12,158 15,569

1996 4.75 9,880 7,995 10,233 12,516 16,036

1997 5.15 10,712 8,183 10,473 12,802 16,400

1998 5.15 10,712 8,316 10,634 13,003 16,660

_________________________________________________________________________________

Note: * an extreme upper bound which assumes a person works at the hourly minimum wage 8 hours 

a day, 5 days a week for 52 weeks with no overtime or vacations, i.e., a total of 2080 hours a year.

Sources: U.S. Department of Labor, Wage and Hour Division; U.S. Census Bureau.
29 Organization for Economic Cooperation and Development (OECD), Employment Outlook, June 1998 (Paris:OECD,

1998), p. 31.

30 Council of Economic Advisers, Economic Report of the President, 1999 (Washington: U.S. Government Printing

Office, February 1999), Table B-47, p. 382.

31 Organization for Economic Cooperation and Development (OECD), Economic Outlook, June 1998 (Paris: OECD, 1998),

p. 40.

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minimum wage earnings exceeded only the poverty threshold for one person. With the increase in the

minimum wage in 1997, annual earnings at the minimum wage level now again exceed the poverty threshold

for a two-person family.

Another way to view the poverty thresholds is to examine the full-time hourly wage rates needed to exceed

them and how those wage rates compare to the minimum wage. The table below presents such a

comparison for the 1997 and 1998 poverty thresholds.

Estimated Hourly Wage of a Full-Time Worker at the Poverty Threshold, by Family Size, 1997-98

Family 1997 Poverty Hourly Minimum 1998 Poverty Hourly Minimum

Size Threshold Wage Wages Threshold Wage Wages

 1 US$8,183 US$4.10 0.80 US$8,316 US$4.16 0.81

 2 10,473 5.24 1.02 10,634 5.32 1.03

 3 12,802 6.41 1.24 13,003 6.50 1.26

 4 16,400 8.20 1.59 16,660 8.33 1.62

 5 19,380 9.69 1.88 19,680 9.84 1.91

 6 21,886 10.95 2.13 22,228 11.11 2.16

 7 24,802 12.41 2.41 25,257 12.63 2.45

 8 27,593 13.80 2.68 28,166 14.08 2.73

 9 or more 32,566 16.29 3.16 33,339 16.67 3.24

____________________________________________________________________________________

Note: The hourly wage is estimated as the annual poverty threshold divided by 2000 hours (8 hours a day,

5 days a week, 50 weeks a year, assuming two-weeks time-off). Minimum wages is the estimated hourly wage

at the poverty threshold divided by the current federal minimum wage of US$5.15 per hour.

A recent OECD report29 noted, “Several OECD countries have experienced a rise in earnings inequality

and/or a widening of the gap in income between rich and poor over the last decade or so. This has led to

a resurgence of interest in the links between employment growth, low pay and poverty.” The movement

to enact living wage proposals in the United States may have been motivated, in part, by the 12 percent

decline in real average hourly earnings in the total private nonagricultural economy between 1973 and

1997,30 and the 20 percent decrease in the real value of the U.S. minimum wage from 1979 to 1997.31

In many ways, the main arguments the early supporters gave for establishing minimum wage laws in the

United States during the early part of this century are very similar to those of today’s proponents of a living

wage: a person working at a full-time job ought to be able to provide a decent standard of living for
32 ACORN (Association of Community Organizations for Reform Now) web sites: <http://www.acorn.org> and

<http://www.livingwagecampaign.org>. For a more detailed account of the municipal living wage movements in the

United States, see Robert Pollin and Stephanie Luce, The Living Wage: Building a Fair Economy (New York: The New

Press, 1998). See also, Selena Spain and Jean Wiley, “The Living Wage Ordinance: A First Step in Reducing Poverty,”

Clearinghouse Review, Vol. 32, Nos. 5-6 (September-October 1998), pp. 252-267.

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themselves and their family.

In the 1990s, the living wage movement in the United States has concentrated on municipal living wage

proposals that require private firms that are awarded large service contracts by a municipality or receive

substantial financial assistance in the form of grants, loans, tax abatements, or other economic development

subsidies from a city or county government to pay a “living wage” that is higher than current federal and

state minimum wage levels. In some cases, city government employees are also covered by living wage

ordinances. Baltimore was the first city to implement a living wage ordinance for service contractors, doing

so in 1994. Since then, over 20 other cities have enacted living wage ordinances and other cities are

considering similar proposals.32 See the table below for a summary of these initiatives.

Most of the living wage ordinances establish a dollar-level threshold on contracts or subsidies covered and

in some cases explicitly specify the type of low-wage workers covered (e.g., janitors, clerical, food

services, parking attendants, security, temporary workers, etc.). The wage levels mandated by these

municipal ordinances range from US$6.25 to US$10.75 an hour.

! In most cases, the level of the living wage is a wage that would allow a worker to support a family

(usually of three or four) at or above the official U.S. poverty level. For example, Boston requires

a wage of US$8.23 an hour (in 1998) which is the hourly pay rate that would yield an annual

income equal to the federal poverty line for a family of four.

! In other cases, the living wage level is set as a multiple of a poverty threshold for a family of 3 or

4, or as a multiple of the federal minimum wage rate.

! In most cases, the living wage is indexed to a local price index to adjust for inflation. 

! Increasingly, living wage ordinances are incorporating additional requirements to that of a living

wage, such as health benefits, vacation days, community hiring goals, public disclosure, community

advisory boards, environmental standards, and language that supports union organizing. For

example, some ordinances require firms to pay more (usually about US$1 an hour more) if they

do not provide health insurance.

In addition to municipal legislative initiatives, a number of groups have made living wage calculations for

various states and cities within the United States. These groups include the Association of Community

Organizations for Reform Now (ACORN), National Priorities Project, Jobs With Justice, the Los Angeles
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Living Wage Coalition, the New Party, the Preamble Collaborative, the Peace and Justice Center, and

Wider Opportunities for Women (WOW). Estimates of living wages by these groups vary significantly,

from US$7 to US$16 an hour.
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Hourly Living Wage Rates

for Employees of Certain Firms Receiving Public Service Contracts, Tax Abatements, and Other Subsidies from Cities

and Counties in the United States

State and

City or County Date Rate and Coverage

Arkansas

Little Rock pending

Arizona

Tucson 1999 US$8.00–city minimum wage.

California

Hayward 1999 US$8.00 with health insurance, US$9.25 without health insurance; adjusted annually with an area cost of living index; includes 12 paid days off a year–city

service contracts; also applies to city employees.

Los Angeles 1997 US$7.25 (1997), US$7.39 (1998), US$8.32 (1999) with health insurance; US$8.50 (1997), US$8.64 (1998), US$9.46 (1999) without health insurance; indexed

to the cost of living; includes 12-days paid vacation a year–city service contracts and subsidies.

Marin County pending

Oakland 1998 US$8.00 (1998), US$8.35 (1999) with health insurance; US$9.25 (1998), US$9.60 (1999) without health insurance; adjusted annually using the Bay Region

Consumer Price Index; includes 12 paid days off a year–city service contracts and subsidies.

Pasadena 1998 US$7.25 with health insurance, US$8.50 without health insurance–city service contracts; also applies to city employees.

San Jose 1998 US$9.50 with health insurance, US$10.75 without health insurance–city service contracts.

1991 union wage scale (prevailing wage ordinance)–city service contracts.

San Francisco pending

Santa Clara County 1995 US$10.00 plus health insurance–tax abatements and subsidies.

West Hollywood 1997 US$7.25 with health benefits, US$8.50 without health benefits–city service contracts.

Colorado

Denver pending US$7.73 (proposed)–city minimum wage and subsidies.

Connecticut

New Haven 1997 US$7.43 (wage equivalent to the poverty line for a family of 4) to be increased to 120% of the poverty line over 5 years; first consideration to community

hiring halls–city service contracts.

Florida

Miami–Dade County 1999 US$8.56 with health insurance, US$9.81 without health insurance–city service contracts; also applies to county employees.

Illinois

Chicago 1998 US$7.60–city service contracts.

Cook County 1998 US$7.60–city service contracts.

Indiana

Gary 1991 prevailing wage plus complete health care package–tax abatements and subsidies.

South Bend pending

Iowa

Des Moines 1988; 1996 US$7.00 (1988) city-funded urban renewal projects; set goal of US$9.00, including benefits (1996).

Kansas

Manhattan pending

Louisiana

New Orleans pending US$1.00 higher than the federal rate (proposed)–city minimum wage.

Maryland

Baltimore 1994 US$6.10 (1994) increased in steps to US$7.70 (1998)–city service contracts.

Montgomery County pending US$9.00 with health benefits, US$10.44 without health benefits (proposed).

State of Maryland pending US$6.60 (1996), US$7.10 (1997), US$7.70 (1998) for contract cleaners of the state-owned World Trade Center in Baltimore.

Massachusetts

Boston 1997; 1998 US$7.49 (1997),US$8.23 (1998); poverty line for family of 4, indexed annually to the higher of 110% of state minimum wage or the adjusted poverty

guideline–city service contracts, subsidies, and community hiring.

Cambridge 1999 US$10.00; indexed annually to area consumer price index–city service contracts; also includes city employees.

Hampshire County pending US$7.00 with health benefits, US$8.50 without health benefits–all county employees (proposed).

Somerville 1999 US$8.35 (poverty guidelines for a family of 4, adjusted annually in accordance with poverty guidelines)–city service contracts; also covers city employees.

Michigan

Detroit 1998 US$8.35 with health insurance (federal poverty line for family of 4), US$10.44 without health insurance (125% of federal poverty line)–city service

contracts and subsidies.

Minnesota

Duluth 1997 at least 90% of employees must be paid US$6.50 with health insurance or US$7.25 without health insurance–tax abatements and subsidies.

Minneapolis 1997 US$8.83 (1999); 110% of federal poverty line for a family of 4, indexed for inflation; 60 percent of the jobs must go to city residents–tax abatements and

subsidies.

St. Paul 1997 US$8.03 with health insurance (100% of federal poverty line for a family of 4; indexed for inflation) or US$8.83 without health insurance (110% of federal

poverty line for a family of 4; indexed for inflation) in 1999; at least 60% of the jobs must go to city residents–tax abatements and subsidies.

Missouri

St. Louis pending US$6.25 (1997), US$6.50 (1998), US$6.75 (1999), and increases of US$0.15 per year thereafter (proposed)–city service contracts and subsidies.

Montana

Missoula pending US$8.00 (proposed)—municipal employees and workers whose employers get grants or other assistance from the city.
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II-190

Hourly Living Wage Rates

for Employees of Certain Firms Receiving Public Service Contracts, Tax Abatements, and Other Subsidies from Cities

and Counties in the United States–continued

State and

City or County Date Rate and Coverage

New Jersey

Hudson County 1999 US$7.73 (150% of federal minimum wage; must provide health insurance and one week paid vacation)–city service contracts.

Jersey City 1996 US$7.50 plus vacation and health benefits–city service contracts.

New Mexico

Albuquerque pending US$6.50 (proposed)–city minimum wage.

New York

Albany County pending US$8.55 plus US$0.68-US$1.21 for health benefits (proposed)–city service contracts and subsidies.

Buffalo pending US$8.50 (proposed)–city contractors and subcontractors.

New York City 1996 “acceptable prevailing wage” determined by City Comptroller–city service contracts.

North Carolina

Durham 1998 US$7.55 (minimum rate paid to Durham city employees)–city service contracts.

Orange County pending rate not yet proposed–service contracts and subsidies.

Ohio

Cleveland pending

Oregon

Multnomah County 1998 US$9.00 combined value of wage and benefit package, adjusted annually by the Consumer Price Index–city service contracts.

Portland 1996; 1998 US$6.75 (1996), US$7.00 (1997), US$7.50 (1998), US$8.00 (1999), plus basic medical benefits (1998)–city service contracts.

Pennsylvania

Philadelphia pending US$7.90 (proposed)

Pittsburgh pending US$7.73 (proposed)–city employees and service contractors.

Texas

Austin pending

Dallas pending

Houston pending US$6.50 (proposed)–city minimum wage.

San Antonio 1998 US$9.27 for new services and non-durable-goods-manufacturing jobs and US$10.13 for new durable goods manufacturing jobs created as a result of city

tax abatement and subsidies; at least 70 percent of such new jobs created must meet or exceed these pay requirements.

Virginia

Alexandria pending

Washington

Spokane pending US$8.25 (proposed)–city minimum wage.

Wisconsin

Dane County 1999 US$8.03 (federal poverty level for a family of 4)–city service contracts and subsidies; also applies to county employees.

Madison 1999 US$7.91 to be raised in 2-steps to 110% of federal poverty guidelines for family of 4 by January 1, 2001 and continuing thereafter–city service contracts

and subsidies; also covers city employees.

Milwaukee 1995 US$6.05 (1995); adjusted annually to poverty line for family of 3, currently US$6.67–certain city service contractors

1996 US$7.70–all public school employees and contractors

Milwaukee County 1997 US$6.25, indexed to wage increases of county employees–certain county service contractors

_____________________________________________________________________________________________________________________________________________________

Note: Initiatives to increase the state minimum wage are not included in this table.

Sources: ACORN (Association of Community Organizations for Reform Now) web sites, <http://www.livingwagecampaign.org> and <http://www.acorn.org>, and Robert Pollin and Stephanie

Luce, The Living Wage: Building a Fair Economy (New York: The New Press, 1998), Appendix II.
1

 The documents reproduced here were downloaded from the ILO’s ILOLEX web site: <http://www.ilolex.ilo.ch>.

A-1

APPENDIX A

Selected International Labor Organization (ILO) Documents

Relevant to Minimum Wage Setting1

Preamble of the Constitution of the International Labour Organization

Whereas universal and lasting peace can be established only if it is based upon social

justice;

And whereas conditions of labour exist involving such injustice hardship and privation to

large numbers of people as to produce unrest so great that the peace and harmony of the

world are imperilled; and an improvement of those conditions is urgently required; as, for

example, by the regulation of the hours of work including the establishment of a maximum

working day and week, the regulation of the labour supply, the prevention of

unemployment, the provision of an adequate living wage, the protection of the worker

against sickness, disease and injury arising out of his employment the protection of children,

young persons and women, provision for old age and injury, protection of the interests of

workers when employed in countries other than their own, recognition of the principle of

equal remuneration for work of equal value, recognition of the principle of freedom of

association, the organization of vocational and technical education and other measures;

Whereas also the failure of any nation to adopt humane conditions of labour is an obstacle

in the way of other nations which desire to improve the conditions in their own countries;

The High Contracting Parties, moved by sentiments of justice and humanity as well as by

the desire to secure the permanent peace of the world, and with a view to attaining the

objectives set forth in this Preamble, agree to the following Constitution of the International

Labour Organization: 
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Convention No. 26: Minimum Wage-Fixing Machinery Convention, 1928

Convention concerning the Creation of Minimum Wage-Fixing Machinery

(Note: Date of coming into force: 14 June 1930; Place: Geneva; Session of the Conference:11; Date of adoption:16 June 1928; See the

ratifications for this Convention.)

The General Conference of the International Labour Organisation,

Having been convened at Geneva by the Governing Body of the International Labour Office, and having met in its

Eleventh Session on 30 May 1928, and 

Having decided upon the adoption of certain proposals with regard to minimum wage-fixing machinery, which is the first

item on the agenda of the Session, and 

Having determined that these proposals should take the form of an international Convention, 

adopts the sixteenth day of June of the year one thousand nine hundred and twenty-eight, the following Convention,

which may be cited as the Minimum Wage-Fixing Machinery Convention, 1928, for ratification by the Members of the

International Labour Organisation in accordance with the provisions of the Constitution of the International Labour

Organisation: 

Article 1

1. Each Member of the International Labour Organisation which ratifies this Convention undertakes to create or maintain

machinery whereby minimum rates of wages can be fixed for workers employed in certain of the trades or parts of trades

(and in particular in home working trades) in which no arrangements exists for the effective regulation of wages by

collective agreement or otherwise and wages are exceptionally low. 

2. For the purpose of this Convention, the term trades includes manufacture and commerce.

Article 2 

Each Member which ratifies this Convention shall be free to decide, after consultation with the organisations, if any, of

workers and employers in the trade or part of trade concerned, in which trades or parts of trades, and in particular in

which home working trades or parts of such trades, the minimum wage-fixing machinery referred to in Article 1 shall be

applied. 

Article 3

1. Each Member which ratifies this Convention shall be free to decide the nature and form of the minimum wage-fixing

machinery, and the methods to be followed in its operation: 

2. Provided that-- 

(1) before the machinery is applied in a trade or part of trade, representatives of the employers and workers concerned,

including representatives of their respective organisations, if any, shall be consulted as well as any other persons, being

specially qualified for the purpose by their trade or functions, whom the competent authority deems it expedient to

consult; 

(2) the employers and workers concerned shall be associated in the operation of the machinery, in such manner and to

such extent, but in any case in equal numbers and on equal terms, as may be determined by national laws or regulations;
A-3

(3) minimum rates of wages which have been fixed shall be binding on the employers and workers concerned so as not

to be subject to abatement by them by individual agreement, nor, except with general or particular authorisation of the

competent authority, by collective agreement. 

Article 4

1. Each Member which ratifies this Convention shall take the necessary measures, by way of a system of supervision

and sanctions, to ensure that the employers and workers concerned are informed of the minimum rates of wages in force

and that wages are not paid at less than these rates in cases where they are applicable. 

2. A worker to whom the minimum rates are applicable and who has been paid wages at less than these rates shall be

entitled to recover, by judicial or other legalised proceedings, the amount by which he has been underpaid, subject to

such limitation of time as may be determined by national laws or regulations. 

Article 5

Each Member which ratifies this Convention shall communicate annually to the International Labour Office a general

statement giving a list of the trades or parts of trades in which the minimum wage-fixing machinery has been applied,

indicating the methods as well as the results of the application of the machinery and, in summary form, the approximate

numbers of workers covered, the minimum rates of wages fixed, and the more important of the other conditions, if any,

established relevant to the minimum rates. 

Article 6 

The formal ratifications of this Convention, under the conditions set forth in the Constitution of the International Labour

Organisation, shall be communicated to the Director-General of the International Labour Office for registration.

Article 7

1. This Convention shall come into force at the date on which the ratifications of two Members of the International

Labour Organisation have been registered by the Director-General. 

2. It shall be binding only upon those Members whose ratifications have been registered with the International Labour

Office. 

3. Thereafter, the Convention shall come into force for any member at the date on which its ratification has been

registered with the International Labour Office. 

Article 8

As soon as the ratifications of two Members of the International Labour Organisation have been registered with the

International Labour Office, the Director-General of the International Labour Office shall so notify all the Members of

the International Labour Organisation. He shall likewise notify them of the registration of the ratifications which may be

communicated subsequently by other Members of the Organisation. 

Article 9

1. A Member which has ratified this Convention may denounce it after the expiration of ten years from the date on which

the Convention first comes into force, by an act communicated to the Director-General of the International Labour Office

for registration. Such denunciation shall not take effect until one year after the date on which it is registered with the

International Labour Office. 
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2. Each Member which has ratified this Convention and which does not, within the year following the expiration of the

period of ten years mentioned in the preceding paragraph, exercise the right of denunciation provided for in this Article,

will be bound for another period of five years under the terms provided for in this Article. 

Article 10 

At least once in ten years, the Governing Body of the International Labour Office shall present to the General Conference

a report on the working of this Convention and shall consider the desirability of placing on the agenda of the Conference

the question of its revision or modification. 

Article 11

The French and English texts of this Convention shall both be authentic. 
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Recommendation No. 30: Minimum Wage-Fixing Machinery Recommendation, 1928

Recommendation concerning the Application of Minimum Wage-Fixing Machinery

(Note: Date of adoption: 16 June 1928; Place: Geneva; Session of the Conference:11)

The General Conference of the International Labour Organisation,

Having been convened at Geneva by the Governing Body of the International Labour Office, and having met in its

Eleventh Session on 30 May 1928, and 

Having decided upon the adoption of certain proposals with regard to minimum wage-fixing machinery, which is the first

item on the agenda of the Session, and 

Having determined that these proposals should take the form of a Recommendation, 

adopts this sixteenth day of June of the year one thousand nine hundred twenty-eight, the following Recommendation,

which may be cited as the Minimum Wage-Fixing Machinery Recommendation, 1928, to be submitted to the Members

of the International Labour Organisation for consideration with a view to effect being given to it by national legislation

or otherwise, in accordance with the provisions of the Constitution of the International Labour Organisation: 

A

The General Conference of the International Labour Organisation, 

Having adopted a Convention concerning the creation of minimum wage-fixing machinery, and 

Desiring to supplement this Convention by putting on record for the guidance of the Members certain general principles

which, as present practice and experience show, produce the most satisfactory results, 

Recommends that each Member should take the following principles and rules into consideration: 

I

(1) In order to ensure that each Member ratifying the Convention is in possession of the information necessary for a

decision upon the application of minimum wage-fixing machinery, the wages actually paid and the arrangements, if any,

for the regulation of wages should be ascertained in respect of any trade or part of trade to which employers or workers

therein request the application of the machinery and furnish information which shows prima facie that no arrangements

exist for the effective regulation of wages and that wages are exceptionally low. 

(2) Without prejudice to the discretion left to the Members by the Convention to decide in which trades or parts of trades

in their respective countries it is expedient to apply minimum wage-fixing machinery, special regard might usefully be had

to trades or parts of trades in which women are ordinarily employed. 

II

(1) The minimum wage-fixing machinery, whatever form it may take (for instance, trade boards for individual trades,

general boards for groups of trades, compulsory arbitration tribunals), should operate by way of investigation into the

relevant conditions in the trade or part of trade concerned and consultation with the interests primarily and principally

affected, that is to say, the employers and workers in the trade or part of trade, whose views on all matters relating to the
A-6

fixing of the minimum rates of wages should in any case be solicited and be given full and equal consideration. 

(2) 

(a) To secure greater authority for the rates that may be fixed, it should be the general policy that the employers and

workers concerned, through representatives equal in number or having equal voting strength, should jointly take a direct

part in the deliberations and decisions of the wage-fixing body; in any case, where representation is accorded to one

side, the other side should be represented on the same footing. The wage-fixing body should also include one or more

independent persons whose votes can ensure effective decisions being reached in the event of the votes of the

employers' and workers' representatives being equally divided. Such independent persons should, as far as possible,

be selected in agreement with or after consultation with the employers' and workers' representatives on the wage-fixing

body. 

(b) In order to ensure that the employers' and workers' representatives shall be persons having the confidence of those

whose interests they respectively represent, the employers and workers concerned should be given a voice as far as is

practicable in the circumstances in the selection of their representatives, and if any organisations of the employers and

workers exist these should in any case be invited to submit names of persons recommended by them for appointment

on the wage-fixing body. 

(c) The independent person or persons mentioned in paragraph (a) should be selected from among men or women

recognised as possessing the necessary qualifications for their duties and as being dissociated from any interest in the

trade or part of trade concerned which might be calculated to put their impartiality in question. 

(d) Wherever a considerable proportion of women are employed, provision should be made as far as possible for the

inclusion of women among the workers' representatives and of one or more women among the independent persons

mentioned in paragraph (a). 

III

For the purpose of determining the minimum rates of wages to be fixed, the wage-fixing body should in any case take

account of the necessity of enabling the workers concerned to maintain a suitable standard of living. For this purpose

regard should primarily be had to the rates of wages being paid for similar work in trades where the workers are

adequately organised and have concluded effective collective agreements, or, if no such standard of reference is

available in the circumstances, to the general level of wages prevailing in the country or in the particular locality. 

Provision should be made for the review of the minimum rates of wages fixed by the wage-fixing bodies when this is

desired by the workers or employers who are members of such bodies. 

IV

For effectively protecting the wages of the workers concerned and safeguarding the employers affected against the

possibility of unfair competition, the measures to be taken to ensure that wages are not paid at less than the minimum

rates which have been fixed should include: 

(a) arrangements for informing the employers and workers of the rates in force; 

(b) official supervision of the rates actually being paid; and 

(c) penalties for infringements of the rates in force and measures for preventing such infringements. 

(1) In order that the workers, who are less likely than the employers to have their own means of acquainting themselves
A-7

with the wage-fixing body's decisions, may be kept informed of the minimum rates at which they are to be paid, employers

might be required to display full statements of the rates in force in readily accessible positions on the premises where

the workers are employed, or in the case of home workers on the premises where the work is given out or returned on

completion or wages paid. 

(2) A sufficient staff of inspectors should be employed, with powers analogous to those proposed for factory inspectors

in the Recommendation concerning the general principles for the organisation of systems of inspection adopted by the

General Conference in 1923, to make investigations among the employers and workers concerned with a view to

ascertaining whether the minimum rates in force are in fact being paid and taking such steps as may be authorised to deal

with infringements of the rates. As a means of enabling the inspectors adequately to carry out these duties, employers

might be required to keep complete and authentic records of the wages paid by them, or in the case of home workers to

keep a list of the workers with their addresses and provide them with wage books or other similar record containing such

particulars as are necessary to ascertain if the wages actually paid correspond to the rates in force. 

(3) In cases where the workers are not in general in a position individually to enforce, by judicial or other legalised

proceedings, their rights to recover wages due at the minimum rates in force, such other measures should be provided

as may be considered effective for preventing infringements of the rates. 

B

The General Conference of the International Labour Organisation thinks it right to call the attention of Governments to

the principle affirmed by Article 41 of the Constitution of the International Labour Organisation that men and women

should receive equal remuneration for work of equal value. (Note: This Paragraph refers to the Constitution of the

International Labour Organisation prior to its amendment in 1946. In the Constitution as amended in 1946 a reference to

equal remuneration appears in the Preamble.)

Cross references: Labour Inspection Recommendation, 1923; Article 41 of the Constitution of the International Labour

Organisation.
A-8

Convention No. 99: Minimum Wage Fixing Machinery (Agriculture) Convention, 1951

Convention concerning Minimum Wage Fixing Machinery in Agriculture

(Note: Date of coming into force: 23 August 1953; Place: Geneva; Session of the Conference:34; Date of adoption: 28 June 1951; See

the ratifications for this Convention.)

The General Conference of the International Labour Organisation, 

Having been convened at Geneva by the Governing Body of the International Labour Office, and having met in its

Thirty-fourth Session on 6 June 1951, and 

Having decided upon the adoption of certain proposals with regard to minimum wage fixing machinery in agriculture,

which is the eighth item on the agenda of the session, and 

Having determined that these proposals shall take the form of an international Convention, 

adopts the twenty-eighth day of June of the year one thousand nine hundred and fifty-one, the following Convention,

which may be cited as the Minimum Wage Fixing Machinery (Agriculture) Convention, 1951: 

Article 1 

1. Each Member of the International Labour Organisation which ratifies this Convention undertakes to create or maintain

adequate machinery whereby minimum rates of wages can be fixed for workers employed in agricultural undertakings

and related occupations. 

2. Each Member which ratifies this Convention shall be free to determine, after consultation with the most representative

organisations of employers and workers concerned, where such exist, to which undertakings, occupations and categories

of persons the minimum wage fixing machinery referred to in the preceding paragraph shall be applied. 

3. The competent authority may exclude from the application of all or any of the provisions of this Convention categories

of persons whose conditions of employment render such provisions inapplicable to them, such as members of the

farmer's family employed by him. 

Article 2

1. National laws or regulations, collective agreements or arbitration awards may authorise the partial payment of minimum

wages in the form of allowances in kind in cases in which payment in the form of such allowances is customary or

desirable. 

2. In cases in which partial payment of minimum wages in the form of allowances in kind is authorised, appropriate

measures shall be taken to ensure that-- 

(a) such allowances are appropriate for the personal use and benefit of the worker and his family; and 

(b) the value attributed to such allowances is fair and reasonable. 

Article 3 

1. Each Member which ratifies this Convention shall be free to decide, subject to the conditions stated in the following
A-9

paragraphs, the nature and form of the minimum wage fixing machinery, and the methods to be followed in its operation.

2. Before a decision is taken there shall be full preliminary consultation with the most representative organisations of

employers and workers concerned, where such exist, and with any other persons specially qualified by their trade or

functions whom the competent authority deems it useful to consult. 

3. The employers and workers concerned shall take part in the operation of the minimum wage fixing machinery, or be

consulted or have the right to be heard, in such manner and to such extent as may be determined by national laws or

regulations but in any case on a basis of complete equality. 

4. Minimum rates of wages which have been fixed shall be binding on the employers and workers concerned so as not

to be subject to abatement. 

5. The competent authority may permit exceptions to the minimum wage rates in individual cases, where necessary, to

prevent curtailment of the opportunities of employment of physically or mentally handicapped workers. 

Article 4

1. Each Member which ratifies this Convention shall take the necessary measures to ensure that the employers and

workers concerned are informed of the minimum rates of wages in force and that wages are not paid at less than these

rates in cases where they are applicable; these measures shall include such provision for supervision, inspection, and

sanctions as may be necessary and appropriate to the conditions obtaining in agriculture in the country concerned. 

2. A worker to whom the minimum rates are applicable and who has been paid wages at less than these rates shall be

entitled to recover, by judicial or other appropriate proceedings, the amount by which he has been underpaid, subject

to such limitation of time as may be determined by national laws or regulations. 

Article 5

Each Member which ratifies this Convention shall communicate annually to the International Labour Office a general

statement indicating the methods and the results of the application of the machinery and, in summary form, the

occupations and approximate numbers of workers covered, the minimum rates of wages fixed, and the more important

of the other conditions, if any, established relevant to the minimum rates. 

Article 6 

The formal ratifications of this Convention shall be communicated to the Director-General of the International Labour

Office for registration. 

Article 7 

1. This Convention shall be binding only upon those Members of the International Labour Organisation whose

ratifications have been registered with the Director-General. 

2. It shall come into force twelve months after the date on which the ratifications of two Members have been registered

with the Director-General. 

3. Thereafter, this Convention shall come into force for any Member twelve months after the date on which its

ratifications has been registered. 

Article 8 
A-10

1. Declarations communicated to the Director-General of the International Labour Office in accordance with paragraph

2 of article 35 of the Constitution of the International Labour Organisation shall indicate -- 

a) the territories in respect of which the Member concerned undertakes that the provisions of the Convention shall be

applied without modification; 

b) the territories in respect of which it undertakes that the provisions of the Convention shall be applied subject to

modifications, together with details of the said modifications; 

c) the territories in respect of which the Convention is inapplicable and in such cases the grounds on which it is

inapplicable; 

d) the territories in respect of which it reserves its decision pending further consideration of the position. 

2. The undertakings referred to in subparagraphs (a) and (b) of paragraph 1 of this Article shall be deemed to be an

integral part of the ratification and shall have the force of ratification. 

3. Any Member may at any time by a subsequent declaration cancel in whole or in part any reservation made in its

original declaration in virtue of subparagraph (b), (c) or (d) of paragraph 1 of this Article. 

4. Any Member may, at any time at which the Convention is subject to denunciation in accordance with the provisions

of Article 10, communicate to the Director-General a declaration modifying in any other respect the terms of any former

declaration and stating the present position in respect of such territories as it may specify. 

Article 9 

1. Declarations communicated to the Director-General of the International Labour Office in accordance with paragraph

4 or 5 of article 35 of the Constitution of the International Labour Organisation shall indicate whether the provisions of

the Convention will be applied in the territory concerned without modification or subject to modifications; when the

declaration indicates that the provisions of the Convention will be applied subject to modifications, it shall give details

of the said modifications. 

2. The Member, Members or international authority concerned may at any time by a subsequent declaration renounce

in whole or in part the right to have recourse to any modification indicated in any former declaration. 

3. The Member, Members or international authority concerned may, at any time at which the Convention is subject to

denunciation in accordance with the provisions of Article 10, communicate to the Director-General a declaration

modifying in any other respect the terms of any former declaration and stating the present position in respect of the

application of the Convention. 

Article 10

1. A Member which has ratified this Convention may denounce it after the expiration of ten years from the date on which

the Convention first comes into force, by an Act communicated to the Director-General of the International Labour Office

for registration. Such denunciation should not take effect until one year after the date on which it is registered. 

2. Each Member which has ratified this Convention and which does not, within the year following the expiration of the

period of ten years mentioned in the preceding paragraph, exercise the right of denunciation provided for in this Article,

will be bound for another period of ten years and, thereafter, may denounce this Convention at the expiration of each

period of ten years under the terms provided for in this Article. 

Article 11
A-11

1. The Director-General of the International Labour Office shall notify all Members of the International Labour

Organisation of the registration of all ratifications and denunciations communicated to him by the Members of the

Organisation. 

2. When notifying the Members of the Organisation of the registration of the second ratification communicated to him,

the Director-General shall draw the attention of the Members of the Organisation to the date upon which the Convention

will come into force. 

Article 12

The Director-General of the International Labour Office shall communicate to the Secretary-General of the United Nations

for registration in accordance with Article 102 of the Charter of the United Nations full particulars of all ratifications and

acts of denunciation registered by him in accordance with the provisions of the preceding Articles. 

Article 13 

At such times as may consider necessary the Governing Body of the International Labour Office shall present to the

General Conference a report on the working of this Convention and shall examine the desirability of placing on the

agenda of the Conference the question of its revision in whole or in part. 

Article 14 

1. Should the Conference adopt a new Convention revising this Convention in whole or in part, then, unless the new

Convention otherwise provides: 

a) the ratification by a Member of the new revising Convention shall ipso jure involve the immediate denunciation of this

Convention, notwithstanding the provisions of Article 10 above, if and when the new revising Convention shall have

come into force; 

b) as from the date when the new revising Convention comes into force this Convention shall cease to be open to

ratification by the Members. 

2. This Convention shall in any case remain in force in its actual form and content for those Members which have ratified

it but have not ratified the revising Convention. 

Article 15

The English and French versions of the text of this Convention are equally authoritative. 

Cross reference: Article 35 of the Constitution of the International Labour Organisation 
A-12

Recommendation No. 89: Minimum Wage Fixing Machinery (Agriculture) Recommendation,

1951

Recommendation concerning Minimum Wage Fixing Machinery in Agriculture

(Note: Date of adoption: 28 June 1951; Place: Geneva; Session of the Conference:34)

The General Conference of the International Labour Organisation, 

Having been convened at Geneva by the Governing Body of the International Labour Office, and having met in its

Thirty-fourth Session on 6 June 1951, and 

Having decided upon the adoption of certain proposals with regard to minimum wage fixing machinery in agriculture,

which is the eighth item on the agenda of the session, and 

Having decided that these proposals shall take the form of a Recommendation supplementing the Minimum Wage Fixing

Machinery (Agriculture) Convention, 1951, 

adopts this twenty-eighth day of June of the year one thousand nine hundred and fifty-one, the following

Recommendation, which may be cited as the Minimum Wage Fixing Machinery (Agriculture) Recommendation, 1951:

The Conference recommends that each Member should apply the following provisions as rapidly as national conditions

allow and report to the International Labour Office as requested by the Governing Body concerning the measures taken

to give effect thereto. 

I

1. For the purpose of determining minimum rates of wages to be fixed it is desirable that the wage fixing body should

in any case take account of the necessity of enabling the workers concerned to maintain a suitable standard of living.

2. Among the factors which should be taken into consideration in the fixing of minimum wage rates are the following:

the cost of living, fair and reasonable value of services rendered, wages paid for similar or comparable work under

collective bargaining agreements in agriculture, and the general level of wages for work of a comparable skill in other

industries in the area where the workers are sufficiently organised. 

II 

3. Whatever form it may assume, the minimum wage fixing machinery in agriculture should operate by way of

investigation into conditions in agriculture and related occupations, and consultation with the parties who are primarily

and principally concerned, namely employers and workers, or their most representative organisations, where such exist.

The opinion of both parties should be sought on all questions concerning minimum wage fixing and full and equal

consideration given to their opinion. 

4. To secure greater authority for the rates that may be fixed, in cases where the machinery adopted for fixing minimum

wages makes it possible, the workers and employers concerned should be enabled to participate directly and on an equal

footing in the operation of such machinery through their representatives, who should be equal in number or in any case

have an equal number of votes. 

5. In order that the employers' and workers' representatives should enjoy the confidence of those whose interest they

respectively represent, in the case referred to in Paragraph 4 above, the employers and workers concerned should have
A-13

the right, in so far as circumstances permit, to participate in the nomination of the representatives, and if any

organisations of employers and workers exist, these should in any case be invited to submit names of persons

recommended by them for appointment on the wage fixing body. 

6. In the case where the machinery for minimum wage fixing provides for the participation of independent persons,

whether for arbitration or otherwise, these should be chosen from among men or women who are recognised as

possessing the necessary qualifications for their duties and who have no such interest in agriculture or in any branch

thereof as would give rise to doubt as to their impartiality. 

III 

7. Provision should be made for a procedure for revising minimum wage rates at appropriate intervals. 

IV 

8. For effectively protecting the wages of the workers concerned, the measures to be taken to ensure that wages are not

paid at less than the minimum rates which have been fixed should include-- 

(a) arrangements for giving publicity to the minimum wage rates in force, and in particular for informing the employers

and workers concerned of these rates in the manner most appropriate to national circumstances; 

(b) official supervision of the rates actually being paid; and 

(c) penalties for infringements of the rates in force and measures for preventing such infringements. 

9. A sufficient number of qualified inspectors, with powers analogous to those provided for in the Labour Inspection

Convention, 1947, should be employed; these inspectors should make investigations among the employers and workers

concerned with a view to ascertaining whether the wages actually paid are in conformity with the minimum rates in force

and, if need be, should take such steps as may be authorised in the case of infringement of the rate fixed. 

10. In order to enable the inspectors to carry out their duties efficiently, employers should, where appropriate or

necessary in the opinion of the competent authority, be required to keep complete and authentic records of the wages

paid by them, and might also be required to issue the workers pay books or similar documents containing the information

necessary for verifying whether the wages actually paid correspond to the rates in force. 

11. In cases where the workers are not in general in a position individually to enforce, by judicial or appropriate

proceedings, their rights to recover wages due at the minimum rates in force, such other measures should be provided

as may be considered effective for this purpose. 
A-14

Convention No. 131: Minimum Wage Fixing Convention, 1970 

Convention concerning Minimum Wage Fixing, with Special Reference to Developing Countries

(Note: Date of coming into force: 29 April 1972; Place: Geneva Session of the Conference:54; Date of adoption:22 June 1970; See the

ratifications for this Convention.)

The General Conference of the International Labour Organisation, 

Having been convened at Geneva by the Governing Body of the International Labour Office, and having met in its Fiftyfourth Session on 3 June 1970, and 

Noting the terms of the Minimum Wage-Fixing Machinery Convention, 1928, and the Equal Remuneration Convention,

1951, which have been widely ratified, as well as of the Minimum Wage Fixing Machinery (Agriculture) Convention, 1951,

and 

Considering that these Convention have played a valuable part in protecting disadvantaged groups of wage earners,

and 

Considering that the time has come to adopt a further instrument complementing these Conventions and providing

protection for wage earners against unduly low wages, which, while of general application, pays special regard to the

needs of developing countries, and 

Having decided upon the adoption of certain proposals with regard to minimum wage fixing machinery and related

problems, with special reference to developing countries, which is the fifth item on the agenda of the session, and 

Having determined that these proposals shall take the form of an international Convention, 

adopts the twenty-second day of June of the year one thousand nine hundred and seventy, the following Convention,

which may be cited as the Minimum Wage Fixing Convention, 1970: 

Article 1

1. Each Member of the International Labour Organisation which ratifies this Convention undertakes to establish a

system of minimum wages which covers all groups of wage earners whose terms of employment are such that coverage

would be appropriate. 

2. The competent authority in each country shall, in agreement or after full consultation with the representative

organisations of employers and workers concerned, where such exist, determine the groups of wage earners to be

covered. 

3. Each Member which ratifies this Convention shall list in the first report on the application of the Convention submitted

under article 22 of the Constitution of the International Labour Organisation any groups of wage earners which may not

have been covered in pursuance of this Article, giving the reasons for not covering them, and shall state in subsequent

reports the positions of its law and practice in respect of the groups not covered, and the extent to which effect has been

given or is proposed to be given to the Convention in respect of such groups. 

Article 2

1. Minimum wages shall have the force of law and shall not be subject to abatement, and failure to apply them shall make
A-15

the person or persons concerned liable to appropriate penal or other sanctions. 

2. Subject to the provisions of paragraph 1 of this Article, the freedom of collective bargaining shall be fully respected.

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, 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. 

Article 4

1. Each Member which ratifies this Convention shall create and/or maintain machinery adapted to national conditions

and requirements whereby minimum wages for groups of wage earners covered in pursuance of Article 1 thereof can be

fixed and adjusted from time to time. 

2. Provision shall be made, in connection with the establishment, operation and modification of such machinery, for full

consultation with representative organisations of employers and workers concerned or, where no such organisations

exist, representatives of employers and workers concerned. 

3. Wherever it is appropriate to the nature of the minimum wage fixing machinery, provision shall also be made for the

direct participation in its operation of-- 

(a) representatives of organisations of employers and workers concerned or, where no such organisations exist,

representatives of employers and workers concerned, on a basis of equality; 

(b) persons having recognised competence for representing the general interests of the country and appointed after full

consultation with representative organisations of employers and workers concerned, where such organisations exist and

such consultation is in accordance with national law or practice. 

Article 5 

Appropriate measures, such as adequate inspection reinforced by other necessary measures, shall be taken to ensure

the effective application of all provisions relating to minimum wages. 

Article 6 

This Convention shall not be regarded as revising any existing Convention. 

Article 7

The formal ratifications of this Convention shall be communicated to the Director-General of the International Labour

Office for registration. 

Article 8 
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1. This Convention shall be binding only upon those Members of the International Labour Organisation whose

ratifications have been registered with the Director-General. 

2. It shall come into force twelve months after the date on which the ratifications of two Members have been registered

with the Director-General. 

3. Thereafter, this Convention shall come into force for any Member twelve months after the date on which its

ratifications has been registered. 

Article 9

1. A Member which has ratified this Convention may denounce it after the expiration of ten years from the date on which

the Convention first comes into force, by an Act communicated to the Director-General of the International Labour Office

for registration. Such denunciation should not take effect until one year after the date on which it is registered. 

2. Each Member which has ratified this Convention and which does not, within the year following the expiration of the

period of ten years mentioned in the preceding paragraph, exercise the right of denunciation provided for in this Article,

will be bound for another period of ten years and, thereafter, may denounce this Convention at the expiration of each

period of ten years under the terms provided for in this Article. 

Article 10

1. The Director-General of the International Labour Office shall notify all Members of the International Labour

Organisation of the registration of all ratifications and denunciations communicated to him by the Members of the

Organisation. 

2. When notifying the Members of the Organisation of the registration of the second ratification communicated to him,

the Director-General shall draw the attention of the Members of the Organisation to the date upon which the Convention

will come into force. 

Article 11 

The Director-General of the International Labour Office shall communicate to the Secretary-General of the United Nations

for registration in accordance with Article 102 of the Charter of the United Nations full particulars of all ratifications and

acts of denunciation registered by him in accordance with the provisions of the preceding Articles. 

Article 12

At such times as may consider necessary the Governing Body of the International Labour Office shall present to the

General Conference a report on the working of this Convention and shall examine the desirability of placing on the

agenda of the Conference the question of its revision in whole or in part. 

Article 13

1. Should the Conference adopt a new Convention revising this Convention in whole or in part, then, unless the new

Convention otherwise provides: 

a) the ratification by a Member of the new revising Convention shall ipso jure involve the immediate denunciation of this

Convention, notwithstanding the provisions of Article 9 above, if and when the new revising Convention shall have

come into force; 
A-17

b) as from the date when the new revising Convention comes into force this Convention shall cease to be open to

ratification by the Members. 

2. This Convention shall in any case remain in force in its actual form and content for those Members which have ratified

it but have not ratified the revising Convention.

Article 14

The English and French versions of the text of this Convention are equally authoritative. 

Cross reference: Article 22 of the Constitution of the International Labour Organisation 
A-18

Recommendation No. 135: Minimum Wage Fixing Recommendation, 1970

Recommendation concerning Minimum Wage Fixing, with Special Reference to Developing Countries

(Note: Date of adoption: 22 June 1970; Place: Geneva; Session of the Conference:54) 

The General Conference of the International Labour Organisation, 

Having been convened at Geneva by the Governing Body of the International Labour Office, and having met in its Fiftyfourth Session on 3 June 1970, and 

Noting the terms of the Minimum Wage-Fixing Machinery Recommendation, 1928, the Minimum Wage Fixing Machinery

(Agriculture) Recommendation, 1951, and the Equal Remuneration Recommendation, 1951, which contain valuable

guidelines for minimum wage fixing bodies, and 

Considering that experience in more recent years has emphasised the importance of certain additional considerations

relating to minimum wage fixing, including that of adopting criteria which will make systems of minimum wages both an

effective instrument of social protection and an element in the strategy of economic and social development, and 

Considering that minimum wage fixing should in no way operate to the prejudice of the exercise and growth of free

collective bargaining as a means of fixing wages higher than the minimum, and 

Having decided upon the adoption of certain proposals with regard to minimum wage fixing machinery and related

problems, with special reference to developing countries, which is the fifth item on the agenda of the session, and 

Having determined that these proposals shall take the form of a Recommendation, 

adopts this twenty-second day of June of the year one thousand nine hundred and seventy, the following

Recommendation, which may be cited as the Minimum Wage Fixing Recommendation, 1970: 

I. Purpose of Minimum Wage Fixing 

1. Minimum wage fixing should constitute one element in a policy designed to overcome poverty and to ensure the

satisfaction of the needs of all workers and their families. 

2. The fundamental purpose of minimum wage fixing should be to give wage earners necessary social protection as

regards minimum permissible levels of wages. 

II. Criteria for Determining the Level of Minimum Wages

3. In determining the level of minimum wages, account should be taken of the following criteria, amongst others: 

(a) the needs of workers and their families; 

(b) the general level of wages in the country; 

(c) the cost of living and changes therein; 

(d) social security benefits; 
A-19

(e) the relative living standards of other social groups; 

(f) economic factors, including the requirements of economic development, levels of productivity and the

desirability of attaining and maintaining a high level of employment. 

III. Coverage of the Minimum Wage Fixing System

4. The number and groups of wage earners who are not covered in pursuance of Article 1 of the Minimum Wage Fixing

Convention, 1970, should be kept to a minimum. 

5. (1) The system of minimum wages may be applied to the wage earners covered in pursuance of Article 1 of the

Convention either by fixing a single minimum wage of general application or by fixing a series of minimum wages

applying to particular groups of workers. 

(2) A system based on a single minimum wage-- 

(a) need not be incompatible with the fixing of different rates of minimum wages in different regions

or zones with a view to allowing for differences in costs of living; 

(b) should not impair the effects of decisions, past or future, fixing minimum wages higher than the

general minimum for particular groups of workers. 

IV. Minimum Wage Fixing Machinery

6. The minimum wage fixing machinery provided for in Article 4 of the Convention may take a variety of forms, such as

the fixing of minimum wages by-- 

(a) statute; 

(b) decisions of the competent authority, with or without formal provision for taking account of

recommendations from other bodies; 

(c) decisions of wages boards or councils; 

(d) industrial or labour courts or tribunals; or 

(e) giving the force of law to provisions of collective agreements. 

7. The consultation provided for in paragraph 2 of Article 4 of the Convention should include, in particular, consultation

in regard to the following matters: 

(a) the selection and application of the criteria for determining the level of minimum wages; 

(b) the rate or rates of minimum wages to be fixed; 

(c) the adjustment from time to time of the rate or rates of minimum wages; 

(d) problems encountered in the enforcement of minimum wage legislation; 

(e) the collection of data and the carrying out of studies for the information of minimum wage fixing authorities.

8. In countries in which bodies have been set up which advise the competent authority on minimum wage questions,
A-20

or to which the government has delegated responsibility for minimum wage decisions, the participation in the operation

of minimum wage fixing machinery referred to in paragraph 3 of Article 4 of the Convention should include membership

of such bodies. 

9. The persons representing the general interests of the country whose participation in the operation of minimum wage

fixing machinery is provided for in Article 4, paragraph 3, subparagraph (b), of the Convention should be suitably

qualified independent persons who may, where appropriate, be public officials with responsibilities in the areas of

industrial relations or economic and social planning or policy-making. 

10. To the extent possible in national circumstances, sufficient resources should be devoted to the collection of statistics

and other data needed for analytical studies of the relevant economic factors, particularly those mentioned in Paragraph

3 of this Recommendation, and their probable evolution. 

V. Adjustment of Minimum Wages

11. Minimum wage rates should be adjusted from time to time to take account of changes in the cost of living and other

economic conditions. 

12. To this end a review might be carried out of minimum wage rates in relation to the cost of living and other economic

conditions either at regular intervals or whenever such a review is considered appropriate in the light of variations in a

cost-of-living index. 

13. (1) In order to assist in the application of Paragraph 11 of this Recommendation, periodical surveys of national

economic conditions, including trends in income per head, in productivity and in employment, unemployment

and underemployment, should be made to the extent that national resources permit. 

(2) The frequency of such surveys should be determined in the light of national conditions. 

VI. Enforcement

14. Measures to ensure the effective application of all provisions relating to minimum wages, as provided for in Article

5 of the Convention, should include the following: 

(a) arrangements for giving publicity to minimum wage provisions in languages or dialects understood by

workers who need protection, adapted where necessary to the needs of illiterate persons; 

(b) the employment of a sufficient number of adequately trained inspectors equipped with the powers and

facilities necessary to carry out their duties; 

(c) adequate penalties for infringement of the provisions relating to minimum wages; 

(d) simplification of legal provisions and procedures, and other appropriate means of enabling workers

effectively to exercise their rights under minimum wage provisions, including the right to recover amounts by

which they may have been underpaid; 

(e) the association of employers' and workers' organisations in efforts to protect workers against abuses; 

(f) adequate protection of workers against victimisation. 

Cross references: Minimum Wage Fixing Machinery Recommendation, 1928; Minimum Wage Fixing Machinery (Agriculture) Recommendation, 1951; Equal Remuneration Recommendation, 1951.
1

John Ryan, A Living Wage: Its Ethical and Economic Aspects (New York: MacMillan, 1906, third printing

1912; reprinted edition, New York: Arno and the New York Times, 1971), p. 99.

2 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, fifth edition of 1789, edited

by Edwin Cannan (New York: Modern Library, 1937), pp. 821-822.

3

 See Lawrence B. Glickman, A Living Wage: American Workers and the Making of Consumer Society (Ithaca,

NY: Cornell University Press, 1997), especially pp. 62-66.

B-1

APPENDIX B

Survey of the Literature and Other Sources of Information 

on the Extent to Which Workers’ Wages Meet Their Basic Needs

Early History

The current attempts to define a wage rate that would provide an “acceptable” standard of living which is

above the minimum required for biological existence go back at least to the Middle Ages. The origin of the

concept of a “fair and decent” wage was already present in the Middle Ages where wages and prices were

not market determined but administratively set in a manner consistent with community values. Since this

assessment about fair wages and prices was made “under the immediate and powerful influence of moral

and religious teaching,”1 it incorporated the dominant ethical ideals of the time.

The concept that there is some wage level above biological subsistence that is nevertheless “necessary” can

be found in the earliest of economic writings. Adam Smith stated in his 1789 treatise Wealth of Nations:

2

By necessaries I understand, not only the commodities which are indispensably necessary for the

support of life, but whatever the custom of the country renders it indecent for creditable people, even

of the lowest order, to be without...Under necessaries therefore, I comprehend, not only those things

which nature, but those things which the established rules of decency have rendered necessary to

the lowest rank of people.

In the United States and the United Kingdom, skilled workers and their unions played a major role in the

development of the living wage concept during the nineteenth century.3 In some countries, religious leaders

also played an important role. Joseph Cook, a minister, delivered several lectures in 1877 and 1878 that

made a distinction between “starvation wages” and “natural wages” or “just wages.” He determined what

he thought were the necessary requirements for a family and specified the yearly income needed to achieve
4

 Joseph Cook, Boston Monday Lectures: Labor with Preludes on Current Events (Boston: Houghton Osgood

and Company, 1880).

5

 Gerald Starr, Minimum Wage Fixing: An International Review of Practices and Problems (Geneva:

International Labour Office, 1981; third printing with corrections, 1993), p. 8.

6 Gordon M. Fisher, “From Hunter to Orshansky: An Overview of (Unofficial) Poverty Lines in the United States

from 1904 to 1965,” Poverty Measurement Working Papers (Washington: U.S. Census Bureau, 1997).

7

 John Ryan, A Living Wage: Its Ethical and Economic Aspects (New York: MacMillan, 1906, third printing

1912; reprinted edition, New York: Arno and the New York Times, 1971), pp. 134-136.

8

Louise Bolard More, Wage Earners Budgets: A Study of Standards and Costs of Living in New York City

(New York: Henry Holt and Company, 1907).

B-2

that standard of living.4 The importance of the notion of a living wage in Roman Catholic social

thought—especially within Latin America—was epitomized by papal encyclicals Rerum Novarum (1891)

and Quadragesimo Anno (1931).5

During the first decade of the twentieth century, educators, religious and civic leaders, and philanthropic

organizations became interested in determining what the minimum income level was for an minimally

acceptable American living standard. The investigators used their own assessment to determine what

physical quantities of goods defined a living standard that was acceptable. Family budgets for several

different levels of well-being were developed for persons living in selected cities; some of the higher living

standards included items such as insurance, savings, vacations, reading material, and cultural expenses.

Some of these higher working-class living standards were referred to as a“fair living wage.”6

In 1906, Father John Ryan published a book entitled A Living Wage; Its Ethical and Economic Aspects

which argued for a “living wage” that allowed “a decent livelihood for the adult male laborer.” Ryan

proposed that a living wage would allow income for not only food, clothing, and a five room dwelling, but

also education for four or five children, periodicals, recreation, labor union dues, church contributions, and

savings for sickness and old age.7 He determined the dollar value of a living wage by specifying the

required dollar expenditures (but not the exact physical quantities) for 17 types of commodities.

Since that time, numerous studies have attempted to determine the income necessary to achieve a “fair”

standard of living. These studies have been similar, in that they were based on a living standard higher than

mere subsistence and one that would allow for the “development and satisfaction of human attributes.”

These studies generally specified the items necessary to obtain this standard of living, determined their

prices, and calculated the total costs required to obtain those items. The authors gave these income levels

various names such as “safe normal living cost,” “minimum comfort level,” or “fair standard of living.” As

with the estimates of living wages today, there was never any agreement on specifically what items and what

quantities were required in order to obtain an “adequate” living standard. Some of the more significant

studies conducted during the early part of this century include those by More (1907),8 Worcester and
9 Daisy Lee Worcester, Grim the Battles: A Semi-Autobiographical Account of the War Against Want in the

United States During the First Half of the Twentieth Century (New York: Exposition Press, 1954). Daisy Lee Worcester

and her husband Wood Worcester provided estimates of a “fair standard of living” for the early part of the twentieth

century and are notable in that they (1) attempted to determine if children needed to work to attain that level, and (2) used

the diet of the federal prison in Atlanta to determine the food component. 

10 Scott Nearing, Financing the Wage-Earner’s Family: A Survey of the Facts Bearing in Income and

Expenditure in the Families of American Wage-Earners (New York: B.W. Huebsch, 1913). 

11 Seebohm Rowntree, The Human Needs of Labour (London: T. Nelson & Sons Ltd., 1918).

12 William Ogburn, “Measurement of the Cost of Living and Wages,” Annals of the American Academy of

Political and Social Science, Vol. 81 (January 1919), pp. 110-122.

13 Described in Gordon Fisher, “Is There Such a Thing as Absolute Poverty Line Over Time? Evidence from

the United States, Britain, Canada, and Australia on the Income Elasticity of the Poverty Line,” Poverty Measurement

Working Papers (Washington: U.S. Census Bureau, 1995), pp. 32-33.

14 Leonard C. Marsh, Report on Social Security for Canada (Ottawa: Edmond Cloutier, 1943).

15 Gordon M. Fisher, “From Hunter to Orshansky: An Overview of (Unofficial) Poverty Lines in the United

States from 1904 to 1965,” Poverty Measurement Working Papers (Washington: U.S. Census Bureau, 1997), p. 22.

16 Jett Lauck and Edgar Sydenstricker, Conditions of Labor in American Industries: A Summarization of the

Results of Recent Investigations (New York: Funk and Wagnalls, 1917).

17 Caradog Jones, Cost of Living Of Representative Working Class Families (Liverpool: University Press of

Liverpool, 1941).

B-3

Worcester (1911-1929),9 Nearing (1913),10 Rowntree (1918),11 Ogburn (1919),12 the Australian Royal

Commission on the Basic Wage (1919-1920),13 and Marsh (1943).14

Using a slightly different approach, Warren and Sydenstricker (1916) studied the budgets of a number of

households at different income levels and determined the point at which an income level actually reached

the level for an adequate dietary subsistence level.15 Similarly, Lauck and Sydenstricker (1917) determined

the income level below which infant mortality increased significantly.16 Jones made an early distinction

between the poverty-line living standard, which he argued was more appropriate for a family on public

assistance, and a “human needs” standard of living, which was more appropriate for working families that

were self-supporting.17

In 1919, the U.S. Bureau of Labor Statistics (BLS) published a “quantity budget” referred to as “the

minimum of health and comfort level” that would allow a government employee with a family of five to live
18 Bureau of Labor Statistics, “Tentative Quantity-Cost Budget Necessary to Maintain Family of Five in

Washington, D.C.,” Monthly Labor Review, Volume 9, No. 6 (December 1919), pp. 22-29. 

19 Bureau of Labor Statistics, “Minimum Quantity Budget Necessary to Maintain a Worker’s Family of Five in

Health and Decency,” Monthly Labor Review, Volume 10, No. 6 (June 1920), pp. 1-18.

20 Margaret Loomis Stecker, Quantity Budgets of Goods and Services Necessary for a Basic Maintenance

Standard of Living and for Operation Under Emergency Conditions (Washington: Works Progress Administration,

1936). 

21 U.S. Bureau of Labor Statistics, Workers’ Budgets in the United States: City Families and Single Persons,

1946 and 1947, BLS Bulletin 927 (Washington: U.S. Government Printing Office, 1948).

B-4

a life characterized by “health and decency.”18 This study was conducted for the U.S. Congressional Joint

Commission on Reclassification of Salaries. The budget allowed for food sufficiency; respectable clothing;

sanitary housing; medical and dental care; insurance covering death, disability, and fire; occasional movies;

street car fares; church contributions; labor dues; a daily newspaper; Christmas gifts; and a minimum of

essential sundries; but not for savings, vacations, or books. Two lower living standards were also

estimated. The budgets were estimated using a full market basket approach and assumed that there was

only one breadwinner in a household and their dwelling was rented. In 1920, BLS estimated a budget for

a workingman’s family and published the results in a 1920 Monthly Labor Review article, which detailed

all the items that were thought necessary to achieve this standard of living.19

During the Great Depression of the 1930s, the focus of the budget studies undertaken by the U.S.

government began to concentrate on “emergency” living standards.20 While adequate standard of living

levels were still estimated, the studies also attempted to determine how reductions in these levels might be

made in emergency conditions with the least harm. 

In 1945, the Labor and Federal Security Subcommittee of the Committee on Appropriations of the U.S.

House of Representatives directed BLS “to find out what it costs a worker’s family to live in the large cities

of the United States.” A Technical Committee was formed which used BLS family expenditures studies

conducted between 1929 and 1941 to derive a set of budgets.21 The Committee attempted to determine

budgets in a more “scientific” manner than the earlier market basket approaches which were dependent

on the “judgements” of the researcher. For the food and housing portions of the budget, studies of actual

budgets were used to determine the income level at which consumers actually purchased what was deemed

to be adequate based upon scientific analysis. The nutritional standard for food was based on the 1945

allowances recommended by the National Research Council, but the selection of specific foods to meet

these standards was made from a 1941 BLS expenditure survey. In a like manner, specifications for

healthful housing were formulated by the American Public Health Association. The balance of the budget

was set at a level such that families spent all their income; if there were savings, it was assumed that income

was more than was necessary, while if there was dissaving, it was assumed that consumption at that level

of income was unacceptable. The estimated budgets provided a full market basket of goods required to

attain an “adequate but moderate” living standard—like the previous BLS estimated budgets of the
22 U.S. Department of Health, Education and Welfare, Social Security Administration, “A Budget for an Elderly

Couple,” Social Security Bulletin (February 1948), pp. 4-12.

23 Helen H. Lamale and Margaret S. Stotz, “The Interim City Worker’s Family Budget,” Monthly Labor Review

(August 1960), pp. 785-808.

24 Margaret S. Stotz, “The BLS Interim Budget for a Retired Couple,” Monthly Labor Review (November 1960),

pp. 1141-1157.

25 U.S. Bureau of Labor Statistics, Report of the Advisory Committee on Standard Budget Research

(Washington: U.S. Government Printing Office, June 1963).

26 U.S. Bureau of Labor Statistics, City Worker’s Family Budget: For a Moderate Living Standard, BLS Bulletin

No. 1570-1 (Washington: U.S. Government Printing Office, Autumn 1966). 

B-5

1920s—but derived instead from expenditure surveys. The budgets estimated in the 1940s assumed a

four-person family (instead of the five-person family used in the 1920s) and were estimated for 34 different

cities. Using similar concepts and methodology, a “modest but adequate” standard of living was also

estimated for a couple age 65 or older, at March 1946 and June 1947 prices, living in 8 large cities.22

These budgets were updated annually for price changes between 1946 and 1951. 

In 1959, BLS prepared budgets for 20 large cities using a similar methodology, but updated using the

BLS’s Survey of Consumer Expenditures during the 1950s and price data from 1959.23 While the food

and shelter components continued to be based upon “expert” opinion with regard to the expenditure level

necessary to reach this standard as derived from expenditure surveys, the quantities of other items were

derived more directly from expenditure surveys, which revealed the income level at which the rate of

increase in quantities purchased for various goods began to decline in relation to the rate of change in

income, i.e., the point of maximum elasticity, where it was assumed that increasing elasticity indicates

increasing urgency of demand and decreasing elasticity indicates decreasing urgency. The average number

and kind of items purchased at these expenditure levels were the quantities and qualities specified for the

budget. Besides the family budgets, a “modest but adequate” budget was also estimated for a couple 65

or older.24

The methodology for determining these budgets was reviewed in 1963, but only minor changes were

suggested.25 In 1966, budget levels for 39 cities were determined using 1960s Surveys of Consumer

Expenditure and revised Department of Agriculture food plans.26 The 1966 budget used a similar

methodology as the budgets calculated in the 1940s and 1950s, with minor technical refinements although

adjustments were made for changing consumption patterns. 

In 1978, the Bureau of Labor Statistics contracted with the Institute for Research on Poverty at the

University of Wisconsin to recommend revisions in the Family Budget Program, which had been providing

estimates for expenditure levels (or baskets of goods) needed to attain several different levels of living

standards since the late 1940s. These baskets had been updated periodically using information from the
27 Harold W. Watts, “Special Panel Suggests Changes in BLS Family Budget Program,” Monthly Labor Review

(December 1980), pp. 3-10.

28 Harold W. Watts, “Special Panel Suggests Changes in BLS Family Budget Program,” Monthly Labor Review

(December 1980), p. 8. 

29 Bureau of Labor Statistics, “Autumn Urban Family Budgets and Comparative Indexes For Selected Urban

Areas,” Department of Labor News, 82-139 (April 16, 1982).

30 Conference on Economic Progress, Poverty and Deprivation In the United States: The Plight of Two-Fifths

of a Nation (Washington: Conference on Economic Progress, April 1962).

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Consumer Expenditure Survey. By 1980, three different expenditure levels (or standards of living) were

estimated. The Institute’s report recommended that four levels be estimated (in order of their expenditure

level): social minimum standard, lower living standard, prevailing family standard, and social abundance

standard.27 The prevailing family standard was the conceptual descendant of the previous “intermediate

budget” and defined a “modest but adequate” living standard or a level that “affords a family [the] full

opportunity to participate in contemporary society, and enjoy the basic options it offers.” More

importantly, the report recommended discontinuing the methodology of specifying the market basket of

goods required for a certain living standard, and replacing it with a relative income method, using national

expenditure data collected from the Consumer Expenditure Surveys. Under the relative income method,

the prevailing family standard was defined as the median expenditure level for a two parent-family of four.

Once the overall expenditure level was determined, expenditures by major categories were derived from

the Consumer Expenditure Survey based upon how the average household (at that expenditure level)

actually spent its income. The report concluded “that the main claimed advantage of lists of quantities of

goods and services—that such a lists assure the meeting of authoritatively established needs—was in fact

illusory.”28 The report also explored the theoretical and practical possibility of deriving genuine scientific

market baskets, but no promising new approach was discovered. The report concluded that the relative

income approach was more democratic, since it allowed ordinary people, and not experts, to determine

what is needed to attain an adequate living standard. 

The recommendations in the Institute’s report were never implemented by BLS; the BLS program for

calculating budgets was eliminated as part of a general budget reduction in 1982.29 A final update of the

family budgets was published in April 1982, using the established methodology; adjustment factors were

provided for different family sizes and different cities. 

Besides the BLS program discussed above, there were few other studies of living wage issues in the 1940s

and 1950s. In 1962, a report by the Conference on Economic Progress provided income requirements

for various standards of living which were above the deprivation level that included a “deprivationcomfort,”“comfort-affluence,” and “affluent or higher” levels.30 Within academic circles, Lamale discussed

how the concept of income adequacy had changed from 1860 to 1958. She pointed out that the

“subsistence” concept used during the period 1860 to 1900 gave way to the “living wage” concept during
31 Helen H. Lamale, “Changes In Concepts Of Income Adequacy Over The Last Century,” American Economic

Review (May 1958), pp. 291-299; and discussion by Frank Notestein, pp. 300-302, and Meredith B. Graves, pp.302-304.

32 Alice Bourneuf, “Comment on Goldsmith ‘Low-Income Families and Measures of Inequality’,” Review of

Social Economy, Vol. 20, No. 1 (March 1962), p. 20. 

B-7

the period 1900 to 1935 and eventually to the “social” concept from 1935 to 1958.31 In 1962, Bourneuf

raised the issue of the need to determine a “living wage” that would allow decent housing, good food,

medical care, and savings for old age and emergencies.32

Recent Studies and Other Sources of Information: An Annotated Bibliography

The following presents an annotated bibliography of a cross-section of recent studies and other sources

of information on the issue of a living wage: 

ACORN (Association of Community Organizations for Reform Now), Living Wage web sites:

<http://www.acorn.org> and <http://www.livingwagecampaign.org>.

This organization has been at the forefront of the municipal living wage movement in the United

States. The web sites provide an up-to-date listing of the status of municipal ordinances and their

provisions and responses to arguments against living wage ordinances.

Arthur D. Little, Inc., Fourteenth Report on the Signatory Companies to the Statement of Principles

for South Africa (Cambridge, MA: Industry Support Unit of Arthur D. Little, 1990).

Discusses the Statement of Principles for South Africa, a voluntary business code for firms

operating in South Africa at that time. The “minimum living level”—calculated by the University

of South Africa—and the “household subsistence level”—calculated by the University of Port

Elizabeth—use a market basket approach to determine the required wage levels for compliance

with the minimum wage requirement that is part of the Statement of Principles.

Calzini, Derek, Jake Odden, Jean Tsai, Shawna Huffman, and Steve Tran, Nike Inc.: Survey of

Vietnamese and Indonesian Domestic Expenditure Levels, Field Study in International Business, Amos

Tuck School, Dartmouth College, November 1997.

Analyzes the adequacy of NIKE contract factory wages in Indonesia and Vietnam. NIKE

workers were interviewed to determine how much they actually spent each month on essential

items, which included food, housing, clothing, utilities, communication, and health care. Reported

wages were then compared to total expenditures for essential items. The study concluded that

NIKE workers in both countries earn wages at or above government-mandated wages, and these

wages permitted workers to generate discretionary income in excess of what is required for

essential items. In both countries, approximately 40 percent of average reported wages of NIKE

workers was available for discretionary expenditures. In Indonesia, the costs of purchasing a

typical basket of basic food items were found to be similar to the reported expenditures for food
B-8

by NIKE workers. In both countries, there are significantly more applicants than factory positions

available. The study concludes that NIKE is perceived as an attractive place to work. 

Carvalho, Soniya, and Howard White, “Combining the Quantitative and Qualitative Approaches to Poverty

Measurement and Analysis,” World Bank Technical Paper, No. 366 (Washington: World Bank, 1997).

Highlights the key characteristics of the quantitative and qualitative approaches to poverty

measurement and analysis, examines the strengths and weaknesses of each approach, and analyzes

the potential for combining the two approaches in analytical work on poverty. Concludes that a

combination of the two approaches is more desirable than reliance on either approach separately.

The quantitative approach defines poverty using income or consumption measures, while the

qualitative approach allows the community being studied to define poverty. The two approaches

can reach opposite conclusions. For example, although per capita fell between 1963-66 and

1982-84 in two villages in Rajasthan, India, researchers using a qualitative approach concluded

that the households were better off, based upon their actual consumption of food types such as

vegetables, their possession of items such as shoes and radios, and the availability of education.

Center for Reflection, Education and Action (CREA), In Whose Interest: Using the Purchasing Power

Index to Analyze Plans, Programs and Policies of Industrialization and Development in Haiti

(Hartford, CT: CREA, February 1996).

Presents the results of a market basket survey of basic food items that was conducted in various

cities in Haiti during 1992 to 1995. Discusses the adequacy of Haitian wages (both existing and

proposed minimum wages) in meeting these basic needs. Discusses the need for wages to provide

more than the most basic food needs to reduce malnutrition, infant mortality, illness, retarded mental

development, etc. Makes calculations for the minutes of work needed to buy basic food stuffs;

uses a purchasing power index methodology. Compares the time required to buy basic food stuffs

using actual minimum wages, a lower Tripartite Commission-recommended wage, and two

minimums proposed by President Aristide which are higher than the actual minimum. The report

suggests other items that need to included in the market basket, but are not included in this study.

Commission for the Verification of Corporate Codes of Conduct (COVERCO), Maquilas and Cost of

Living in Guatemala (Baltimore: Marianist Brothers and Priests, Office of Justice and Peace, October

1998).

This study provides an overview of the 250 Guatemalan maquilas which employ more than 50,000

workers and yield over US$350 million in revenues. Data on the size distribution of the maquilas

are provided. Demographic and wage information is provided for Guatemala’s workers. Some

of the information comes from official sources and some from interviews performed for the study.

Calculations by the Bank of Guatemala are provided for the income level of poverty (Canasta

Básica Vital - Basic Goods and Services) and the income level of extreme poverty (Canasta

Básica de Alimentos -Basic Food Basket) for 1994 to 1998, which were made using a basket

of goods approach. The study makes no independent calculations. The distribution of incomes

earned by maquila workers is provided and compared to these poverty measures. Generally a
B-9

two-worker family of five can make more than the BFB level of income, but less than that of the

BGS; however, a sole breadwinner with a family of five would be living in extreme poverty.

Council on Economic Priorities Accreditation Agency (CEPAA), Guidance Document for Social

ACCOUNTABILITY 8000 (New York: CEPAA, 1998); web site: <http://www.cepaa.org>. 

Explains the SA 8000 standard and its implementation, provides examples of methods for verifying

compliance, and serves as a handbook for auditors and for companies seeking certification of the

standard. The SA 8000 uses a food market basket extrapolation approach. The SA 8000

explicitly states that the food basket must provide 2,100 calories per day. CEPAA’s living wage

formula adjusts for the number of wage earners in a family unit and allows an additional 10 percent

of income for discretionary purposes in addition to the cost of a basic food basket.

Employment Policies Institute, Washington, DC; web site: <http://www.epionline.org>.

Provides information on estimated living wage levels for a large number of states and cities in the

United States. Discusses the negative impact living wages may have on low-skilled employees by

locking them out of the job market. 

Fisher, Gordon M., “From Hunter to Orshansky: An Overview of (Unofficial) Poverty Lines in the United

States from 1904 to 1965,” Poverty Measurement Working Papers (Washington: U.S. Census Bureau,

1997); web site: <http://www.census.gov/hhes/poverty/povmeas/papers/>.

Describes the history of American poverty lines and how market baskets were used to specify a

given level of well-being. Argues that the drawing of poverty lines is not merely a technical

economic exercise, but also a social process. Concludes that: (1) there is no such thing as an

absolute poverty line; (2) hypothetical food budgets are an unsatisfactory means of determining the

level of food expenditures that a real family requires; (3) poverty lines have usually been developed

by advocates of the disadvantaged rather than social scientists; and (4) economists did not get

involved in poverty line studies until the War on Poverty in 1964.

Fisher, Gordon M., “Is There Such a Thing as an Absolute Poverty Line Over Time? Evidence from the

United States, Britain, Canada, and Australia on the Income Elasticity of the Poverty Line,” Poverty

Measurement Working Papers (Washington: U.S. Census Bureau, 1995); web site:

<http://www.census.gov/hhes/poverty/povmeas/papers/>.

Provides a comprehensive analysis of how the concept of poverty has evolved through time.

Concludes that the definition of absolute poverty is not absolute, but very dependent on the

standard of living at the time and refers to this tendency as the income elasticity of poverty.

Describes in detail a large number of studies of poverty and living standards. Since some of the

living standards analyzed were higher than a basic subsistence poverty level, they are similar to a

living wage standard of living. Suggests that the living wage as well as the poverty level increase

at approximately the same rate as the general standard of living. This has been true historically not

only for the United States, but also for Britain, Canada, and Australia. Discusses the history of the

development of the U.S. official poverty line and argues that the fixing of this poverty line in real
B-10

terms since 1969 has been a major historical anomaly.

Global Exchange, Wages and Living Expenses for Nike Workers in Indonesia (San Francisco: Global

Exchange, 1998); web site: <http://www.globalexchange.org>. 

Describes research on wage levels for NIKE workers in Indonesia after the economic crisis in

1997. Approximately 50 interviews with NIKE workers were conducted to determine how their

standard of living had been affected by the crisis. The study finds that NIKE workers suffered a

significant fall in real income between 1997 and 1998. In addition, it concludes that NIKE workers

are not making a living wage based upon a market basket approach. The study provides a fairly

detailed market basket made up of food, fuel, kitchen equipment, and clothing and then adds 15

percent to cover miscellaneous additional expenditures. The basket is specified using physical

quantities of items (e.g., 12.6 kg of rice per month, 2 T-shirts per year, etc.) and their costs at the

time of the survey.

Jobs with Justice, Washington, DC; web site: <http://www.jwj.org>. 

Discusses the living wage for U.S. workers and compares it to the prevailing wage.

Kuttner, Robert, “Boston’s Living Wage Law Highlights New Grassroots Efforts to Fight Poverty,” 1997;

web site of Economic Policy Network, <http://www.epn.org>.

Discusses the living wage movement by U.S. cities, with particular emphasis on Boston. Suggests

that living wages discourages privatizations intended to cut wages. 

Maggs, John, “In Some Cities a ‘Living Wage’ Prevails,” National Journal (February 6, 1999), pp. 352-

353.

Discusses the movement by cities in the United States to adopt living wages above current minimum

wages. Focuses on Baltimore, Maryland, and discusses the fact that workers (with children)

currently making the minimum wage are below the poverty line. 

National Labor Committee, Behind Closed Doors: The Workers Who Make Our Clothes (New York:

National Labor Committee, 1998).

Reports the results of an investigation by students from a number of universities who traveled to

Central America (El Salvador, Honduras, and Nicaragua) to investigate the conditions under which

apparel, some bearing college logos, is produced. Documents interviews with workers in the

factories, as well as those with local human rights, women’s, religious, and labor groups. Finds that

workers in these plants do not make a living wage, as defined by the NGOs they interviewed.

Concludes that students should pressure their universities to adopt codes of conduct for apparel

sold with their university logos. Proposes that codes of conduct should include the right of the

workers to organize unions, public disclosure of where the items are being made, and payment of

living wages. 
B-11

National Priorities Project (NPP), Working Hard, Earning Less: The Story of Job Growth in America

(Northampton, MA: National Priorities Project, 1998); web site: <http://www.natprior.org>.

Provides an overview of the methodology used by the National Priorities Project to estimate living

wages. The living wage in the United States for a two-parent family of four is estimated to be

US$32,185 in 1998. Slightly different living wage estimates are provided for the different states

since the cost of living varies by state; for example, the living wage for Massachusetts is

US$38,489 and US$30,037 for Ohio. These living wage estimates are also used by Jobs for

Justice. The NPP living wage calculation uses a modified full basket of goods approach.

However, a detailed basket is not specified and then priced, instead expenditure estimates are

obtained for several broad categories from different sources. The food expenditure is a dollar

figure calculated by the U.S. Department of Agriculture. The housing expenditure uses the 40th

percentile of rents as reported in the U.S. Department of Housing and Urban Development’s Fair

Market Rent Survey. The cost of daycare comes from an estimate provided by the Children’s

Defense Fund. Transportation, clothing, and personal expenses are derived from the Bureau of

Labor Statistics’ Consumer Expenditure Survey as to what is typical of lower income households.

Nolan, Justin, Living Wages: A Corporate Responsibility ?, Master Thesis, University of California at

Berkeley (May 1998).

Describes and evaluates four different methods which have been used by others to calculate a living

wage: (1) basic needs assessment; (2) market basket survey; (3) unit labor costs; and (4) wage

comparison. Finds that NGOs prefer the first two, since they directly address the question of what

income is necessary to satisfy the basic needs of workers. Concludes that NGOs do not support

the use of the latter two methods, since they do not address worker needs although they do

provide interesting cross-sectional or historical comparison of wages. Suggests that some factors

which should be considered in determining a method of calculating a living wage: (1) is it practical

to calculate and monitor; (2) will it enhance a company’s socially responsible reputation; and (3)

can firms afford to pay the calculated wage?

Pakistan Government Planning Commission, Report of the Working Group on Poverty Alleviation for

the Ninth Five Year Plan (1998-2003) (Islamabad: Government of Pakistan, April 1998).

Describes the nature and level of poverty in Pakistan. Discusses a number of different approaches

for the estimation of poverty, but concludes that the use of a calorie norm is the most suitable for

defining the poverty line. The Planning Commission defines the poverty line based on minimum

daily calorie need of 2,550 calories per rural adult or 2,230 per urban adult; approximately one

fourth of the population is below this level. The different levels of calorie requirements for rural and

urban areas were established based upon the nature of activities performed. The recommended

level of calorie intake is converted into a food poverty line by using the “calorie food consumption

function” which involves regressing calorie intake on food expenditure and identifying the

expenditure consistent with the required level of calorie intake. The costs of other basic needs

(besides food) incorporated into the poverty line are determined by looking at the expenditures

on other items of income groups with food consumption at the minimum calorie level. The Planning
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Commission discusses some of the advantages and disadvantages of a calorie norm in its chapter

on poverty alleviation for the Ninth Five Year Plan (1998-2003). The calorie norm is viewed as

a rather restricted conception of poverty, partly because the minimum calorie requirement varies

with a person’s weight, state of health, and level of activity; nevertheless the approach focuses on

the most critical symptom of poverty, i.e., persistent hunger, and is reliable and consistent. The

calorie norm also fails to consider access to other amenities, such as employment, productive

assets, safe drinking water, schools, medical facilities, sewerage, and housing. When these items

are included, poverty appears more widespread; for example 60 percent of the population does

not have safe drinking water, 62 percent of adults are illiterate, and 61 percent has no sanitation

facility.

Peace and Justice Center, “Livable Wage Campaign,” Burlington, VT; web site: <http://www.igc.org/psc>.

Discusses the living wage movement in Vermont. Finds that the living wage in Vermont varies

between US$7.98 an hour for a single person to US$19.82 for a two-parent two-child family,

compared to the minimum wage of US$5.00 an hour. Calculates a living wage after determining

the basic needs (using a full market basket approach) for five family sizes. Items included expenses

for food, housing, child care, transportation, health care, clothing, household and personal

expenses, insurance, and taxes. 

Philippines National Wages and Productivity Commission (NWPC), Development of Methodology for

Estimating Living Wage (Manila: National Statistics Office/Statistical Research and Training

Center/NWPC, 1999).

Provides the methodology and results of an analysis of a Philippines living wage by the National

Statistics Office (NSO) and the Statistical Research and Training Center (SRTC) which were

commissioned by the National Wages and Productivity Commission (NWPC). Since the 1987

Philippine Constitution provides that workers shall be entitled to a living wage and the Republic Act

No. 6727 provides that the demand for a living wage shall be one of the eleven criteria for minimum

wage fixing, the NWPC has had to define the term and compute a living wage. The NWPC uses

the extrapolated food basket approach to estimate living wages for different regions in the

Philippines. Generally, it is concluded that more than one worker must work (at the minimum

wage) in order for a family to attain a family living wage. The report raises the issue of whether the

family living wage should be a minimum wage since many families have more than one wage earner.

Pollin, Robert and Stephanie Luce, The Living Wage: Building a Fair Economy (New York: The New

Press, 1998).

An advocacy piece that provides an in-depth look at the living wage movement in the United States

in the 1990s. Concentrates on the municipal living wage proposals. Discusses the reasons for the

living wage movement (falling real wages since 1973 and a falling real minimum wage since 1968),

the rationale for concentrating at the municipal level (political feasibility), the costs to cities of

implementing living wages (average contractors costs estimated to rise by only one percent in Los

Angeles), the differences in the city ordinances, and who benefits from living wages (primarily those
B-13

who receive it). 

Rothstein, Richard, Developing Reasonable Standards for Judging whether Minimum Wage Levels

in Developing Nations Are Acceptable (Washington: Economic Policy Institute, 1996).

Examines various dimensions of the living wage issue. Argues that an international labor standards

regime cannot expect similar minimum wage standards in nations with different levels of

development, but can (or should) require nations to adopt minimum wage levels which are

“appropriate” to their level of development. Suggests that an expectation of an acceptable

minimum wage level has been incorporated into U.S. trade law, but has not been enforced because

there is no workable standard by which “acceptable” can be judged. Argues that there is no

definitive method to determine “acceptable,” but proposes a variety of less exact methods which

can be used to make that judgement. Proposed methods, which should be reasonable,

internationally uniform, and transparent, include that the minimum wage should: (1) equalize unit

production costs in apparel export industries, with possible adjustments for the level of

development; (2) provide income to purchase a subsistence basket of goods; and (3) be similar

to the minimum wages of currently developed nations when they were at similar levels of

development. Uses this latter method to compare historical minimum wages in the United States

to those currently in Chile, Dominican Republic, and Mexico; he finds that U.S. minimum wages

were three or four times higher than those currently in Chile or Mexico, when the United States was

at a similar level of development. The study argues that the objective of international labor

standards should be to achieve a more equal distribution of income in the developing nations and

restrain capital flows to the developing nations, whose motivation is to take advantage of low labor

costs.

Schilling, David, “Maquiladora Workers Deserve a Sustainable Living Wage,” Interfaith Center on

Corporate Responsibility Brief, Vol 23, No. 10 (1995).

Discusses the need for a living wage for the Mexican maquiladora workers. Argues that

corporations have a responsibility to pay a living wage and argues that a living wage is a human

right. 

Sweatshop Watch, Oakland, CA; web page: <http://www.sweatshopwatch.org>.

This web page maintains information on the living wage issue, with regular updates on the latest

developments and initiatives related to eliminating sweatshops. Discusses the market basket

approach in calculating a living wage. 

Sweeney, John, “How about earning $8.56 an hour?” Miami Herald: International Edition (February

19, 1999), p. 11a. 

Argues that communities need to adopt living wages. Discusses poverty in Miami and the history

of the living wage issue at the community level.
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The Trade Partnership, International Child Labor: Options for Action (Washington: National Retail

Federation and National Retail Institute, December 1997).

Estimates that workers in Bangladesh, China, the Dominican Republic, El Salvador, Honduras,

Guatemala, India, Pakistan, Thailand, and Turkey are being paid “living wages” which are

appropriate to their country’s level of development. Using a historical comparison method, the

analysis shows that workers in these are being paid wages similar to U.S. wage rates when the

United States had the same per capita income. 

UNITE (Union of Needletrades, Industrial and Textile Employees), Was Your Cap Made In This

Sweatshop (New York: UNITE, no date); available on UNITE’s web site at:

<http://www.uniteunion.org/sweatshops/schoolcap/schoolcap.html>.

Provides results of an investigative trip by students to the BJ&B factory in Santo Domingo,

Dominican Republic, that makes baseball caps with university logos. Finds that workers receive

only 8 cents for every US$20 dollar cap produced. Concludes that BJ&B is a sweatshop that uses

illegal forced overtime, discriminates against women, physically and verbally abuses workers, fails

to provide safe drinking water, and suppresses the right to organize unions.

United Kingdom Low Pay Commission, The National Minimum Wage, First Report of the Low Pay

Commission, Presented to Parliament by the President of the Board of Trade by command of Her Majesty,

June 1998); web site: <http://www.lowpay.gov.uk/ir/lowpay/index.htm>.

Discusses establishing a minimum wage in the United Kingdom. Provides recommendations on how

the minimum wage should be implemented in terms of coverage, what income to consider, and the

proposed rate. Although living wage issues are not explicitly discussed, the study provides

extensive analysis regarding implementing minimum wages and may provide useful information and

approaches to dealing with establishing wage floors for low paid workers.

Wall Street Journal, “Indonesian Workers to Get Boost in Entry-Level Wages” (March 24, 1999), p. B2.

Describes the NIKE living wage study conducted by Dartmouth College’s Tuck School of

Business that was used in making wage decisions in Indonesian and Vietnamese plants producing

for NIKE.

Wider Opportunities for Women (WOW), Washington, DC; web sites: <http://www.w-o-w.org> and

<http://www.workplacesolutions.org>.

WOW has calculated family economic self-sufficiency standards for 10 states and areas

(California; District of Columbia; Iowa; Maryland: Montgomery and Prince George’s Counties;

Illinois; North Carolina; Pennsylvania; Texas; Virginia: City of Alexandria, and Arlington and

Fairfax Counties; and Massachusetts), with studies in process in Indiana and New York City (five

boroughs). The standards add up the costs of living and working (housing, child care, food,

transportation, medical care, miscellaneous expenses, and taxes–including tax credits) to determine

the “bottom-line” wages for families based on the number and age of children (70 different family

types are calculated) and geographic location. Since the standards are geographically specific, no
B-15

standards for the United States as a whole have been calculated, although the methodology used

in each jurisdiction is essentially the same. The standards assume that all adults work full-time and

take into account the cost of employment (child care, transportation, and taxes), the size and

composition of the family, regional variations in costs, and changes over time in costs, demography,

and tax policies. The standards are calculated using a market basket approach, pricing each

component individually, based on data collected by federal and state government agencies, and,

in some cases, by local groups. The self-sufficiency standards are considerably higher than the

official U.S. poverty levels since the standards take into account the costs of employment to the

individual, child care costs of preschool children, and regional variations, which are not accounted

for in the official U.S. poverty measure.

Some results for Massachusetts were published in Diana Pearce and Jennifer Brooks with Laura

Henze Russell, The Self-Sufficiency Standard for Massachusetts: Selected Family Types

(Washington: Wider Opportunities for Women, September 1998). For example, in Boston, a

single person with no children needed to earn US$7.52 an hour in 1997 to meet his/her basic

needs; a single parent with one preschooler needed US$15.28 an hour; one adult with two children

(one preschooler and one school-age) needed US$18.54 an hour; and two adults working fulltime, each needed to earn US$10.08 to support their family. The corresponding figures for rural

western Massachusetts (Berkshire County) for the same year were: US$6.16; US$11.68;

US$13.98; and US$8.08 an hour.

Some results for Montgomery County, Maryland, were reported in Jennifer Brooks [Director of

Research, Wider Opportunities for Women (WOW), Washington, DC], “A Real Living Wage,”

Letter to the Editor, Washington Post (July 24, 1999), p. A18. For example, a single parent with

a school-age child needs US$13.61 an hour to cover expenses; if that parent had a preschool-age

child, US$19.21 an hour would be needed, with child care being a major expense. For a twoparent family with an infant and a preschool-age child, each would need to earn US$11.62 an hour

to meet their family’s needs. 
1

Information submitted is on file and available for public inspection at the Office of International Economic

Affairs, Bureau of International Labor Affairs, U.S. Department of Labor, Washington, DC.

C-1

APPENDIX C

Respondents to Federal Register Notice of June 30, 1999 for Public Submissions of

Information for the U.S. Department of Labor’s Wage Study1

Formal Submissions

Asociación Hondureña de Maquiladores, San Pedro Sula, Honduras

Telefacsimile from Henry Fransen, Jr., Genente Administrativo, and Jorge Roberto Interiano, Gerente de Operaciones, to Jorge

Perez-Lopez, Director, Office of International Economic Affairs, Bureau of International Labor Affairs, July 14, 1999, with

information on minimum wage rates and other benefits for maquiladora workers in Honduras.

Chicago Religious Leadership Network on Latin America (CRLN), Chicago, IL

Letter from Daniel P. Driscoll-Shaw, Economic Justice Program Coordinator, to Jorge Perez-Lopez, Director, Office of

International Economic Affairs, Bureau of International Labor Affairs, dated July 28, 1999 with three attachments containing

relevant information on Mexico, Guatemala, and Honduras. Subsequent submission by letter with enclosures to the Office of

International Economic Affairs, received August 17, 1999, providing information on El Salvador.

Colombian Government Trade Bureau, Washington, DC

Telefacsimile from Enrique Gomez Pinzon, Director, to the Office of International Economic Affairs, Bureau of International

Labor Affairs, August 3, 1999, with information on minimum wages and monthly salaries apparel and footwear factories in

Colombia.

Confédération Européenne de L’Industrie de la Chaussure/ European Confederation of the Footwear Industry (CEC),

Brussels, Belgium

Letter from Roeland Smets, Managing Director, to Andrew J. Samet, Deputy Under Secretary for International Labor Affairs,

dated July 23, 1999, expressing views of membership. CEC represents 14 national confederations of European footwear

manufacturers (Italy, Spain, Portugal, France, United Kingdom, Germany, Greece, Austria, Denmark, Netherlands, Sweden,

Finland, Belgium, and Ireland) and 8 observing countries (Czech Republic, Hungary, Norway, Poland, Romania, Russia, Slovakia,

and Turkey).

Embajada de Guatemala, Washington., DC

Telefacsimile from Anamaría Gonzales, Commercial Attaché, to Office of International Economic Affairs, Bureau of

International Labor Affairs, July 13, 1999, providing information regarding labor legislation of Guatemala, including current

minimum wage rates. Subsequent submission by letter with attachments from Ambassador William H. Stixrud to Andrew J.

Samet, Deputy Under Secretary for International Labor Affairs, dated August 31, 1999, which conveyed additional information

on the minimum wage, prevailing wage, and non-wage benefits in the apparel and footwear industries and the established poverty

level for Guatemala that was prepared on August 20, 1999 by the Minister of Labor of Guatemala Luis Felipe Linares López.

International Labor Rights Fund, Washington, DC

Letter from Bama Athreya, Director of Asia Programs, to Andrew J. Samet, Deputy Under Secretary for International Labor

Affairs, dated July 30, 1999 with four enclosures containing relevant information for Israel, El Salvador, Bangladesh, and

Taiwan. Subsequent submission by letter with enclosure to Office of International Economic Affairs, Bureau of International

Labor Affairs, received August 10, 1999, providing information on Peru.

Other

Interfaith Center on Corporate Responsibility (ICCR), New York, NY, and Center for Reflection, Education and Action,
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Inc. (CREA), Hartford, CT.

Letter from Rev. David M. Schilling, Director, Interfaith Center on Corporate Accountability Programs, ICCR, and Dr. Ruth

Rosenbaum, Executive Director, CREA, to Stephanie Swirsky, Deputy Director, Public Liaison, U.S. Department of Labor, dated

June 24, 1999, with attached paper “Purchasing Power Index (PPI) Study Proposal,” which provides some examples of the

method’s application in Mexico, Haiti, and Indonesia.
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APPENDIX D

Basic References for Wages, Benefits, and Poverty

Minimum Wage

History, Application, and Guidance on Wage Setting Mechanisms and Supervision

International Labour Organization, Minimum Wages: Wage-Fixing Machinery, Application and

Supervision, International Labour Conference 79th Session 1992, Report III (Part 4B), General

Survey of the Reports on the Minimum Wage-Fixing Machinery Convention (No. 26) and

Recommendation (No. 30), 1928; the Minimum Wage Fixing Machinery (Agriculture) Convention

(No. 99) and Recommendation (No. 89), 1951; and the Minimum Wage Fixing Convention (No.

131) and Recommendation (No. 135), 1970, Report of the Committee of Experts on the

Application of Conventions and Recommendations (Geneva: International Labour Office, 1992).

International Labour Organization, “Minimum Wage Fixing: A Summary of Selected Issues,” Labour Law

and Labour Relations Branch (LEG/REL) Briefing Note No. 14 (Geneva: International Labour

Office, 1998), which is also available on the ILO’s web site:

<http://www.ilo.org/public/english/80relpro/legrel/papers/brfnotes/minwages/issues3.htm>.

International Labour Organization, Assessing the Impact of Statutory Minimum Wages in Developing

Countries: Four Country Studies, Labour-Management Relations Series No. 67 (Geneva:

International Labour Office, 1988) [The four countries studied are: Botswana, Brazil, Mexico, and

Sri Lanka.]

Pember, Robert J., and Marie-Thérèse Dupré, “Statistical Aspects of Minimum Wage Determination,” Bulletin of Labour Statistics, No. 3 (1997), entire issue. A version of this paper is

available on the ILO’s website as “Statisitcal Aspects of Minimum Wage Determination,” Labour

Law and Labour Relations Branch (LEG/REL) Briefing Note No. 11 at:

<http://www.ilo.org/public/english/80relpro/legrel/papers/brfnotes/minwages/stat3.htm>.

Starr, Gerald, Minimum Wage Fixing: An International Review of Practices and Problems (Geneva:

International Labour Office, 1981; Second printing with corrections, 1993).
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Levels

U.S. Department of State, Country Reports on Human Rights Practices, Worker rights, Acceptable

Conditions of Work (Section 6e) (Washington: Government Printing Office, 1999).

These annual reports are also available on the Internet at:

<http://www.state.gov/www/global/human_rights/hrp_reports_mainhp.html>.

U.S. Department of State, Foreign Labor Trends, selected countries (Washington: U.S. Department

of Labor, periodically).

Bureau of Labor Statistics, Minimum Wages Around the World: Minimum Wage Information for 187

Countries (Washington: U.S. Department of Labor, unpublished draft, May 1997).

International Labour Office, Bureau of Statistics, Geneva, LABMINW (a minimum wage data base

covering 56 countries).

Average Hourly Earnings and Compensation

Bureau of Labor Statistics, International Comparisons of Hourly Compensation Costs for Production

Workers in Manufacturing (Washington: U.S. Department of Labor, September 16, 1998); web

site: <http://stats.bls.gov/flshome.htm>.

The U.S. Bureau of Labor Statistics (BLS) compiles and updates on an annual basis data

on hourly earnings and compensation costs for production workers in various

manufacturing industries using information from national statistical sources of 31 countries

or areas and adjusts these data for comparison with U.S. data. Sectorial data based on

the International Standard Industrial Classification (ISIC) and the U.S. Standard Industrial

Classification (SIC).

International Labour Organization, Yearbook of Labor Statistics, 1998 (Geneva: International Labour

Office, 1998).

A major source of wage data is the International Labor Organization (ILO), which receives

wage data from its member countries. The wage data submitted to the ILO, usually cover

all employees (or production workers) and may use varying pay definitions such as total

compensation, pay for time worked, or hourly direct pay. These data may or may not fit

the definitions of total compensation, hourly direct pay, or pay for time worked used in the

United States. Sectoral data based on ISIC, rev. 2 (1980) or rev. 3 (1990). Wage data

are not available for Honduras, Indonesia, and the United Arab Emirates.

International Labour Organization, Sources and Methods, Volume 2, Employment , Wages, Hours

of Work and Labour Costs (Geneva: International Labour Office, 1995).
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International Labour Organization, Key Indicators of the Labour Market 1999 (Geneva: International

Labour Office, 1999).

A major source of statistical information on labor force, employment, unemployment, time

worked, educational attainment, wages, compensation, productivity, unit labor costs,

poverty, and income distribution for over 100 countries.

International Labour Organization, Globalization of the Footwear, Textiles and Clothing Industries,

Sectoral Activities Programme, Report for discussion at the Tripartite Meeting on the Globalization

of the Footwear, Textiles and Clothing Industries: Effects on Employment and Working Conditions,

TMFTCI/1996 (Geneva: International Labour Office, 1996).

International Labour Organization, Note on the Proceedings, Sectoral Activities Programme, 

Tripartite Meeting on the Globalization of the Footwear, Textiles and Clothing Industries: Effects

on Employment and Working Conditions, Geneva, 28 October-1 November 1996,

TMFTCI/1996/11 (Geneva: International Labour Office, 1996).

Consumer Price Index and Exchange Rates

International Monetary Fund, International Financial Statistics (Washington: International Monetary

Fund, March 1999).

Contains information on the consumer price index for each of the countries covered in this

report, except for Macau, Taiwan, and the United Arab Emirates. Contains information

on U.S. dollar exchange rates for currencies of each of the countries covered in this report,

except for Macau.

U.S. Central Intelligence Agency, The World Fact Book 1998 (Washington: U.S. Government

Printing Office, 1999).

Contains information on the consumer price index for Macau, Taiwan, and the United

Arab Emirates. Contains information on U.S. dollar exchange rates for the currency of

Macau.

Non-Wage Benefits

Bureau of Labor Statistics, International Comparisons of Hourly Compensation Costs for Production

Workers in Manufacturing (Washington: U.S. Department of Labor, September 16, 1998); an

annual publication.

Social Security Administration, Social Security Programs Throughout the World - 1997

(Washington: U.S. Government Printing Office, August 1997); updated every two years.
D-4

Income, Consumption, and Poverty

International Labour Organization, Poverty in Developing Countries: A Bibliography of Publications

by the ILO’s World Employment Programme, 1975-91, International Labour Bibliography No.

12 (Geneva: International Labour Office, 1992). 

Hamid Tabatabai, Statistics on Poverty and Income Distribution: An ILO Compendium of Data

(Geneva: International Labour Office, 1996); updated every three years. 

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

Oxford University Press, 1999); updated annually.

World Bank, World Development Report: Knowledge for Development 1998/99 (New York: Oxford

University Press, 1999); updated annually.