expect significant age discrimination in hiring. The argument for having a lower MW for younger workers as many countries have done is based on this fact.

**Table 12: Range** **<u>of Wages by Age in Urban Formal Enterprises, 2004</u>**

||**Average**|**Minimum**|**Averag**|**e Maximum**|
|---|---|---|---|---|
|Age Category|**N**|**USD/month**|**N**|**USD/Month **|
|15-24|177|78.26|145|109.73|
|25-30|212|94.67|186|148.98|
|31-40|138|128.30|149|194.40|
|41-50|58|177.03|74|239.86|
|Above 50|28|233.06|41|262.87|

Source: UES, 2004 55. (b) <u>Importance of Minimum Wages in Timor Leste:</u> The MW in Timor-Leste was informally set at USD 85 per month by UNTAET. While this has not been legally binding, it has had an important impact on wage setting in the formal sector, in particular the civil service. Box 1 lays out the situation in Timor Leste with respect to MW, with comparisons from other countries in the 1990s and 2000. Even using only formal sector data from the present survey, it is clear that the informal MW remains very high in terms of relativity to average urban wage in Timor Leste, being equal to the average wage for urban formal sector service workers and around 95 percent of the average wage for urban formal sector manual workers.

# **Box 1:  Informal Minimum Wage in Timor Leste in Comparative Perspective**

- In absolute terms, the informal MW for Timor-Leste is dramatically higher than the level of MW in countries of comparable income levels, including neighboring Indonesia and Vietnam. A MW level of USD 85 places Timor-Leste close to Uruguay in the 1990s.  However, the per capita income of Uruguay was USD 6581 and the average years of schooling for its over-15 population was 7.56 in the 1990s, compared to USD 472 and 4.62 respectively for Timor-Leste.

- The informal MW/AW ratio for Timor-Leste on 2000 was 0.56 in urban areas, or in other words, the MW accounted for 56 percent of average wages.  This put Timor-Leste ratio in the “very high” range in international comparison, higher than the Netherlands and Ukraine and closer to countries such as France.

- The monthly MW of West Nusa Tenggara in Indonesia was set at around USD 24 in 2001 and at USD 40 at the end of 2003.  The informal MW of USD 85 per month for Timor-Leste is almost twice as high.  While cost of living may also be higher in parts of Timor-Leste such as Dili due to heavy donor presence, these differentials between West Nusa Tenggara and Timor-Leste are likely to narrow over time.

- If average years of schooling is taken as a proxy of skill levels, Timor-Leste with average years of schooling of 4.62, is closer to the Dominican Republic, but the latter had a had a MW of USD 42 in the mid 1990s.  Thus, even in terms of skill levels, Timor-Leste has high informal MW levels.

- Finally, in terms of per capita income, Timor-Leste is closer to Pakistan, which had a MW of USD 50 in the mid-1990s.

Source: Drawn from Das, 2004 (a).

56. A clearer picture of the potential impact of enforcing the currently informal MW emerges if we look at formal enterprises in a disaggregated manner. Firms were asked about the impact on future hiring and firing of enforcing USD95 MW. Figure 20 and Tables 13 to 15 show that the 25