ASSESSMENT OF THE

GLOBAL WAGE TRENDS Fair Wages and Creating Shared Value

Abstract In a world of uncertainty, answers are not always easy or clear-cut.

Governments and Corporations can create value for society and contribute to solving global problems in a wide variety of ways, from developing

implementable strategies spanning across food security, minimum wages controlling climate change that share the benefits of commercial activities

more broadly, delivering social, environmental and financial returns.

pg. 1

Executive Summary

It has been a subject of constant debate about the role of wages in world economics in recent years. In

a firm, an increase or decrease in wages affects production costs, profitability, sustainability and

competitiveness. For a country, the net effect of wages depends on the relative magnitudes of the

effects of wages on household consumption, investment and net exports. In the Eurozone we have

observed that the concerns over deficits in aggregate demand due to insufficient household

consumption have put pressure on wages, and many of those concerned have surmised that the decline

or stagnation of wages is a direct factor for increasing risk of deflation. However, in some emerging and

developing economies, minimum wages are a key component of overall strategies to reduce poverty

and inequality.

Here are few observations on wages from United Nations and International Labour Organisation

regarding global trends in wage growth.

Global wage growth decelerated in 2013 compared to 2012, and has yet to rebound to pre-

crisis rates.

Global wage growth driven mostly by emerging and developing economies.

Global wage growth contributed by China is almost half of global growth.

Growth in wages in developed economies has remained flat.

Between 1999 and 2013, labor productivity growth in developed economies outstripped real

wage growth, and labor’s share of national income.

Average wages in emerging and developing economies are slowly converging towards average

wages in developed economies.

Globally if too many countries pursue wage moderation policies then there is a risk of negative outcome.

In the current environment, there is persisting risk of global economy sliding back into a low-growth trap.

Considering this risk, higher wage growth is highly recommended in those countries where wages are

lagging behind productivity growth.

Our proposal is to implement a Systematic Tax Exemption for the businesses along with the

implementation of the increased minimum wage. This system will envisage a periodic increase in

minimum wage policy by the government along with a tax exemption that will mitigate the effect of

increase in minimum wage. However this system also ensures a proportional decrease in the exemption

throughout the period of the current policy. The new exemption comes to effect with the implementation

of the next policy. This system will ensure minimum inflation which does not affect the demand and

hence prevents unemployment. This policy will also encourage employment and hence will be a major

driver in reducing poverty.

pg. 2

Introduction

Sustainability, today has become a part of the policies of a country and

corporations both public and private sector and is playing an

increasingly central role in engaging the stakeholders in some of the

world’s biggest social, environmental and governance problems. In the

past two decades we have seen that corporate sustainability

performance has improved, with companies and corporations

becoming actively engaged in issues beyond their responsibility to

respect human rights, labour, the environment and anti-corruption. UN

Global Compact and its initiatives has definitely shown the path

towards structuring the policies towards creating shared value.

Creating Shared Value ranges from poverty alleviation to the fight

against corruption or to eradicate devastating diseases such as

malaria and HIV-AIDS1. At the same time, the complexity of today’s

social, environmental, governance and business challenges is rising.

Conventional economic analysis states that increasing the minimum

wage reduces employment in two ways.

a. First, increase in wages increases the cost of goods sold and

services. These costs definitely get passed on to the

consumers. This results in higher prices, and the higher

prices, in turn, effects the demand for the goods and services.

The reduced demand results in reduced production and lower

employment. This is known as a scale effect, and it reduces employment. This employment

crisis hits both low-wage workers and higher-wage workers.

b. Second, a minimum-wage increase causes a

relative rise of cost of low wage workers compared

to other necessary inputs. Employers use

machines, technology, and more productive higher-

wage workers to produce goods and services. Due

to increase in minimum wages, some employers

reduce their use of low-wage workers and instead,

shift towards the other inputs. That is known as a

substitution effect. It reduces employment among

low-wage workers but does increase employment

among higher-wage workers.

Economists at the National Institute of Economic and Social Research2 estimate that a minimum wage

set at £3.70 an hour for everyone over the age of 25 would, in the long run, cost some 250,000 jobs.

After all, logic says that if you raise the price of something, people will buy less of it. 3

1 New Paths to Performance: UN Global Compact. 2 NIESR aims to promote, through quantitative and qualitative research, a deeper understanding of the interaction of economic

and social forces that affect people's lives, and the ways in which policies can improve them. http://niesr.ac.uk/ 3 Minimum Wage: The minimum wage's seven dark secrets, CHRIS DILLOW, Investors Chronicle, May 15, 1998

“For the most part,

businesses have associated

their social investment

strategies with traditional

philanthropic giving, that

is, the distribution of

wealth already created

without any expected

social or financial return.

The landscape is however

changing. Increasingly,

business is looking to

implement social

investment strategies

across a range of initiatives

that are aligned with their

commercial objectives.” —

Shaun Cannon, Chief

Executive Officer,

Principles for Social

Investment Secretariat

Minimum Wage

Jobs for low-income workers

pg. 3

Minimum Wage

A minimum wage is defined as the lowest monthly remuneration that employers may legally pay to the

workers. Another way of looking at it is the lowest wage at which workers may sell their labour. However

this selling price is not dependent on the market. Usually, the parameters to set minimum wage are

selected such that it minimizes the loss of jobs while maintaining international competitiveness of

domestic industries. The primary indicators used are:

General economic conditions in the country as measured by the GDP

Inflation

Labor supply

Demand situation

Wage levels

Wage differentials

Growth in productivity

Cost of doing business

Living standards

The prevailing average wage rate in the country

The parameters stated above follows the format laid out by UN Global Compact SA 8000 which states

that

Wages paid for a standard work week must meet legal and industry standards and be

sufficient to meet the basic needs of workers and their families and to provide some

discretionary income.4

This macroeconomic outlook is not new, however, after virtually disappearing from policy debates,

minimum wage imbalance has received new attention in recent years. Many countries are trying to

reduce differences between their imports and exports. Wage policies and its global trends play an

important role in this equation.5

Fair Trade Certification6

The central theme of Fair Trade is the minimum price, which is intended to meet a broadly determined

living wage in the sector (originally set in accordance with the data of the International Coffee

Organization) and to cover the average costs of sustainable production including the minimum wage

requirements. The Fair Trade buyer agrees to pay producers at least the minimum price when the world

price is lower, and to pay the world price when this is above the Fair Trade minimum.

In both situations, producers and traders are still free to negotiate higher prices on the basis of quality

and other attributes. This also helps to maintain the minimum wage floor limit.

4 UN Global Compact SA 8000 5 In countries with large current account deficits, where imports exceed exports, wage moderation may contribute to

rebalancing trade accounts. This can have a positive effect on aggregate demand and employment if the boost to the competitiveness of exports is large. However, if wage cuts reduce domestic consumption by more than is offset by an increase in exports, the result will be negative in terms of GDP growth, particularly if government spending is reduced at the same time. In countries with large trade surpluses, higher wage growth can contribute to a rebalancing of demand towards domestic household consumption and away from exports – with the effect on aggregate demand in these countries again depending on the magnitude of the different elements of demand: UN Global Compact 2015. 6 The Economics of Fair Trade : Raluca Dragusanu (Harvard University), Daniele Giovannucci(Committee on Sustainability

Assessment),Nathan Nunn (Harvard University)

pg. 4

A look at the comparisons attributes of Wages and Fair Trade helps us to give a fair idea about the

two issues and how they are related in helping to maintain a balance between the fair wage and the

minimum wage.

While the Wage definition from ILO talks about the policies to decide the minimum wages, the Fair

Trade policies talks about the structure in a system thinking approach that addresses the problems of

today. Systems thinking7, which is the process of understanding how things, regarded as systems,

influence one another within a whole is critical to address the issue of minimum wages since its affects

has direct effects on the economy.

7 Systems thinking - Wikipedia

What are wages?

Wherever possible, in this report wages are defined according to the ILO definition of earnings adopted by the 12th International Conference of Labour Statisticians (ILO, 1973).

(1) Direct wages and salaries for time worked, or work done, cover: (i) straight-time pay of time-rated workers; (ii) incentive pay of time-rated workers; (iii) earnings of piece-workers (excluding overtime premiums); (iv) premium pay for overtime, shift, night and holiday work; and (v) commissions paid to sales and other personnel. Included are: premiums for seniority and special skills; geographical zone differentials; responsibility premiums; dirt, danger and discomfort allowances; payments under guaranteed wage systems; cost-of-living allowances; and other allowances.

(2) Remuneration for time not worked comprises: direct payments to employees in respect of public holidays, annual vacations, and other time off with pay granted by the employer.

(3) Bonuses and gratuities cover: seasonal and end-of-year bonuses; additional payments in respect of vacation periods (supplementary to normal pay); and profit-sharing bonuses.

Earnings include cash earnings and in-kind payments, but the two should be distinguished from each other.

There are also related concepts which are broader. For example, while one element of labour cost is earnings, it also includes other elements such as: food, drink, fuel and other payments in kind, cost of workers’ housing borne by employers; employers’ social security expenditure; cost of vocational training; cost of welfare services (e.g. canteen, recreational facilities); labour costs not classified elsewhere (e.g. cost of work clothes), and taxes regarded as labour cost (e.g. taxes on employment or payrolls). For a detailed description of these elements, see ILO, 1966.

Source: ILO, 1973.

The goal of Fair Trade certification is to improve the living conditions of farmers and workers in developing countries. The process of certification covers number of parameters, which are summarized below

1. Prices: Producers are guaranteed a minimum price for the good, as well as an additional fair trade premium. The price floor and premium are set separately for each good.

2. Workers: Workers must have freedom of association, safe working conditions, and wages at least equal to the legal minimum and regional averages. Child labor (defined as a worker that is less than 15 years of age) is prohibited.

3. Institutional structure: Farmers / workers must organize as cooperatives, where decisions are made democratically and with a transparent administration that can effectively export their product and administer the premium paid to the organization in an accountable manner. For some products larger enterprises can become fair trade certified. Here, joint committees of workers and managers must be formed and democratically structured.

4. Environment: Certain harmful chemicals and GMOs are prohibited. The environmental criteria are meant to ensure that the members work towards including good environmental practices as an integral part of farm management by minimizing or eliminating the use of less desirable agrochemicals and replacing them, where possible, with natural, biological methods, as well as adopting practices that ensure the health and safety of the cooperative members and the community. Producers must provide environmental reports summarizing their impacts on the environment. 5. Stability and access to credit: Fair Trade buyers agree to long-term contracts (at least one year) and to provide advance crop financing to producer groups (up to 60%) if it is requested.

pg. 5

Global Trends

The global economy contracted sharply between 2007 and 2009, recovered in 2010, but subsequently

decelerated as seen in the figure above. While growth rates after 2010 weakened across the globe, the

trends are better in the emerging and developing economies.

In the big economies around the world, the wage trends has followed the GDP trends. However, in most

of the economies the minimum wage is not indexed with the GDP. This is indicative of the tendency to

cut down minimum or fair wages with the economic downturn. This may not affect the skilled / high paid

labor force in a country but it definitely pushes lot of people below poverty line or below living wages.

Global wage growth decelerated in 2013 compared to 2012, and has yet to rebound to pre-crisis rates.

The relationship between wages, compensation, different deflators and labour productivity

Since wages represent only one component of labour costs, it may be more appropriate to compare gains in labour productivity with increases in average compensation per employee (as opposed to wages). Compensation of employees includes wages and salaries payable in cash or in kind and social insurance contributions payable by employers (CEC, IMF, OECD, UN and World Bank, 2009, para. 7.42).

A second area of debate surrounds the most appropriate tool to be used to deflate wages or labour compensation: the consumer price index (CPI) or the GDP deflator. The GDP deflator captures the change in prices of all goods and services produced in the economy. In contrast, the CPI reflects the prices which affect consumers (i.e. the prices of goods and services consumers buy). Thus, the GDP deflator and the CPI can differ, because the overall price of the basket of goods bought by consumers is different from the overall price of all goods produced domestically. So which deflator is more appropriate in calculating changes in real wages and/or labour compensation? It depends on the end-use of the analysis. When the standard of living is being assessed, the CPI more accurately reflects changes in the purchasing power of consumers: this is why the Global Wage Report uses the CPI to calculate its global and regional estimates for average real wage growth. However, for enterprises, the relevant measure may be between productivity and labour compensation deflated by the product price; in this case, the GDP deflator may be more appropriate (Feldstein, 2008).

A detailed study by the US Bureau of Labor Statistics corroborates this finding for the United States: it shows that while these measurement issues do affect the exact estimates, they do not affect the overall conclusion that productivity grew faster than wages (Fleck, Glaser and Sprague, 2011). There was also a similar finding for the United States in 2014 in the Economic report of the President (USCEA, 2014).

-Global Wage Report 2014/15 by ILO

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

REA

L G

DP

GR

OW

TH (

%)

World Advanced economies Emerging market and developing economies

pg. 6

The following chart explains 2 things. First is a global estimate based on wage data for 130 economies

and the second is the global estimate excluding China. China, by virtue of its large number of wage

earners and high real wage growth, accounted for much of the global wage growth. In fact global wage

growth contributed by China is almost half of global growth.

As can be seen from figure above, global real wage growth dropped sharply during the crisis in 2008

and 2009, recovered somewhat in 2010 and then decelerated again. It has yet to rebound to its pre-

crisis rates.

Global wage growth driven mostly by emerging and developing economies.

Growth in wages in

developed economies has

remained flat. The chart

Annual average real wage

growth in the G20, 2006–13

shows estimates for the

whole of G20, for its

developed and its emerging

members. The countries of

the G20 contribute to about

75% of world GDP and

employs more than a billion

paid employees. It can be

observed that the average

real wage growth throughout

the period was driven by

emerging and developing

economies when compared

to developed economies average real wage growth rate which remained low or negative throughout the

period.

Between 1999 and 2013, labour productivity growth in developed economies outstripped real wage

growth, and labour’s share of national income.

2.12.4

0.50.7

1.4

0.1

1.31.1

2.83.1

1.21.6

2.2

1.0

2.22.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gro

wth

(%

)

Global (without China) Global Linear (Global (without China)) Linear (Global)

Annual average global real wage growth, 2006–13 Note: Global wage growth is calculated as a weighted average of year-on-year growth in average monthly real

wages in 130 countries, covering 95.8% of all employees in the world.

Source: ILO Global Wage Report 2014/15

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

GR

OW

TH R

ATE

AXIS TITLE

G20 - developed G20 - emerging G20

Annual average real wage growth in the G20, 2006–13

Note: The estimate for the G20 uses the methodology specified in Appendix I, but is restricted to

18 out of 19 individual countries for which data are available (Argentina identified some

inconsistencies in its wage series for some years and has been excluded).

Source: ILO Global Wage Report 2014/15.

pg. 7

Chart Trends in growth in average wages and labour productivity in developed economies (index),

1999–2013 shows that after

a narrowing of the gap

during the depth of the crisis

between 2008 and 2009,

labour productivity has

continued to outstrip real

wage.

A study of minimum wage issue in United States and the implications to increase it.8

The Congressional Budget Office (CBO) looked into two options for increasing the federal minimum wage to $10.10

in three steps and $9.00 in two steps from the current rate of $7.25.

8 The Effects of a Minimum-Wage Increase on Employment and Family Income: Congress of the United States Congressional

Budget Office

Real wage index

Labour productivity

index

100

103

106

109

112

115

118

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

IND

EX (

BA

SE Y

EAR

=1

99

9)

Trends in growth in average wages and labour productivity in developed

economies (index), 1999–2013 Note: Wage growth is calculated as a weighted average of year-on-year growth in average monthly real wages in

36 economies (for a description of the methodology, see Appendix I). Index is based to 1999 because of data

availability.

Source: ILO Global Wage Report 2014/15.

pg. 8

Effects of CBO’s Options on Employment

According to CBO’s central estimate, implementing the, $10.10 option would reduce employment by roughly

500,000 workers in the second half of 2016, relative to what would happen under current law. That decrease would

be the net result of two effects: a slightly larger decrease in jobs for low-wage workers (because of their higher

cost) and an increase of a few tens of thousands of jobs for other workers (because of greater demand for goods

and services).

Under the $9.00 option, employment would decline by about 100,000 workers in the second half of 2016, relative

to what it would be under current law, according to CBO’s central estimate9.

Measurement & Impact

At first glance, a country's minimum wage rate may look like a definitive starting point for compensation

planning. Upon scrutiny, however, global minimum wage rates raise more compensation and workforce

planning questions than they answer.

“Managed effectively, a minimum wage rate can reduce poverty and deliver significant societal and

economic benefits” World Bank economist Jan Rutkowski.

“Minimum wages are "an indicator of wage inflation. When the minimum wage increased by 5 percent

[in Brazil], we essentially increased our entire salary structure by 5 percent." says Adam Goldman, vice

president of human resources for Safariland, a Jacksonville, Fla.-based provider of law enforcement

and security products and services, and a subsidiary of BAE Systems.

The analysis and debates present a challenge because definitions of "living" and "fair" wages continue

to evolve and change; Different organizations follow different standards, which often requires

conversion of demands and expectations into local currency. Exchange rate fluctuations and

differences effect the average workweeks e.g. 40 hours in the United States equals 48 hours in Mexico.

A "living wage" refers to a threshold that allows workers and their families to have decent living

standards. Location-specific living wage standards usually identify a minimum amount of money

required to cover food, basic non-food items and other discretionary expenditures.10

Wage levels and wage-fixing frameworks provide a living wage floor for workers, while conforming to

national wage regulations (such as the minimum wage, payment of wages, overtime payments,

provision of paid holidays and social insurance payments). It must try to ensure proper wage

adjustments and lead to rational wage increments in the country (with regard to wage disparity, skills,

individual and collective performance, and adequate internal communication and collective bargaining

on wage issues).

The Proposal

9 How CBO Estimated the Total Effects of the Options on Employment

CBO’s central estimates that the $10.10 and $9.00 options would reduce employment by roughly 500,000 and 100,000 workers, respectively, were based on four main factors. 1. The number of low-wage workers directly affected by the options. 2. The responsiveness of the employment of low-wage workers to increases in minimum wages. 3. The change in the wages of directly affected workers and 4. The increase in demand for goods and services caused by each option. To calculate the total effect on employment, CBO multiplied estimates of the first three factors together for teenagers; did the same for adults; added the results; and then added an amount to account for the fourth factor. To reflect the considerable uncertainty in estimating the total employment effect, CBO also reported a range within which, in the agency’s assessment, there was about a two-thirds chance that the actual effect would lie. 10 Minimum’ vs. ‘Fair’ vs. ‘Living’ Wages: Eric Krell: Society for Human Resource Management

pg. 9

By comparing these issues of basic needs, a framework for adjustment can be designed.

Our proposal is to implement a Systematic Tax

Easing Policy and Debt Rate Discount Policy for

the businesses which implement the new wage policy

along with the implementation of the increased

minimum wage by the governments. This system will

envisage a periodic increase in minimum wage policy

by the government along with a tax exemption that will

mitigate the effect of increase in minimum wage.

However this system also ensures a proportional

decrease in the exemption throughout the period of

the current policy. The new exemption comes to effect

with the implementation of the next policy. This

system will ensure minimum inflation which does not affect the demand and hence prevents

unemployment. This policy will also encourage employment and hence will be a major driver in reducing

poverty. This will be accordance to the UN Global to reduce world poverty by 2050.

Stakeholders Analysis

However to implement a framework we need to understand who are the stakeholders. At the national

level Governments, Financial markets, judicial machinery, National labor organizations, Commodity and

money market regulators are the key stakeholders for fixing the minimum wage framework. All these

stakeholders are assisted by Central and local Governments, Domestic and Foreign policy ministries,

Economic and Trade policy ministries, Technology development and policy, Big box Retailers and

Manufacturers, Local labour markets, Local labors unions and Consumers

A brief analysis of the stakeholders are given below.

Stakeholder Roles Responsibilities Interests Motivation Rank

International Trade Organization

To help expand world trade

Eliminate trade barriers

Provide strong incentives for domestic and global trade growth

Reduce import tariffs

Provide consumers greater variety of goods

Stimulate job creation as industries sell beyond borders

Drive worker focus on country competitive advantages

Greater access to modern technologies, healthcare, commerce and education

7

International Labour organization

Promoting Jobs and Protecting people

Promotion of rights at work

Encourage decent employment opportunities

Enhance social protection and strengthen dialogue on work-related issues

Give an equal voice to workers, employers and governments

Ensure that the views of the social partners are closely reflected in labour standards and in shaping policies and programmes.

Drive labour equality

Generate labour for majority populous

Drive the poverty divide among the bottom layer of the pyramid

6

Minimum Wage

Tax Exemption

pg. 10

Stakeholder Roles Responsibilities Interests Motivation Rank

Governments Administer and govern the implementation of the policies

Increase employment rate Reduce inflation Increase GDP growth Encourage industry behaviour in minimum wage adoption

Improve the employment rate

Improve the economy

Encourage the growth in industrial production

Enhance the quality of life

Better social life and local communities

Growth in meeting basic needs of its communities

Growth in income and spending

Growth in Trade and manufacturing

1

Business / Manufacturers

To manufacture and stimulate the economy

Provide better quality of products Reduce the costs Enable better trade practices Support community needs profitably

To engage in ethical and social well-being through manufacturing value enabling products

Adopt innovative processes to deploy new products

Lower taxes

Increase revenues

Maximize gross profits

Lowers Taxes

Build business strategies to engage social well being

Improve brand image and reputation

2

Labour councils (unions) and Labour population

To create better employee - employer relationships and effective labour pools

To be effective medium in labour – owner relations To channel labour pools from local communities to Big box retailers and industries

To improve employment rates of local communities

To promote better labour sourcing practices by providing the labour pools

To liaise with local and central governments in promoting policy adherence and governance

Reputation to drive effective social encouragement and engagement

Advocates of better employment measures and policies

3

Financial Markets / Institutions

To engage profitable exchange of trade in the economy

To support industries in debt financing and equity financing To be the levers of financial stimulus to growing markets To drive economic, financial and employment growth

To lend debt and equity to growth oriented industries

To provide attractive debt financing for organization adopting government policies

Interest revenues for Banks and strong equity markets

4

Local communities

To enable and create socially, financially healthy societies

To be socially responsible for basic education and societal well being Encourage better corporate – social engagement

Promote increase in prosperity inside the community.

Increase the Income of the population generating better quality of life for the same population.

Better educated communities

Basic skilled workforce

5

Feedback, Evaluation and Assessment

pg. 11

Evaluation of results takes many forms. One aspect of this involves seeking regular feedback from local

communities to ensure that activities are on the right track and necessary implementation improvements

can be made (this also builds trust among relevant stakeholders). From the outset, companies and their

partners need to define the mechanisms through which to measure the impact of planned initiatives

(and recognize that measuring comes with a cost that should be factored in at an early stage). As

projects are implemented, companies should ensure that measurement is actually being conducted. To

effectively convey the impact of initiatives—both internally and externally—it is important to agree on a

communications framework from the outset. Sufficient time should be allowed for an impact to

materialize before announcing any results (communications may backfire if results are not being

achieved as quickly as anticipated). If expectations are managed effectively, communications provide

a critical tool in securing buy-in from local communities and partners externally and leadership support

internally—which in turn helps guarantee a long-term impact. Of course, the recommendations set out

here are not mutually exclusive. When embarking on social investment programmes, companies may

place more emphasis on some strategies than others, depending on the focus and scope of the

programmes they are planning to execute. Nevertheless, to varying degrees, all of them should be at

least considered if companies are to turn their social investment programmes from charitable to

strategic.

System Thinking and the Feedback Loop (As Is)

System Thinking and the Feedback Loop (To

Be)

A proper framework for evaluating a firm’s decision

to raise wages in the context of anti-sweatshop

activism would take into account both the costs and benefits of setting wages above the market-clearing

level. In a competitive market with no external pressures, a worker’s wages are set equal to the value

of their marginal product.

pg. 12

Conclusion: Together in a universal compact

The future is not what it used to be. Past expectations of ever-growing abundance

cannot be met. Infinite growth is not possible on a finite planet. We use more of the

Earth’s resources than Earth can regenerate, and natural systems can´t cope with the

waste from an economy built on ever-rising throughput of materials. At the same time,

the reality that governments, communities and businesses need to navigate is

increasingly complex — and the tolerance for navigational errors is zero. Furthermore,

the cost of inaction is rising by the day.11

In today’s intense globalization, more countries need to establish legal minimum and fair wage rates.

Human Resource professionals must familiarize themselves with minimum wage rates from data from

public and private sources. They should be able to recognize the limitations of the standard around

A country's total compensation standards.

A country's wage inflation.

Wage levels that would comply with ethical sourcing guidelines.

Systematic Tax Exemption Program for businesses adopting minimum wage regulations prevents

businesses from increasing product cost and will maintain stable customer demand which prevents

minimum wage labourers from losing their jobs due to lack of production

Systematic Debt Rate discount Policy which allows special debt financing rates over meeting a %

labour population with min wage adherence.

Government will revise the minimum wage policies periodically and will amortize the tax exemption

over that period. This framework will also prevent excessive inflation.

Increasing the minimum wage too high, too fast can have a negative outcome by creating a ripple effect

throughout the economy. Thus a progressive approach towards minimum wages through government

sponsored special financial vehicles would only make this vision a reality. Governments, financial

institutions, businesses and communities together are equal partners in creating a sustainable and

scalable model to meet the minimum wage standard and create shared value.

11 The Global Opportunity Report 2015 by UN Global Compact.