General Observation (CEACR) - adopted 2009, published 99th ILC session (2010)

Subject: Wages

The ongoing global economic crisis is gravely affecting the job and income security of millions of workers around the world. This economic downturn is a forceful reminder of the critical importance of those international labour standards that seek to ensure decent minimum wage levels, prevent the accumulation of wage arrears, grant preferential treatment of wage claims in the event of the employer’s insolvency or avoid the risk of social dumping in public procurement operations. In this context, the Committee wishes to refer to the Note included in its General Report regarding the “Relevance and application of ILO wages-related standards in the context of the global economic crisis” (pages 32-35 ), in which it highlighted the importance of the ILO Conventions on minimum wage fixing, protection of wages – including in the case of the employer’s insolvency – and labour clauses in public procurement contracts for setting the legal framework within which appropriate crisis responses can be formulated.

The Committee considers it very significant that the Global Jobs Pact, adopted by the International Labour Conference in June 2009, places particular emphasis on the need to strengthen respect for international labour standards and expressly identifies ILO instruments on wages and labour conditions on public contracts as being relevant in order to prevent a downward spiral in labour conditions and build recovery (paragraph 14). It further suggests that “governments should consider options such as minimum wages that can reduce poverty and inequity, increase demand and contribute to economic stability” (paragraph 23) and points out that “in order to avoid deflationary wage spirals, … minimum wages should be regularly reviewed and adapted” (paragraph 12). In the same spirit, the ILO Director-General in his Report to the 98th Session of the International Labour Conference entitled Tackling the global jobs crisis – Recovery through decent work policies expressed the view that “the different elements of the way forward are to be found in the international labour standards adopted, promoted and supervised by the ILO” (paragraph 42). More concretely, he stressed that “avoiding wage deflation and providing a proper anchor, in the form of effective minimum wages, will support global demand and reduce trade tensions” (paragraph 116).

The Committee trusts that the crisis responses adopted or envisaged by the governments in the field of income security will be fully consonant with the principles underlying the relevant ILO Conventions and with the output of the ILO supervisory bodies. The Committee draws particular attention to:

• - The Minimum Wage Fixing Convention, 1970 (No. 131), which establishes that determining minimum wage levels within an institutionalized framework of tripartite consultations or negotiations is key to establishing a safety net for the workers at the bottom of the wage scale while periodic review and adjustment of minimum wage rates is an absolute prerequisite to the meaningful operation of any minimum wage system. This, in turn, underlines the importance of independent sources of up to date and reliable statistical information.
• - The Protection of Wages Convention, 1949 (No. 95), which seeks to prevent wage arrears that not only deprive workers of cash and therefore lower consumption but also imply poor tax revenues and reduced public spending thus leading to a vicious circle that affects the entire economic and social tissue of the society. In view of complexity of issues, progress may only be made through cooperation with social partners. Implementing reforms and reaching compromise solutions in a crisis environment needs constant and genuine social dialogue. Drastic measures also call for strict monitoring and enhanced enforcement, which in turn implies reinforced labour inspection services and a system of truly dissuasive and effective sanctions.
• - The Protection of Workers’ Claims (Employer’s Insolvency) Convention, 1992 (No. 173), which focuses on modern solutions for protecting workers’ income in the event of enterprise closure, such as the setting up of wage guarantee funds based on compulsory employers’ contributions, which require appropriate changes in the bankruptcy and wage legislation.
• - The Labour Clauses (Public Contracts) Convention, 1949 (No. 94), which responds to the challenge of how to prevent public authorities from entering into contracts involving the employment of workers at conditions below an acceptable level of social protection and how to encourage public authorities to raise the bar and act as model employers.

To enable the Committee to discharge its functions in monitoring the application of ratified Conventions and also permit the Office to facilitate the exchange of good practices, tested policies and innovative solutions, the Committee would be grateful if the governments concerned would collect and transmit together with their regular reports detailed information on any wage policy measures taken or planned in connection with the current economic crisis which would have an impact on relevant Conventions, especially with reference to: (i) readjustment of minimum wage rates; (ii) prevention of large-scale phenomena of wage arrears; (iii) protection of workers’ claims in bankruptcy or insolvency proceedings; and (iv) inclusion of labour clauses in stimulus packages focusing on public works projects.