Should the minimum wage be raised in Jordan

A group of factors contributed to the increase in the size of the low-income business sector in the world; the most important of which are the high unemployment rates, the growth in the volume of part-time businesses, the increase in women's search for work, the trend towards market economies, the decline in the influence of trade unions and the amendments made to labour laws.

Countries began to give importance to setting a minimum wage due to its fundamental effects on labour, employment in the informal economy, wage structure, poverty levels, worker productivity and inflation rates. So, what is the minimum wage?

Minimum wage systems vary across the world, and their approaches differ from country to another, depending on the needs and choices of individual countries. In some countries, there is one minimum wage applicable to all employees, sectors and regions of the country; others have multiple levels of the minimum wage by sector, economic activity, profession or geographical region.

According to the Jordanian concept, the minimum wage is the wage that the government determines after negotiations with representatives of trade unions and employers, to be paid by the employer to the worker on a monthly basis. Minimum wage is determined at the level of JD220 per month, unified and applied in various sectors and regions in the Kingdom. The minimum wage differs from the equilibrium wage, which is determined by the supply and demand forces in the market. Usually, the employer may pay the worker higher, but not less, than the minimum wage.

The Cabinet set the minimum wage for the first time in 1999 at JD80, based on the recommendation of the committee formed by the Council of Ministers, from representatives of the government, workers and employers, according to Article (52) of Labour Law No. (8) of 1996. This limit was raised in 2003 to JD85, and in 2005 to JD95, after removing a large part of the subsidies provided to petroleum derivatives. It was raised to JD110, JD150 and JD190 in 2007, 2008 and 2012 consecutively due to the high cost of and following the sharp rises in the international and local price levels.

Establishing a minimum wage that works to achieve certain goals, such as limiting low-wage work that is often unfair and exploitative, and reducing workers’ dependence on aid provided by the state and thus reducing the cost to the state budget, which means using the funds available in the budget for other beneficial purposes. It also works to contribute to poverty alleviation and encourage many working groups with low wages to return to education, which means increased investment in human capital.

At the present time, I see that there is a need to correct the current minimum wage level by raising it again to a level of not less than JD300 due to the high cost of living in the past years, and because raising it will achieve many goals, the most important of which is protecting local employment from competition from labour expats, especially illegal migrants, who accept low wages.

Maintaining a low wage level will lead to an increase in unemployment rates due to the refusal of the community members to work in low-paid occupations and manual jobs. Studies on migrant workers indicate that they accept lower wages, harsher working conditions and longer hours than Jordanians. Therefore, they competed with Jordanian labour in some sectors, which led to raising levels of unemployment in the areas where migrant workers are concentrated and increasing the number of workers in informal economic sectors. These are some of the factors that call for raising the minimum wage.

Also, I believe that there should be a minimum national wage in Jordan, and a minimum wage for different regions or governorates in the Kingdom. These wages should be set taking into consideration certain economic, social and housing conditions. This means that distinction should be made in the minimum wage according to the age, number of working hours, place of work, dependency level, health status and the level of inflation in the region or governorate.

The writer is director general of the Association of Banks in Jordan. He contributed this article to The Jordan Times