Why setting a new minimum wage is taking longer

Weaknesses in the country’s labour law, lack of reliable data about different sectors of work, as well as a fragile and rigid private sector have derailed negotiations to institute a new minimum wage.
Workers at a construction site. (File)
Workers at a construction site. (File)

Weaknesses in the country’s labour law, lack of reliable data about different sectors of work, as well as a fragile and rigid private sector have derailed negotiations to institute a new minimum wage.

Several experts interviewed by The New Times about why setting the minimum wage has delayed, explained that the process is sensitive and needs not only extensive consultations with stakeholders but also a review of the country’s seven-year-old labour law.

At Rwf100 per day, the country’s current minimum wage which was set in the 1980s is outdated and out of touch with today’s economic realities, a situation that has led labour unions in the country to push the government to revise the wage in order to protect vulnerable workers.

“For us the delay in setting a new minimum wage is not a good thing in terms of giving the last protection to vulnerable workers. The minimum protection of workers is very necessary and one of the ways to ensure minimum protection for workers is to have the minimum wage,” says Eric Manzi, the Secretary-General of Rwanda’s biggest trade union, Cestrar, who is also the vice-president for the National Labour Council.

In an interview last week, Manzi wondered why the government has taken so long to set the new minimum wage while the current labour law provides for it and consultations about it have been conducted with different stakeholders and even a study about the new wages conducted and concluded in 2014.

“If the minimum wage were to be published this year, after three years many things will have changed in our economic environment,” he said, calling for faster enactment of a ministerial order setting a new minimum wage.

The law N°13 /2009 of May 27 2009 regulating labour in Rwanda, in its article 76, stipulates that “the Minimum Guaranteed Wage (MGW) per categories of work shall be determined by a ministerial order from the ministry of labour after collective consultations with the concerned organs”.

And the Presidential order N°31/01 of 25/08/2003 on compensation for personal injury due to accidents caused by motor vehicles, in its articles 17 and 19, refers to the minimum guaranteed salary as a way of determining compensations and transactions within the insurance sector as well as in other social security issues.

While these two legal provisions have for a relatively long time left many Rwandans believing that they had all it takes to set up a new minimum wage, little did they know about the gap in the labour law until recently when the government was almost completing consultations on instituting the new minimum wage.

Legal experts at the Ministry of Public Service and Labour (Mifotra) say there is a legal challenge still hampering the setting of the minimum wage since the country’s current labour law doesn’t explicitly govern the informal sector.

Article 3 of the labour law says that “the informal sector worker is not subjected to provisions of this law, except for issues relating to social security, the trade union organisations and those relating to health and safety at workplace”.

In that case, the government needs to review the country’s labour law before it can proceed with the process to set a new minimum wage for both the informal and formal sector.

A review of the Labour Law is ongoing and officials at Mifotra say that the country should have a new labour law before the end of the year if things move according to plan.

Apart from making the labour law govern both formal and informal sector workers, the government will also have to reconsider in the law whether a Minimum Guaranteed Wage (MGW) has to be set by work sector categories only or whether a single minimum wage should be applied across all sectors.

While the feasibility study on minimum wage conducted by the government had proposed that minimum wage be set by sector, some experts including those at the International Labour Organisation (ILO) have warned that for a minimum wage system to be effective, it should be updated regularly and the update should be evidence-based, relying on actual data.

“The paper doesn’t mention any method for adjustment in the future. If this is the intention, will (should) there be a regular wage survey conducted to ensure further adjustments are based on evidence?” ILO experts noted in their feedback to government on the proposed minimum wage by work sectors.

ILO experts wondered if the government’s consultants had reliable data about different sectors of work in the country and their economic contribution to society when they proposed a minimum wage of Rwf270 for domestic workers and Rwf7460 for air transport workers, essentially opening huge inequality gaps among workers.

Jude Muzale, National Programme Coordinator for ILO in Rwanda, said in an interview last week that minimum wages should have fewer exceptions if they are to be effective.

“Let me emphasise that to have maximum benefits, minimum wages should have as few exceptions as possible and cover the groups of wage-earners who are most vulnerable and open to low pay and poverty. I am thinking, for example, at the case of domestic workers. They are frequently excluded from minimum wage protection,” he said.

An estimated 22.4 million domestic workers (42.6 per cent of the total worldwide) have no minimum wage that is applicable to them, Muzale says, explaining that if well designed minimum wages can be a useful tool for social justice.

Apart from the gaps in the legal framework and the poor availability of data on the labour situation, there is also an issue of fragile and rigid private sector in the country with regard to setting a new minimum wage.

Manzi said while workers he represents have no problem with suggesting a minimum wage, many members of the private sector haven’t been flexible at all as they continue to see setting a new minimum wage as a threat to their current powers to negotiate with employees at their own terms.

“There are many challenges, especially the private sector or the business community. Maybe setting a new minimum wage is taking long because there are some other negotiations between the government and the private sector,” he said, urging members of the private sector to be flexible.

The Minister for Public Service and Labour, Judith Uwizeye, said late last month that the minimum wage will be approved “in a not so long time.”

She said that “the government has never been afraid of setting a minimum wage” and explained that the process is taking long because it requires consensus among all stakeholders.

“Setting a minimum wage deeply affects the country’s life, so we need to carry out conclusive consultations with all the stakeholders,” she said, promising that the consultations will end soon and a minimum wage set.

While experts at ILO couldn’t say how long consultations to set a minimum wage should take, they insisted that full consultations with social partners and independent experts in the operation of minimum wage systems is essential and lies at the heart of ILO Convention No131 on Minimum Wage Fixing.

“Minimum wages must be designed in a way to balance the needs of workers and their families and economic factors, including the legitimate needs of sustainable enterprises. If they are set too low they will have limited effects on living standards. If they are set too high, they can hurt wage employment or formal employment,” Muzale said, emphasising the need for full consultations while setting a new minimum wage for Rwanda, also adding that the new minimum wage’s effects on public sector pay and the budget should also be assessed.

The ILO Minimum Wage Fixing Convention of 1970 indicates that crucial elements to be considered while determining the level of minimum wages shall include 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.

The convention also states that economic factors, including the requirements of economic development, levels of productivity and the desirability of attaining and maintaining a high level of employment should be considered.