A Minimum Wage for Ethiopia?!

Following a learning visit to Vietnam with several Ethiopian stakeholders in November 2023, important lessons for the introduction of a Minimum Wage in Ethiopia were discussed at a knowledge sharing workshop on May 29. Organised by FES Ethiopia and the International Labour Organisation, this debriefing brought together the impressions and insights of various participants of the visit, thereby uniting perspectives from both employers, workers, and the government side.

The primary goal of the visit was to draw upon Vietnam's experience in introducing a minimum wage, applying South-South learning to inform Ethiopia's approach. After helping to develop an understanding of labor policy and legislation, the wage-setting institutions, and ways to minimize potential risks, it seems that the visit has effectively addressed misconceptions and alleviated concerns surrounding the implementation of a minimum wage.

Most participants highlighted the numerous positive effects: An adequate minimum wage can lift workers out of poverty and enable them to meet the essential needs of themselves and their families. Elevating their living standards can subsequently enhance productivity, by boosting motivation and mitigating the adverse effects of low income, such as inadequate nutrition, compromised health, or lengthy commutes. Furthermore, adopting a minimum wage is likely to attract higher-quality foreign direct investments and major international corporations, which would invest in training their workforce, thereby enhancing their skill level. A long-term positive effect for the economy might be an increase in consumer spending thereby fueling overall economic growth and development, while at the same time enhancing wealth distribution and mitigating socio-economic disparities.

To ensure this positive impact, however, the process of setting and adjusting wage rates should be evidence-based, relying on scientific data from independent research. It is imperative, not only to assess the country's economic landscape but also basic living expenses for workers, such as housing, nutrition, and healthcare. Vietnam’s approach also integrates regional realities to ensure an equitable minimum wage, a lesson highlighted as particularly interesting for Ethiopia. The process itself should be transparent, led by effective participatory minimum wage institutions and involve all tripartite partners. Finally, awareness raising and information-sharing across all stakeholders is essential to ensure sustainable benefits.

These lessons were gathered in speeches delivered by ILO, FES, and the House of Peoples' Representatives, and were further discussed in a panel featuring CETU, CEEA, the Civil Service Commission, and others. Alongside enthusiasm and knowledge gained, critiques surfaced regarding the perceived reluctance of the government, and emphasis was placed on the prolonged timeline of the process. Concerns regarding affordability for businesses were addressed by insights from the ILO: as of 2021, only 13% of Ethiopia's workforce were categorized as wage employees, indicating a potentially minimal impact on employers post-implementation of a minimum wage. Nonetheless, the positive outcomes would persist, potentially bringing Ethiopia, currently one of the few African nations without a Minimum Wage, closer to achieving labor justice and its goal of becoming a middle-income country.