Discussion heightened towards setting minimum wage in Ethiopia

Addis Ababa, Ethiopia (ILO News) - In a continued bid to enhance the discussion on minimum wage in Ethiopia, ILO experts presented a study on the potential implementation of minimum wage laws in the country, in a forum organised by the Friedrich Ebert Stiftung (FES) and ILO. 

According to the presentation from ILO Wage Specialist, Guillaume Delautre, low wages are a major factor behind Ethiopia's high worker turnover rates. This issue forces companies to incur substantial expenses in getting and training new employees. Hence, Delautre recommends an intervention through minimum wage legislation.

However, the primary concern was the wage policy's various dimensions, particularly the pros and cons of reforming workers' conditions amid soaring inflation, high turnover rates, low labour productivity, and macroeconomic challenges. An ILO study revealed a median monthly wage of 3,000 Ethiopian Birr. The study also identified that low wages are a major source of dissatisfaction for workers citing the fact that 48 per cent of Ethiopian workers in foreign-owned apparel firms left their jobs due to poor wages. 

ILO recommended a gradual implementation of minimum wage laws through proper legislation to improve workers' living standards without significantly undermining businesses' capacity to pay.

In the discussion, Guillaume Delautre recommended that it is important to back minimum wage with collective bargaining for its effectiveness in Ethiopia. 

Back in November 2023, a delegation led by Negeri Lencho (PhD), chairman of the Standing Committee for Human Resources & Technology Affairs, at the Ethiopian House of Peoples’s Representatives along representatives from ILO, workers and employers’ associations, Civil Service Commission, Friedrich Ebert Stiftung and others visited Vietnam for a south-south learning. 

The experiences gained were shared to stakeholders in Addis Ababa during a continued minimum wage discussion. Vietnam's transformation due to its minimum wage law was widely presented. For Vietnam, a two-way structure: a National Wage Council and a technical board comprising various stakeholders responsible for updating wages explained was crucial in being consistent in reforming their wage structure. 

The visit was a great learning experience for Ethiopia on how Vietnam uses National Wage Council & Technical committee to ensure active participation of all relevant stakeholders to set evidence based minimum wage. Not only on setting minimum wage but also on how the introduction of minimum wage attracted quality investment & contributed to poverty reduction in the country. 

According to Kidist Chala, Head of ILO’s Apparel and Textile Programme in Ethiopia, “a robust employer-employee participation process would increase the likelihood of creating a consensual minimum wage law in Ethiopia, improving livelihoods, and attracting quality-oriented investment.” 

Employers’ association representatives also agree on the importance bipartite and tripartite discussion and participatory platforms to settle the matter in Ethiopia. Similarly, trade union representatives underscore that setting minimum wage is important and timely for the mutual benefit of both employers and workers and the government should take the centre stage to take the discussion to the next level.