Minimum wage compliance in developing countries among the informal sector workers in ghana

Aaron Kumah

Minimum wage legislations are applicable in most countries in the world and across continents. This research sought to assess the level of compliance of minimum wage legislation among informal sector workforce in Ghana. Literature in relation to wages such as components, types, classifications, compositions, determinants among others relative wage analysis were reviewed. A survey research was used with the adoption of a cross-sectional design that allowed the researchers to draw one or more samples from the population at one time period. The methodology then comprises research design, population, sample size and techniques, data collection procedure as well as data quality control. Using household and labour force survey data from varying informal sectors in Ghana as a developing country, the author calculated the rates of minimum wage compliance for employees covered by current legislation and assesses the average “depth” of violations. The level of compliance with minimum wage laws often depends on factors specific to each labour market. The research revealed, a substantial share of workers still earns less than the legal minimum wage. Enforcement has not kept up with growth in regulations to protect workers from low wages and poor working conditions. Several institutional structures shape enforcement, including the role of labour inspectors and the presence of unions. These enforcement enablers were non-functional and thus though make compliance negatively related to the ratio of minimum to median wages in Ghana, compliance rates with occupational or industry or location-specific minimum wage systems are more prevalent. Pursuance of informal minimum wages across sectors and the provisioning of adequate infrastructural base to expand employment opportunities shall on its own expand the economy and surge up wages to become living wages instead of pursuance of minimum wages. However, better compliance – especially for women, ethnic groups, and unskilled and informal workers – also depends on contextualized yet comprehensive minimum wage policies combining union/employer involvement, awareness-raising and credible enforcement.

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