PEP findings on the impact of Ecuador’s minimum wage policies discussed at national conference

November 18, 2016 | Guayaquil, Ecuador

Local PEP researchers in Ecuador held a national policy conference to discuss their findings and recommendations relating to the country’s minimum wage policy.

November 18, 2016 – A team of local PEP researchers in Ecuador presented their findings on the impact of the country’s minimum wage policy at a national policy conference organized in collaboration with the Ecuadorian-Canadian Chamber of Commerce and the ESPAE Graduate School of Management.

The team organized the event with the aims of 1) raising public awareness about the relationship between labor laws, minimum wage policies and labor market outcomes, such as wages, income, and employment, in Ecuador; and 2) promoting relevant policy recommendations to key stakeholders in order to improve the current minimum wage policy.

The team discussed their policy recommendations with 35 representatives of the Ministry of Labor, other government organizations, trade unions, private sector companies, academia, the media, and the general public.

The PEP team’s findings and recommendations come from their study, selected for support under the PAGE initiative in 2015. In this study, the team analyzed data from the National Survey on Employment, Unemployment and Underemployment from December 2011 and December 2012 to assess the impact of the January 2012 increase to the basic unified minimum wage, known by its Spanish acronym: SBU. The team’s analysis indicates that the minimum wage increase had a significant and positive effect on the wages of covered and affected (i.e. low income and formal) workers and is linked to reduced inequality. However, negative income effects were observed for higher-wage and female workers indicating that businesses compensated for the increased wage of low-paid workers by freezing or even reducing the wages of higher-paid workers, or by reducing the hours worked by female employees.

Based on these findings, the team recommends continuing to gradually increase the minimum wage while also implementing mechanisms to better enforce the fulfillment of both the hours and wage aspects of the policy. Find out more about the research methods, findings, and policy recommendations in PEP Policy Brief 148.

 

Main outcomes

As well as an opportunity for the team to present their findings to stakeholders, the event included a panel discussion featuring representatives of three key actors: the national government, employers, and employees. Martin Borja, Director of Salary Analysis at the Ministry of Labor, Xavier Sisa, representative from the National Wages and Labor Council (the institution responsible for establishing the SBU), and Maritza Zambrano, Secretary of the National Union of Remunerated Domestic Workers and candidate for the National Assembly, made up the panel.

The panel discussion, moderated by the team leader, Sara Wong, covered the effects of minimum wages and employment policies for low-wage workers, particularly for certain segments of youth workers and women in Ecuador. They also discussed the opinions of the panelists’ respective institutions on the current performance of minimum wages, including where improvements may be made. This section of the conference was particularly interesting as the panelists all conveyed specific and differing points of view on the effect of minimum wages.

During the event, each panelist expressed their interest in the study and in learning more about the team’s research. The team hopes that the panelists will share the results of the study with their colleagues during the discussions between the Ministry of Labor and the National Wages and Labor Council to set the minimum wage for 2017.

The team noted during the conference that the representatives of private sector companies were particularly concerned by the changes to the minimum wage and the effects it may have on employment.

The findings and recommendations were shared not only with the stakeholders in attendance but also the population at large thanks to reports in both the number one national newspaper in Ecuador, Diario el Universo, and one of the most popular newspapers in Guayaquil, Diario Expreso, shortly after the conference. ESPOL TV, a public television channel, also reported from the event. The report is available to watch online.

Additionally, the national economics magazine, Gestión, will publish an article by team leader Sara Wong discussing minimum wages and the main results of the team’s research in December 2016.

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