The minimum wage is an economic and social policy that consistently sparks debate across various sectors, particularly in political and economic circles. It sets the lowest value a worker can receive as compensation for their labor. This measure is part of efforts to protect workers’ rights and ensure a decent standard of living. However, its implementation faces differing viewpoints between its proponents and opponents, and its philosophy and motivations vary, along with its implications for the different parties involved.
The philosophy of the minimum wage stems from the need to achieve social justice and improve living conditions for low-wage workers. Since many workers earn wages that do not correspond to the cost of living, the government intervenes by setting a minimum wage to protect these workers from employer exploitation and ensure their basic needs are met. Governments impose minimum wage policies for both social and economic reasons. Socially, it aims to promote justice and reduce poverty by ensuring a reasonable income for low-wage working groups. Economically, it seeks to achieve economic stability, as increasing wages for the working class can enhance purchasing power and stimulate domestic demand for goods and services, thereby boosting economic growth.
One of the most significant impacts of the minimum wage is its effect on workers. It is seen as a tool to improve living standards, particularly for those earning close to the minimum wage. Raising wages increases individuals’ income, helping them improve their living conditions and meet their basic needs. On the other hand, imposing a high minimum wage may reduce job opportunities, as employers may find themselves compelled to reduce their workforce or cut working hours to cover the increased costs.
From an employer’s perspective, the minimum wage represents a challenge in managing operating costs. Small and medium-sized enterprises are usually the most affected, as they struggle to pay higher wages without impacting their profit margins. Increasing the minimum wage can lead to higher production costs, potentially forcing some companies to make unpopular decisions, such as raising prices or reducing labor, which negatively affects the economy overall.
For governments, the minimum wage achieves a range of social and economic objectives. It helps reduce the gap between social classes and alleviates poverty, and may reduce reliance on social support programs, thereby lowering current expenditures in the budget, reducing the need for borrowing, and easing debt burdens. However, implementing this policy requires continuous monitoring of its effects on the labor market, and sometimes necessitates providing incentives or support to employers to help them adapt to the increase in labor costs.
Thus, the minimum wage is a double-edged sword; on one hand, it provides essential protection for workers and promotes social justice, but on the other hand, it may place additional burdens on employers, especially small businesses, and lead to unintended consequences like higher unemployment or inflation. Therefore, governments must carefully balance achieving social justice with ensuring sustainable economic growth.
In Jordan, the first minimum wage was adopted at 80 dinars in July 2000, and it has been raised several times over the past 20 years, currently standing at 260 dinars. The tripartite committee, composed of the three production parties—employers, workers, and the government—has the authority under the law to adjust the minimum wage. It decided to raise the wage by rates equivalent to the cumulative inflation rates for the past three years (2022–2024), with the increase delayed until early 2025. The issue was recently revisited when current Labor Minister Khaled Al-Bakri affirmed the ministry’s commitment to implementing the wage increase decided by the tripartite committee, without any retraction, and it will be applied with the agreement of the committee members.
But how is the minimum wage level calculated?
Some countries calculate the minimum wage based on the concept of a “living basket,” estimating the minimum necessary to cover basic individual or household needs. This basket includes expenses for housing, food (measured in calories), education, transportation, and healthcare. The average prices of these goods and services are analyzed, and the wage level that ensures coverage of these needs is set. The question is: Does the current minimum wage in Jordan (260 dinars) cover those needs? Even if it increases by the inflation rate, according to the tripartite committee’s decision, by 8% to reach 280 dinars, does the minimum wage suffice to cover these needs?
If the answer is no, it raises questions about the effectiveness of minimum wage policies in Jordan in achieving a decent living standard for workers. It is important to note that rising living costs, especially in areas like rent and energy, make it difficult for individuals to cover their basic needs even after this increase. Moreover, the “living basket” depends on other factors, such as family size and price variations between different governorates, emphasizing the need for regular and comprehensive reviews that consider these economic and social variables. Therefore, it is crucial to reevaluate minimum wage policies in line with market changes and increasing living pressures to ensure social and economic justice. We have specific proposals in this regard that align with global practices.
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