But I would like to raise another question: How can we give workers opportunities to earn more than the minimum wage and continue increasing their earnings throughout their careers?
For me, increases in the minimum wage and opportunities for workers to develop their skills, capabilities and careers so they can earn above the minimum should go hand in hand. The minimum wage provides a floor of protection, while skills and better job opportunities help our people rise above that floor.
In the labour market, employers hire people to produce goods or provide services that others need. Therefore, their ability to create jobs and pay wages depends on orders, productivity, costs, management and competitiveness.
In a simple competitive-market model, a minimum wage set below prevailing market wages may have little direct effect. If it is set above what employers can sustain, all else being equal, businesses may reduce hiring or working hours, potentially increasing unemployment.
But real labour markets are more complicated than this model. Where workers have limited employment choices, an appropriate minimum wage can improve wages without necessarily causing job losses. Therefore, wage increases do not have the same effects in every situation. We need to consider the size of the increase, the circumstances of businesses and measures that can help enterprises adapt.
I believe a meaningful wage discussion must answer two questions at the same time: What do workers need to live decently? And what do we need to improve so the economy can provide better jobs and higher wages?
Don’t Let a Single Wage Figure Hide the Differences
When we talk about “wages”, we need to be clear about what we mean. The minimum wage is the lowest level of pay that must be guaranteed, and employers are not allowed to pay below the legally established minimum. Basic wage is the base pay for a position and normal working hours before additions such as overtime, bonuses and other allowances.
Gross wage includes basic pay plus allowances, overtime, bonuses and other components counted as income before taxes and employee contributions are deducted.
Average wage is calculated by adding the wages of all workers and dividing the total by the number of workers. This figure can be pulled upward or downward by a relatively small number of high- or low-paid workers.
Median wage is the middle value after wages are arranged from lowest to highest, dividing wage earners into two equal halves.
Exact definitions may vary according to the law and statistical source.
In particular, an employee’s gross wage is not the same as an employer’s total labour cost. Labour costs may also include employer-paid social security contributions and other expenses associated with hiring and developing employees. The money an employee takes home (take-home pay) is the amount remaining after deductions. Total wages may include allowances, bonuses and overtime, depending on the definition being used.
If take-home pay increases because a worker is working more overtime, we should ask: Has the hourly wage increased as well? How much time does the worker have left for rest and family?
Similarly, an increase in average wages does not mean everyone has received the same increase. A relatively small number of highly paid workers can pull the average upward. Therefore, we should also look at the median wage, which represents the middle point, and at wage quintiles, which divide wage earners into five groups of 20%, from the lowest-paid to the highest-paid.
For me, the important question is: Are people in the lowest-paid groups gaining opportunities to move upward?
For Cambodia, Employment Opportunities Must Include Those Working, Those Waiting to Enter the Workforce and Those Who Will Join It in the Future
Cambodia’s young labour force is an opportunity for the country’s future. But youth can become an economic driver when young people have skills, information about career opportunities and opportunities to use their abilities.
Every year, the labour market receives new entrants from different groups: graduates, those who leave education before completing it, and people beginning their search for work.
For young people who leave the education system too early and do not yet have sufficient skills, a first job may be an urgent necessity to support their families. We need to ensure that this first job has a pathway forward: workers should be able to continue learning while working, receive short-term training and move into jobs offering better pay. Leaving school early should not mean closing the door to lifelong learning.
For Cambodian workers returning from Thailand, we also need to recognise both their need to rebuild their incomes and the skills they bring home. Some workers may have valuable work experience and skills but lack formal certificates or connections to employers who need those skills.
Therefore, skills assessment and recognition of experience, training to fill skills gaps and employment-matching services are important.
This approach is consistent with efforts to support the reintegration of returning migrant workers being implemented by the Royal Government and the Ministry of Labour and Vocational Training, by connecting employment services, skills development and social protection. Returning home should not mean that a worker’s experience has to start from zero.
In this context, maintaining and expanding employment is extremely important. But having a job alone is not enough. We need to create jobs that provide pathways for skills development and wage progression.
Why Can Skills Help Increase Wages?
People who can operate machinery effectively, reduce errors, ensure quality, solve problems or manage teams can help businesses create greater value. This provides an important foundation for the possibility of higher wages.
But productivity is not the result of a worker’s effort alone. It also depends on machinery, technology, management, raw materials and work organisation. Even skilled workers may struggle to perform at their full potential if equipment is inadequate or work systems are inefficient.
For example: A team spends $10,000 on labour to produce 100 units a day. After training and process improvements, the same team can produce 125 units in the same amount of time, while labour costs rise to $11,000. Overall, the labour cost per unit falls from $100 to $88.
This illustrates how workers can receive higher pay while an enterprise’s labour cost per unit falls. In practice, investment decisions must also take into account equipment costs, training expenses and market demand for the products.
At the same time, higher productivity does not automatically guarantee higher wages. There must also be clear wage structures, negotiation and equitable sharing of the benefits.
Singapore Offers a Lesson on Creating a Pathway to Higher Wages
Singapore’s Progressive Wage Model links job levels, training and wages. It was developed by employers, unions and the government and sets wage and training requirements for workers covered by the system.
What Cambodia can learn from this is how to make workers see a clear pathway for themselves: “What level am I currently at? What do I need to learn? What skills do I need to demonstrate? And how will that progress be linked to higher wages?”
I believe Cambodia could consider piloting such an approach in sectors that are ready, linking skills standards, recognition of competencies, job levels and skilled pay through tripartite agreement or mechanisms under the National Council on Minimum Wage.
Linking wages to skills must go hand in hand with consideration of living costs and protection of the minimum wage. It should not become a condition requiring workers to wait until they acquire higher skills before receiving basic livelihood protection.
Breaking the Cycle of Low Skills and Low Wages Starts With Access to Opportunity
Low incomes can limit a family’s ability to invest in education. Children may leave school before acquiring skills and then enter low-paying jobs. This cycle can repeat itself from one generation to the next.
We can change this direction through skills demanded by the market, jobs that use those skills, and wages that reflect workers’ progress through skills development. As living standards improve, families have greater capacity to invest in healthcare, savings and their children’s education. Higher income today can become a learning opportunity for children tomorrow. And the skills those children gain tomorrow can expand opportunities for the family in the next generation.
But families cannot make this journey alone. There must be quality education, scholarships, accessible training, childcare services and social protection, especially for those facing hardship.
Overall, in my view, four groups need to play practical roles:
Employers should invest in skills, equipment, machinery and management, establish wage-progression pathways within their factories and enterprises, and clearly share the benefits of productivity gains.
Workers should participate in learning and continuously develop their capabilities and skills, while planning their careers with support for training time and costs, and continue investing in the education of the next generation.
Unions should protect workers’ rights, help improve working conditions, and promote opportunities for training and skills development.
The government should ensure decent working conditions, fair wages and labour rights, expand skills development, connect job seekers with employers, and support factories and enterprises in creating higher-value jobs.
I want to see a young person enter their first job with not only an income but also a pathway for career growth. I want to see returning migrant workers find jobs that recognise their experience. And I want to see workers’ families have greater opportunities to send their children to higher levels of education and access better employment opportunities.
That is why I believe wage growth must be linked to growth in skills, productivity and equitable sharing of the benefits. Skills must have value in the workplace, and that value should be reflected in people’s wages and living standards.
Mao Vutha is a Cambodian communications specialist with a keen interest in social affairs. The views and opinions expressed ae his own.
