Regionalization of Minimum Wages

Minimum wages are nearly universal policy instrument - they are applied in more than 100 countries (ILO, 2008). One striking feature, however, is their impressive diversity. These differences include the setting regimes, adjustment methods, coverage of employees and the role of social partners. The way in which the minimum wages are set is very important, as the fi xing mechanism may affect both the level and the responsiveness of the minimum wages to changes in key economic parameters. Many countries with vast territories and inter-regional economic differentiation have introduced regional minimum wages (RMW). The aim of this article is to analyze the mechanisms of MW regionalization that are used by countries with different socio-economic structure. What are the major advantages and disadvantages of these mechanisms? What is the role of social partners in setting the MWs at the regional level? And most important - what problems may be solved by the regionalization of the MWs?Based on the practice of the MW regionalization, we divide countries into four groups. However, the prevailing method is the coexistence of the national minimum wage floor set by the federal government and regional minimum wages. We conclude that the decentralized model allows taking into account the situation in the regional labor markets, including the dynamics and structure of employment, the share of low-wage labor and sectoral structure of production.