Wage Policy in Developing Countries

In this paper a number of issues affecting the determination of a wage policy in a developing country are discussed. Two specific characteristics have been assumed for such a country, neither of which is necessarily of general applicability: the existence of a large volume of unemployment and underemployment; and the tolerance of the norms of parliamentary democracy and of groups which differ from one another politically and socially as well as in their economic objectives. The quest for Pareto optimality in the enforcement of any given national wage policy in a developing economy, it has been argued, will depend for its success on institutional arrangements which can accommodate and conciliate multi-class, multi-sector and multi-party points of view, in the short, as well as long, term. Where such conciliation is not possible, the implementation of wage policy will, more often than not, be a hit-and-miss affair.