Monday, August 18, 2014

International Minimum Wage Comparisons

How does the level of the minimum wage relative to other wages compare across higher-income countries around the world? Here are a couple of figures generated from the OECD website, using data for 2012.

As a starter, here's a comparison of minimum wages relative to average wages. New Zealand, France, and Slovenia are near the top, with a minimum wage equal to about half the average wage. The United States (minimum wage equal to 27% of the average wage) and Mexico (minimum wage equal to 19% of the average wage) are near the bottom.

However, average wages may not be the best comparison. The average wage in an economy with relatively high inequality, like the United States, will be pulled up by the wages of those at the top. Thus, some people prefer to look at minimum wages relative to the median wage, where the median is the wage level where 50% of workers receive more and 50% receive less. For wage distributions, which always include some extremely large positive values, the median wage will be lower than the average--and this difference between median and average will be greater for countries with more inequality.

Here's a figure comparing the minimum wage to the median wage across countries.  The highest minimum wage by this standard is Turkey (71% of the median wage) followed by France and New Zealand (about    60% of the median wage). The lowest three are the United States (38%), the Czech Republic (36%) and Estonia (36%).

This post isn't the place to rehearse arguments over the minimum wage one more time: if you want some of my thoughts on the topic, you can check earlier posts like "Minimum Wage and the Law of Many Margins" (February 27, 2013), "Some International Minimum Wage Comparisons" (May 29, 2013), "Minimum Wage to $9.50? $9.80? $10?" (November 5, 2012). Moreover, minimum wages across countries should also evaluated in the context of other government spending programs or tax provisions that benefit low-wage families.

However, I will note for US readers that the international comparisons here can give aid and comfort to both sides of the minimum wage argument in this country. Those who would like the minimum wage raised higher can point to the fact that the U.S. level remains relatively low compared to other countries. Those who would prefer not to raise the minimum wage higher can take comfort in the fact that, even after the minimum wage increased signed into law by President Bush in May 2007 and then phased in through 2009, the U.S. minimum wage relative to average or median wages remains comparatively low.