Minimum Wage is Rising in the West

Growing income inequality is a hot topic of the developed world.  In the US and around Western Europe workers have seen static wages and rising living costs for many years. In the UK, in 2012 real wages had fallen back to 2003 levels. Meanwhile in the US in 2009 95% of all income increases went to the top 1% of earners. The gap between rich and poor is becoming frontline politics.

Two recent developments catch the eye. In May the people of Switzerland (who have no current minimum wage) strongly rejected in a nationwide referendum the introduction of the world’s highest minimum wage rate at $25 per hour. Clearly, the minimum rate wouldn’t have applied to many Swiss citizens.

Meanwhile, in the US the City of Seattle has approved a large rise in their minimum wage, up $5.68 to $15 per hour (to be implemented in stages over several years). This is more than double the current Federal minimum wage and is a defining step in the US context. Other States are watching and 34 are considering or have already set increases. Meanwhile President Obama would like to raise the US Federal rate from $7.25 to $10.15 per hour but does not have the support of Congress.  The IMF however yesterday recommended raising the Federal rate both to boost growth and address the country’s 15% poverty rate.

In Europe, there is some talk of setting an EU wide minimum wage rate.  This is very unlikely to happen in the near future given the complexity of doing so.  But moves towards linking minimum wage rates to average wage rates are looking more likely and the voluntary use of the “living wage” is becoming more common.

Taking the long view, between 2000 and 2011 wages tripled in Eastern Europe, doubled in Asia, and grew by 5% in the developed world.  But global growth rates between 2009 and 2012 dropped sharply, often falling below inflation.

Below is a comparative chart in US dollars of the minimum hourly wage rates (current and announced) of some of the world’s leading economies.

Comparative chart

Country/State Minimum hourly rate, US$ (1 Euro to $1.36) (OECD)
Australia 16.45
Luxembourg 15.11
US – Seattle (by 2021) 15
France 12.84
Belgium 12.41
Ireland 11.77
Netherlands 11.60
UK 10.91
US – Washington DC 9.32
Spain 8.90
US – New York 8.00
US – Federal rate 7.25
South Korea 4.63
Hong Kong 3.87
Brazil 2.11
China 1.19
Russia 1.04
India 0.28