How the United States and other countries differ in setting the minimum wage
Most Americans prefer to raise the federal minimum wage, which has been $ 7.25 an hour since 2009. About six in ten adults (62%), including the majority in almost all demographic groups, support increasing the wage. minimum wage at $ 15 an hour. Even among the 38% of Americans who oppose a minimum of $ 15, most say they would support a smaller increase, according to a survey by the April Pew Research Center.
But popular support does not necessarily translate into government action. Proposals to raise the federal minimum wage have been repeatedly blocked in Congress over the past decade. While the Center polled the general public rather than lawmakers, the results suggest that partisan divisions among lawmakers mirror those of Americans as a whole. More than seven in ten Republicans and Independents (72%) oppose the wage hike to $ 15 an hour, including 45% who strongly oppose it, while 87% of Democrats and Democrats say they are in favor of such an increase (including 61% who strongly support it).
Such a partisan divide is important because the federal minimum wage is set out in law (the Fair Labor Standards Act of 1938, to be precise), which means that it can only be changed if Congress passes a bill. for this purpose and that the President signs it (or Congress cancels its veto). Putting minimum wage policy directly into the hands of lawmakers is just one of the many ways the American approach stands out from most other countries.
Given the renewed importance of the federal minimum wage in American politics, this article examines how other countries around the world are approaching this still controversial issue.
We have chosen as universe the 193 member countries of the United Nations and two non-member observer states (Palestine and Vatican City), plus two autonomous non-members (Kosovo and Taiwan), for a total of 197 countries and territories.
Since there is no authoritative source of information on each country’s minimum wage systems, we have relied on multiple sources for this analysis. The most important were the International Labor Organization, in particular its database on working conditions laws and its “World Wage Report 2020-21”; the annual US Department of State Country Reports on Human Rights Practices; and the WageIndicator Foundation, a Netherlands-based non-governmental organization that promotes transparency in the labor market and collects data on, among other things, minimum wage rates and rules for most countries.
As needed, we supplemented these sources with information from press reports, academic studies, government websites, and consultant reports, among others.
For the purposes of this analysis, we considered that a country has a “generally applicable minimum wage system” if it covers all or most adult workers in the private sector. Systems that apply only to the public sector were excluded because, in essence, the government only sets a pay scale for its own workers.
In some countries in the Middle East, foreign workers constitute the majority of the private sector workforce; in such cases, minimum wage laws which applied only to native-born workers were not considered “generally applicable”.
Finally, keep in mind that the minimum wage generally only applies to workers in the formal economy. In some countries that we classify as having generally applicable minima, significant parts of the workforce work in the “informal economy” and are therefore not covered.
We looked at 197 countries and autonomous territories to see how (and if) they set and adjust minimum wages, and to get a sense of the outlier the United States has in this area. We have identified 173 of them with some sort of generally applicable minimum wage system, defined as a system that covers all or most adult workers in the private sector of a country.
Here is what we found:
The United States is one of the few countries where the legislator has primary responsibility for setting the minimum wage.
Only 17 countries (about 10% of those with minimum wage systems) set their rates by status, which (as the US experience shows) can make them more difficult to update.
In at least 115 countries, the central government (or an official such as a minister of labor) sets the minimum wage by regulation, decree or decree, usually under a licensing law. In about three-quarters of these countries, government action is expected to take place only after input from workers ‘and employers’ organizations – ranging from unspecified “consultations” to formal recommendations from structured committees or commissions on labor market issues. minimum wage. (The International Labor Organization’s 1970 Minimum Wage Fixing Convention, which 54 countries have ratified, calls for such a dialogue, which may help explain its prevalence.)
Minimum wage commissions usually include representatives of workers and employers, often joined by civil servants (in which case they are called “tripartites”), and sometimes independent economic experts or representatives of civil society (“tripartite-plus” ). In at least 15 countries, these bodies are themselves authorized to set minimum wages, if they reach consensus on them.
Fifteen countries – 10 European and 5 African – rely on collective bargaining between unions and employers’ organizations to set wage levels, including minimum wages. Such negotiations usually take place at the sector or industry level, and the resulting agreements usually have the force of law.
Unlike many countries, the United States has no legal obligation to periodically review and, if necessary, adjust its minimum wage.
At least 80 countries where minimum wages are set by or in accordance with national law have an explicit obligation to review them from time to time – in most cases once a year or once every two years.
Fifty countries do not have an explicit periodic review requirement, and in 22 cases we could not find precise information in both cases. Even so, it seems that most countries review their minimum wages more frequently than the United States: Between 2010 and 2019, according to a 2020 report from the International Labor Organization, 134 countries adjusted their minimum wages to at least every three to five years.
In the United States, unlike most countries, states, counties and cities can set their own minimum wage rates.
In the vast majority of countries – 145, in our opinion – minimum wages are the sole responsibility of the national government, a national minimum wage board or other central authority. The United States is one of seven countries where states, provinces, cities, or other subnational governments have the concurrent power to set their own minimum wages (as long as they are not below the national minimum). In six countries, the minimum wage is the exclusive responsibility of subnational entities.
In general, countries that grant minimum wage authority to subnational units are large and complex (China, India, Indonesia), have long traditions of decentralized power (Canada, Australia) and / or have strong identities regional (Iraq, Bosnia and Herzegovina).
Almost half (83 or 48%) of all countries with minimum wage systems have a single, widely applicable national minimum. We don’t count the United States in this group because the federal minimum wage of $ 7.25 is actually only used in 21 of the 50 states, which together make up about 40% of American wage earners. The other 29 states, as well as the District of Columbia and several cities and counties, have higher minimums. (The highest local minimum wage, $ 16.84 an hour, is in Emeryville, Calif.)
India was supposed to get its first national floor wage in 2020, but the government has postponed it indefinitely due to the ongoing COVID-19 pandemic.
Ninety other countries have at least two and up to several dozen minimum wages, which may vary by region, industry, occupation, experience or a combination of these factors. For example, Panama, a country of about 4.2 million people, has minimum wage scales in 20 different sectors. In each sector, the minimums vary according to the region (there are two) and the type of business in each region. (Interestingly, public sector workers are exempt from minimum wage rules and generally earn less than their private sector counterparts.)
One thing quickly emerged from our review: No country has exactly the same minimum wage systems, and many of them have combinations of characteristics that are not easily categorized. Some examples:
- In Austria, at the request of the federal government, workers ‘and employers’ organizations negotiated in 2017 a national minimum wage of 1,500 euros per month which applies to all sectors. This wage floor was not implemented by a national law, but sector by sector via the collective agreements which have historically fixed the wage policies of the country.
- In Switzerland, minimum wages are fixed by sectoral collective agreements, which cover around 40% of the workforce. But a federal “standard employment contract” sets the minimum wage for domestic workers, and four of the 26 cantons have their own general minimum wage.
- Saudi Arabia’s “minimum wage” of 4,000 riyals per month (about $ 1,067) is linked to the government’s “Saudiization” program to increase employment of Saudi nationals in the private sector. Companies must employ a certain number (varying by industry and size) of Saudi nationals, and only Saudis who earn minimum wage are fully counted towards this quota. However, the minimum wage does not apply to foreign workers, who constitute the vast majority of the country’s private sector workforce.
On the other hand, 21 countries do not have a generally applicable minimum wage at all, although some have set minimums for specific occupations or industries. In five countries with national minimum wage systems, we could not find reliable information on how they work. Finally, there are three countries (North Korea, Syria and Vatican City) for which we could not find reliable and up-to-date information on their minimum wage systems, if not if there is one.