Minimum wages: U.S., Canada and the world
The red line shows the value of the US federal minimum wage in 2010 dollars.
During Tuesday’s State of the Union Address, President Obama called for a federal minimum wage of $9 an hour, with an index that adjusts for inflation. As we all know, there are sound arguments both for and against a higher minimum wage.
The topic spurred my own curiosity about the wage picture is in other states and countries. Of course, the value of money is a moving target. Here’s the site I used for currency conversion.
Minimum wage in New York State at present is $7.25/hr.
Across the U.S. four states have no minimum wage (Any guesses which ones?) As best I can tell, the highest is Washington state’s $9.19/hr. Vermont comes in 3rd, at $8.60/hr.
The U.S. Department of Labor has a useful color-coded chart that shows these variations.
And outside the U.S.?
Mexico recently raised its highest minimum wage by region to 65 pesos (roughly $5.10 USD) per day.
According to various media reports, minimum wages also vary by region in China, but have been on the rise:
After 24 regions in China adjust their minimum wage standards on Jan. 1, Shenzhen will have the highest monthly minimum wage at 1,500 yuan (US$241), while Beijing will have the highest hourly salary at 15.2 yuan (US$2.43), according to data recently released by the country’s Ministry of Human Resources and Social Security.
In the UK hourly minimum wages are grouped by age or apprenticeship status, and it’s much lower for teens. For age 21 up it’s presently £6.19 ($9.58 USD).
Germany was something of a surprise. According to this article “All work and low pay” in Spiegel International the median hourly wage may be €9.62 ($12.83 USD) although that’s simply an unofficial average:
Unlike most European countries, Germany does not have a federal minimum wage. Instead, the state guarantees a “minimum standard of living” for its citizens. In practical terms, that means the government — rather than employers — ensures that people get enough money to survive. This policy is meant to provide employers with greater flexibility, and some credit it as one reason behind Germany’s low unemployment rate. But others argue that the state is simply supporting bad employment practices.
Here’s a handy chart from the Globe and Mail that lists hourly wages for OECD nations (converted to USD). Australia leads that pack at $15.96 AUD/ hr ($16.52 USD) – with much lower rates for “apprentices, juniors and trainees”.
One of the biggest arguments against minimum wage hikes is that higher costs will actually reduce hiring and over-all employment. Should the conversation include tiered wages for trainees, apprentices or younger workers? Many other countries seem quite comfortable with that.
Minimum wage in Canada varies by province or territory, and the rate does not shift for age or experience. Minimums range from a low of $9.50 CAD in Saskatchewan to $11.00 CAD in Nunavuit (where the cost of imported everything is crazy high). Ontario’s hourly minimum wage currently stands at $10.25 CAD ($10.18 USD).
Any discussion about getting by on the bottom rungs of employment should mention that the U.S. remains the only major industrialized country without some form of universal health coverage. This is not new information. As dissected in a Salon article on the health care debate from 2009:
Among the OECD’s 30 members — which include Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, South Korea, Luxembourg, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, and the United Kingdom — there are only three lacking universal health coverage. The other two happen to be Mexico and Turkey, which have the excuse of being poorer than the rest (and until the onset of the world economic crisis, Mexico was on the way to providing healthcare to all of its citizens). The third, of course, is us.
Canadian minimum wages earners get unlimited – if basic – health care (that’s my own description). This is a priceless benefit in many households. And it has nothing to do with the job – all qualified residents (incluing many non-citizens) get provincially-administered health care, whatever their age or employment status. Eligibility requirements for OHIP (Ontario’s program) seem almost shockingly accesible from the American perspective.
The health care issue is huge, complex and contentious. But it’s hard to leave that out of any discussion about being able to survive on basic wages.
If the competition is a worker in China or Mexico, U.S. minimum wage earners come out looking OK. (Though after regional living costs are factored in, who knows?)
If the competitive comparison is minimum wage earners in Canada, Australia or most of Europe – who all have some form of health coverage – then many U.S. workers are left at a significant disadvantage.
Tags: canada, economics, minimum wage, politics, U.S., universal health coverage
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I would favor the German approach. You make sure you have a safety net that provides a basic level of support, health care, etc. But you do not set a mandated wage. Wages are prices and when the government sets prices you will have economic distortions that can harm the economy and the worker.
Interestingly, the US still far outpaces all of these countries in the median incomes of families.
One thing you really need to understand about business, small or large. No one hires anyone unless they need them. No business hires people just for the sake of giving someone a job. They either need someone or they don’t need someone. That is a bottom line of business.
Therefore, if a business is prone to pay only the minimum wage, that is what it will pay. And it will pay it if they need the employees no matter what the minimum wage is. They might raise the price of the goods or services but they will not raise it by much because there are many other factors in the price game.
Forget for a moment the minimum wage whatever it is. Smart employers pay more than the minimum wage if they want to retain employees and not be having them leave for a few dimes or dollars more, and then need to retrain a new employee which costs money and lowers efficiency.
The income tax credit is one lousy idea for bridging the gap between the minimum wage and a living wage. Why? Because it is a subsidy to business that is borne by other tax payers.
Lastly, does anyone really want the United States to look like Mexico or China?
Raising the minimum wage should be a no brainer.
If the multinational corporations have their way, we’ll all be working for the same wage as the Chinese. Globalization sounds good until it puts us down there…working for those way up there.
Obama’s plan is raise the minimum wage, which will raise unemployment, and have the unemployment benefits extended ad infinitum.
To simply, move employed people to the welfare dole.
sorry, jdm. here’s krugman:
Would that be the same Krugman who endorsed the minting of the trillion dollar platinum coin?
minimum wage around 7$ = about $15000
raise it to 9$ = about $18000
both wages are poverty level.
raising the min wage is not a plan to help the middle class. it’s a policy on poverty. it’s insulting
getting some 35$ an hour jobs created, now that’s a referendum for the middle class.
That raising the minimum wage will help alleviate poverty is another nonsensical, liberal myth. It will not relieve the economic problems of the unskilled or the under-employed. It will only encourage the false hope that one can actually make a decent living at a minimum wage job and it will certainly purchase votes for the Democrats. More importantly, it will also shift part of the burden of caring for the unskilled and under-employed from the government to private enterprise and, as such, constitute an increased tax burden on the middle class who own the businesses who will be hurt by this raise. Inevitably, they will pass the hurt on to their customers and employees.
I think the actual market wage for these sorts of jobs is above the current minimum wage, thus a case could be made that raising the minimum wage would simply protect some exploited workers, but would not radically impact the labor market in that most of the lower paying jobs are already paying more than 7.25 per hour.
I do think it may have an impact on particular industries we will see. The studies are often done in the aggregate so you don’t see the very local effects. We have small businessmen on this board, what do you guys think about having to pay 9.50 an hour? Would that impact you?
I don’t mind making Walmart pay 9.50 an hour although many of their jobs already pay at that rate, the question is how many dishwashers can our local restaurants hire at that wage, if any?
mervel: “the question is how many dishwashers can our local restaurants hire at that wage, if any?”
I don’t know. Perhaps Mr. Krugman has done a study on that.
Presumably local restaurants have enough dishwashers to meet demand as it is. So the question is, how does the business pay for the extra expense?
Let’s hypothesize a diner that has 8 employees, 6 of whom make minimum wage.
40 hours at $2.25/hr=$90. But there are other costs to the business. Let’s call it $100 per week per employee for simplicity. $100/wk x 6 employees = $600.
$600 per week divided by 7 days =$85.71 per day in extra costs. Figure some inflation in …we’ll round it up to $90 in cost per day of operation.
What is the average meal price and cost? Say 2 eggs, bacon, potatoes, toast and coffee. 2 eggs = $0.20, 3 slices bacon = $0.75, potato = $0.43, toast = $0.18 (expensive whole wheat 22slice/loaf), coffee = $0.50 (1 cup + 1 1/2 refill) . Grand total = $2.06 … call it $2.00 in expense. Sale price of this meal about $6.25.
$6.25 – $2.00 = $4.25
$90.00 divided by $4.25 = roughly 21 extra meals per day to pay for the increased cost of minimum wage without raising prices. 21 meals x 7 days = 147 extra customers per week or a little more than 2 extra customer per hour.
The next question is, will the increase in pay for low wage workers translate to enough extra meals sold in our hypothetical diner? Will 147 extra people decide to eat one meal for $6.25 when their income increases by $90?
If I owned that diner I would see how it went for a while with the thought that I might raise the price of that breakfast to $6.50 if business didn’t pick up.
khl:
First, I think that you did a very thoughtful analysis, and I’m not at all trying to poke fun at your comment.
I would like to say, tongue-in-cheek, on this statement: “If I owned that diner I would see how it went for a while with the thought that I might raise the price of that breakfast to $6.50 if business didn’t pick up.”
If business doesn’t pick up organically, raising prices is probably not the best move.
I think the point that I take from your analysis is that it is up to the restaurant owner, not the Federal government, to decide what rate to pay its workers.
JDM, I actually run a business where I have to make decisions on pricing all the time – though the decisions I make are somewhat different because my business relies on fewer sales at much higher price points.
Still, over the last several years I have found my costs escalating far faster than increase in price customers seem willing to bear, or to be more accurate there is more competition for fewer jobs so everyone is working to keep their bids low to try to get the order. My suppliers have been doing the same thing, cutting their margins in order to make the sale. But they have increased some costs, for instance some suppliers that used to deliver for free started charging a delivery fee when diesel prices increased several years ago and have increased the fee slightly since then.
All in all my input costs are mainly my own labor so I often end up squeezing my own take-home. So you may think that I would find that unsustainable, and in the very long term if things didn’t turn around it would be. But I have noticed a turn in the economy in the last 8 – 12 months, judging by people asking me to bid on projects.
Often I end up making less than minimum wage myself but I would consider paying someone else $7.25 an hour an insult. So I agree in the abstract that it should be up to the business person to decide the wage and let the labor market decide if it is high enough. In the real world though, there are too many people who have no conscience and will take advantage of others. It is hard not to think of the billionaire Walton family of Walmart. If they were legally allowed to pay $5.00 an hour I’m certain they would do it. And there are plenty of employers willing to take advantage of illegal labor to cut costs.
In the end, with my business hat on and thinking of my own experience working for minimum wage in my youth, I am firmly convinced that the result of an increase in minimum wage translates to a better business climate.
I’m sorry Knuckle, but who is paying their help $2.25 an hour? Your post makes no sense. Up it to $8.25 and do the math. Add in the increasing taxes, fuel costs, healthcare, etc., all which is passed on to the businessman and see how it works.
As far as your being convinced that a higher min wage means a better business climate, talk to some people who got laid off the last time the wage took a hike and see what they think.
Rancid I’m talking about an increase of $2.25 per hour. And I’ve worked plenty of minimum wage jobs over the years. My experience was that every time there was an increase in the minimum wage I did better and my employer stayed in business. Just my experience.
is it time now, to bring up the subject of illegals?
Knuckle,
Would a minimum wage of 9.50 or 10 per hour impact your business?
I don’t know about your wal-mart comparison though as Wal-Mart pays above minimum wage for all of its employees. So obviously they don’t just pay the minimum they legally can. I think they could pay more, but many walmart employees do OK.
khl: I agree with your business philosophy.
mervel raises a good point. At some point, the minimum wage will be detrimental to your business.
And detrimental to other businesses at different price points.
If $9.00 an hour will make it all better, then why not $18.00 an hour or $27.00 an hour? Having had family members laid of or let go because of min wage hikes or other costs, I just can’t see how a hike will not affect people. It makes no sense whatsoever.
Thank you for the explanation Knuckle. My bad, I misunderstood. But you have to add in some other costs. Everyone up the line who has to pay their employees more will pass those costs on to you. No one just eats increasing costs, it all gets passed on.
Minimum wage doesn’t affect my business because I work for myself. When you own your own business there are risks but also benefits. Sometimes I dont take a paycheck for weeks at a time but my business pays all of my healthcare. Also, I own my workplace through a separate business and the rent I pay is nearly all turned into equity on the property. And a lot of the time I’ve got nothing better to do than work anyway so if I’m working I’m not wasting money on entertainment.
Perhaps I’m overly harsh about Walmart but they do not provide health care to all their workers. They are a good fit for many people though and maybe the only job some can find.
I don’t believe a reasonable increase in minimum wage is bad for business, but certainly there is a point of diminishing return. As for eating costs, it doesn’t all get passed on. Any business that deals in materials that are sold as commodities go through periods where they really have little choice but to eat a difference in cost. And sometimes you get lucky by buying at a good rate then when costs escalate you have below market inventory to work with and you can cut your competitor’s throat or take a better profit.
Many times a business will work at cost or even lose money on jobs in order to keep a good customer, market share, or retain good employees through a downturn. If you let employees go when times are tough the best ones find other jobs and if you have to re-hire later you either end up with less skilled workers or you have to pay more for the good workers you had before.
And sometimes during a downturn a business may decide to INCREASE production because there is greater competition among suppliers and if buy more you get good deals. If you are confident you will eventually sell the product building inventory may be a windfall later.
Oh, the other benefit of an increase in minimum wage – and probably the best reason to increase it – workers are happier; they can afford little things that make their life a little easier, like maybe putting $10 of gas into their tank every few days instead of $3 every day; and they are likely to be more productive with fewer problems.
As long as they don’t spend the extra money on pot and beer.
I don’t know anyone working a in wage job that gets health care Knuckle. Not a one. When you work a min wage job you usually qualify for Medicare, or so I’m told. Maybe I’m wrong, but it seems to me that expecting a company to hire a min wage employee and pay healthcare these days is simply dreaming.
I agree Rancid, that is why I believe we should have universal single-payer healthcare. It helps level the playing field for small businesses and for individual workers.
Which leads to a whole new amount of taxation, power, lack of choice and regulation Knuckle. From your perspective it’s a cure all, from mine it’s just another knife in my back.
Good thing you would be covered for your Emergency Room visit to have that knife removed if I had my way. No need to thank me.
I have to agree with knuckle. I don’t think health insurance should be tied to particular employment and employers, it should be tied either to us individually so we can afford to buy it like we do car insurance or it should be offered by the government.
The problem with Obamacare it is simply a giant unfunded mandate for employers, it does not solve the basic problem or solve cost problems within the HC system.
Actually if you and your wife both work full time minimum wage jobs you would make too much for medicaid. Medicaid means you are indigent with zero assets and almost no income. You can get Child Health Plus which you buy into and that does work pretty well.
So if you are uninsured and end up with cancer, you are essentially going to have to go bankrupt. You could get medicaid if you had almost zero assets, so you could sell most of what you own and give that to the hospital then you could go to medicaid. It is a horrible system we have right now.
“Medicaid means you are indigent with zero assets and almost no income.”
Baloney Mervel. I have family members who are neither indigent nor without assets and they get Medicaid for themselves and their kids.
I do agree that Obamacare is a disaster. The news is full of stories of employers cutting hours back to 28 or 29 to avoid having to pay. It’s also reported 7 million will lose their coverage because of Obamcare. The CBO keeps reporting higher and higher costs. It was a bad plan and it’s not doing a thing to help the problem.
I like your idea of tying healthcare to the individual. Sounds like health savings plans to me.
Re: Obamacare. Now that the early reviews are coming in, more and more people are recognizing this for the disaster it will be. It’s not too late to step back from the cliff and repeal this idiotic, costly and ineffective law. It will hurt more than it helps.
Rick Scott, Republican Florida governor and former head of for-profit health-care group, disagrees with you Larry.
http://www.huffingtonpost.com/2013/02/20/rick-scott-medicaid_n_2728187.html
He’s a political whore; he let himself be bought by Federal funding for Medicaid over the next three years. Let’s see if he changes his tune if/when the funding gets cut.
You are probably thinking of Child Health Plus Rancid not Medicaid. They often get confused.
We don’t know the impact of Obama Care yet, no one does. Only time will tell, I think by the end of his current term we will have a much better view of how the program will work or not.
I think Health care should be purchased like we buy other insurance, car or home insurance is a good model. We don’t expect our employer to buy our car insurance and there is a competitive market for auto-insurance.
I don’t remember ever seeing an advertisement trying to convince me to choose a particular health insurance company, this is a sign of monopoly power, there is no true competition we don’t really choose our health insurance it’s a set deal largely defined by anti-competitive rules which don’t allow competition. This is of course fine for the health insurance corporations they love it. The same goes for medical care in the US, we need to radically expand the supply of medical services in the US, right now doctors in the US make over twice as much as doctors in Europe and Canada, they limit the supply of doctors, not for quality but to keep the prices high, another monopoly.
We have the worst of all worlds, the private sector getting very wealthy through monopolies and the government enforcing and paying for those monopolies. We can go two directions single payer that simply sets prices or full competition. I don’t care frankly either would be better than our current system. Make no mistake the current system works very well for the medical-government industry thus change will be resisted.
Speaking of minimum wage, the actual people supplying care to our elderly ARE the lowest paid of this entire scheme, CNA’s etc, often make just a little more than minimum wage, less than workers at Wal-Mart or McDonald’s. Its ironic the government ensures some medical professionals make higher than market wages, but does nothing for those providing day to day care.
This is the Medicaid income cut-offs for NYS
How do I know if my income and resources qualify me for Medicaid?
The chart below shows how much income you can receive in a month and the amount of resources (if applicable) you can retain and still qualify for Medicaid. The income and resource (if applicable) levels depend on the number of your family members who live with you.
2012 Income & Resource Levels*
Medicaid Standard for Singles
People, Couples without
Children & Low Income
Families Net Income for Families; and Individuals who
are Blind, Disabled or Age 65+ Resource Level
(Individuals who are Blind, Disabled or Age 65+ ONLY)
Annual Monthly Annual Monthly
1 $8,818 $735 $9,500 $792 $14,250
2 $11,008 $918 $13,900 $1,159 $20,850
3 $13,098 $1,092 $15,985 $1,333 $23,978
4 $15,208 $1,268 $18,070 $1,506 $27,105
5 $17,389 $1,450 $20,155 $1,680 $30,233
6 $18,984 $1,582 $22,240 $1,854 $33,360
7 $20,665 $1,723 $24,325 $2,028 $36,488
8 $22,822 $1,902 $26,410 $2,201 $39,615
9 $24,057 $2,005 $28,495 $2,375 $42,743
10 $25,294 $2,108 $30,580 $2,549 $45,870
For each additional person, add: $1,236 $104 $2,085 $174 $3,128
*Effective January 1, 2012
Maybe your relatives have families with 10 in them?
So a family of 4 can’t make more than $15,208.
OK if you both work minimum wage jobs you would make 2,560 per month or $30,720 per year, that would be WAY over. If only one of you worked a minimum wage job supporting a family of 4 you would bring home around $15,600 for the year, once again too much to get Medicaid.
You can’t work a full time minimum wage job and get medicaid, unless you have 5 or 10 kids. We don’t have a decent safety net in this country, our system in particular punishes people who work for lower wage jobs.
It just annoys me when we keep hearing this lie that everyone who is poor is taken care of, it is simply a lie.
Mervel, not everyone making min wage or a bit over get’s 40 hours a week. The relative I’m thinking of works 4 days a week, as do most of her co-workers. It’s about 28 hours a week average. She qualifies with one child. In fact she tells me the Medicaid people will ask the questions until they get the answers they need to cover you. For instance, although she owns the mobile home she lives in, she does not own the property it sits on. Therefore, in the view of the State, her home is not an asset.
I would love to see everyone taken care of in a proper fashion Mervel. But the more we try to “take care of people” it seems the more we see people refusing to care for themselves. I’ll help anyone that’s trying. I have no sympathy for those that expect to be taken care of.
Ah, the old “deserving poor” concept.
I don’t know what you want to call it, but sitting on the couch watching TV, drinking beer and waiting for someone to provide for you is not a sustainable paradigm.
Rancid I basically agree, we show people respect and dignity for who they are when we challenge them and hold them to the same sort of expectations that we have for all individuals; to work and to be productive and to care for their families. Most people have a built in desire to do that, most people are happier doing that than totally relying on the government.
Working 28 hours per week (I am sure she would take more hours if offered) at minimum wage, how could she expect to go into the private market and buy health insurance for her and her child? If you look at what health insurance costs to just buy it for yourself, it would be more than her entire check every month. It would be impossible for her. So in her case don’t you think we as a society should help her and her child get health insurance? It seems to me better for all of us if she and her child are insured, I would rather have my tax dollars go for that than some of this other foolishness that it gets spent on.
Also to me we should not discourage work or the accumulation of assets. Here is the rub for her, if she does get more hours or if the minimum wage is raised she would likely go over the $11,000 she can make now to get Medicaid. Health insurance is worth a lot, I do know people who do not take extra hours so they don’t lose their benefits, I would in that situation.
The basic problem is the cost of medical insurance and medical care, until that changes we are all going to be in these fixes.
Mervel- SHE HAS HEALTH CARE INSURANCE THROUGH MEDICAID!!! That’s what I’m saying. No, it isn’t a cadillac plan, but she and the kid get health coverage. when people talk about safety nets I see Medicaid as already being there. What is it, what “better” plan do people think should be implemented? Should everyone have full coverage for whatever they desire? It would be great, but I don’t see how that is going to work unless the gov’t starts hiring the doctors and buying the hospitals and producing the drugs. Is that what people want? I don’t know, I know I don’t like the idea.
Beyond healthcare, what will raising the min wage do in real world terms? It isn’t going to make it so people can afford health insurance. It won’t lower the fuel prices. It won’t lower food costs, rent, electricity or your taxes. You go from $290.00 a week gross to 360.00 a week gross. $70.00 more a week is great, but how much are they taking home? Maybe $35-40.00? That’s not even 10 gallons of gas or fuel oil. It might cause some to lose their healthcare as you said.
The answer isn’t raising the min wage. The answer is to stop devaluing the dollar so we can afford more of the stuff at Walmart or at the gas station, to be able to buy more food. The answer is to make NY the best place to do business, not the 2nd worst. Part time, minimum wage jobs are not an answer. Our State gov’t dodges the responsibility on this every time and I think it’s time we put the blame squarely where it lays- on ALBANY!
Rancid I realize she has Medicaid as she makes under the $11,000 for a family of 2 to qualify. My point was simply I don’t have a problem with that and I think the cutoffs are far to low. As you point out even with a rise in the minimum wage people would still not be able to purchase private health insurance.
You ask what a better plan would be? I would suggest that it is radical cost reductions in the health care system combined with a broader government purchase option for those making lower incomes and removing health care as a employer benefit, let health care be something that we all buy and are responsible for ourselves, just like car insurance. You would have a combination of a stronger safety net plus opening up competition in the health care markets which would reduce the prices and let us choose what fits us the best.
As far as minimum wage goes there are positives and negatives of raising the minimum wage. I don’t know the answer on that one, it will cause some unemployment but it will also put more money in the pockets of some low wage workers.