TED Employment Snapshot Series focuses on areas of employment law that may change under the Biden Administration. We hope that, in sharing how different places handle these topics, businesses find perspective and, hopefully, creative solutions.
In our previous alert about the likely increase in the federal minimum wage under the Biden Administration, we shared our view that an incremental increase from the current $7.25 per hour was more likely than an immediate and nationwide jump to $15. We also highlighted that the majority of U.S. states already have a minimum wage that is higher than the federal $7.25, with some states already implementing a goal of $15 in the coming few years. At least 11 other capitalist market economies have higher minimum wage rates than the U.S. federal minimum wage. Let’s take a look at some of the differing approaches.
Not all of Western Europe is part of the E.U., and even the individual E.U. member states have the ability to determine their own minimum wage laws. The U.K. has a tiered minimum wage based on age. Those 25 and over (i.e. generally no longer in further education) receive £8.72 per hour (approximately $11.67), decreasing by age brackets to £4.55 for the under 18s. They also have a separate rate for apprentices.
Nordic countries, like Sweden, Norway, Denmark, and Iceland, have no minimum wage laws, but the widespread participation in unions and collective bargaining – at rates far higher than in the U.S. - ensure that wages remain high. In other words, trade unions rather than government mandates decide minimum wage rates in those countries. About 90% of Swedish workers are protected by collective agreements. Rates are generally determined by industry. Some of the lowest paid workers are in the hospitality industry, with average annual wages of around $30,000. The minimum wage in Copenhagen, Denmark, is approximately $16.37 per hour. Wages for the lowest earners in Norway is about $19.50 per hour.
France has both a minimum wage law and strong union participation. Workers there currently earn at least €10.25 (approximately $12.44) per hour. Germany introduced a minimum wage in 2014. Collective bargaining also plays a role in Germany, although to a lesser extent than in France. Current minimum wage in Germany is €9.50 (around $11.53) and will increase in stages to €10.45 (around $12.68 ) in June 2022. Germany also has a separate rate for apprentices.
Canada has minimum wage set by its different provinces. Generally, the rate is at least $8.18 (USD) per hour.
Australia and New Zealand
Australia has varying minimum wage rates that apply depending on age, type of work (e.g. apprentice), and industry. For example, a 21-year-old fast food cashier may be entitled to around $21.41 AUD per hour (around $16.36 USD). New Zealand also has varying minimum wage rates depending on age, length of service, and type of role (e.g. employees who supervise others). Workers in New Zealand who are 16 or older and who supervise or train others earn around $18.90 NZD (around $13.66 US) after six months’ of service.
What’s the Magic Number for the U.S.?
Each of the above countries has its own unique history, demographics, and cultural factors. While the approaches of other countries – or even different cities and states within the U.S. – might not provide a one-size-fits-all solution for the entire U.S., it is clear that we can look to the diversity of approach for input and as case studies. The Wall Street Journal has described the quest for the magic number as one of “trial and error,” although studies show that raising the rate usually starts leading to unemployment if the rate exceeds 60% of the median wage. (Current minimum wage rates in the U.S. vary between 37% and 57% of the median U.S. wage.)
What is certain is that it is both unlikely and unrealistic to expect the current federal minimum wage in the U.S. to stay $7.25 forever. So if not $15 now, then how much and when? Perhaps the diverse approaches described above can help guide us.