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News : Global Economy Last Updated: May 7, 2015 - 2:47 PM


Minimum wage levels in OECD countries
By Michael Hennigan, Finfacts founder and editor
May 7, 2015 - 8:40 AM

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The Organisation for Economic Cooperation and Development (OECD) has published a new briefing on minimum wages (MW) in the 34-member country OECD area and it contains comparisons for minimum wage levels between countries, as well as the differing tax and contributions paid by employers and workers. It also highlights the need for governments to co-ordinate minimum wages with other policies, especially taxes and benefits, and regularly adjust them in light of economic and job market developments.

Minimum wage levels compared to the median wage (the mid-point where 50% of a population are above and 50% below) vary widely across OECD countries, ranging from 40% or lower in Czech Republic, Mexico, United States, Estonia and Japan to more than 60% in Slovenia, France, Chile and Turkey. This translates into take-home pay of less than US$3 per hour in Mexico, Latvia, Chile and Estonia, Hungary and the Czech Republic to over $9 in Luxembourg and Australia.

The briefing also examines family incomes that a minimum-wage job accrues after accounting for tax burdens and government transfers. "On this measure, countries differ enormously and in some countries incomes of full-time minimum-wage earners can be well below commonly used poverty lines. In these cases, even working very long hours may not enable families to escape income poverty as conventionally measured."

The OECD said that for example, a half-time MW job in Australia, Ireland and the United Kingdom can be sufficient to take a family with two children out of poverty, and out-of work benefits in Japan provide income close to the poverty threshold even when no-one in a two-parent family works.

However, in most countries, a single full-time MW job leaves two-parent families below the poverty line and employment of both parents is needed to ensure that children do not grow up in poverty. In the Czech Republic, Estonia, Greece, Korea and Spain, the working hours required to escape poverty on a minimum wage are unrealistic for lone parents in particular; they would need better income support, or wages significantly above the MW to work their way out of poverty.

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