Economy

Minimum Wage Around the World

January 31st 2016

By:
Ingrid Holmquist

America's minimum wage has become an issue around the country and in the current presidential campaign. As we grapple with the question about what's appropriate, we can look at the rest of the developed world for comparisons.

The federal minimum wage in the United States is currently $7.25 an hour (before taxes). The three leading Democratic presidential candidates have each said that is too low.

How does the rest of the world handle the minimum wage? The Organization for Economic Cooperation and Development has ranked several countries by after-tax hourly wages, taking into account the cost of living in each country. (Wages are shown in equivalent U.S. dollars.):

  • Australia has the highest minimum wage of all developed nations: $9.54 an hour after taxes. That’s $15.96 an hour before taxes. Compare that to the United State’s $7.25 before taxes, with a typical $6.26 after taxes.
  • Luxembourg ranks second, with a minimum wage of $9.24 after taxes.
  • Belgium comes in third, at $8.57 after taxes.

Top 10 national minimum wages in the world

The after-tax wage takes into account the difference in the cost of living in Australia and the United States, according to CNN Money. For a full-time worker, that’s the difference of $366.40 a month, or $4,396.80 a year.

Perhaps this is what makes Australia a hot post-graduate destination for young people looking for a gap year to make money while traveling. Not only is Australia a great place to make money because of the high and livable minimum wage, it also has many opportunities to work in its growing economy, according to GoStudy.

 

 
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There is a caveat in these comparisons. “Other countries have set higher hourly rates, but they also tax minimum wage workers more, leaving them with less in their pockets,” CNN Money reported.

The United States ranks 11th on the OECD's list. But some states have minimum wages that exceed the federal level; the highest is Washington, whose before-tax minimum wage is $9.32 per hour.

 

Instead of requiring a higher minimum wage, the U.S. government spends $152.8 billion annually in aid to support working families in need, Myles Udland reported in Business Insider.

Wages in general have not increased much for the average American. “Real hourly wages of the median American worker were just 5 percent higher in 2013 than they were in 1979, while the wages of the bottom decile of earners were 5 percent lower in 2013 than in 1979," Udland reported, based on a study by the University of California, Berkeley. "Inflation-adjusted wage growth from 2003 to 2013 was either flat or negative for the entire bottom 70 percent of the wage distribution.”

While it’s difficult to compare wages among different countries, it’s clear that the United States does not take the gold medal for “kindest minimum wage.” That award can be shipped Down Under.