Apr 272015

In the U.S., there has been a considerable amount of discussion and disquietude concerning the current minimum wage in the country. One of the major points of emphasis is the minimum wage in other countries and how it compares to the minimum wage in the U.S. According to the Bureau of Labor Statistics, it is important to make the necessary adjustments to the conceptual framework of different economic policies worldwide, or otherwise the numbers that are being compared can provide a distorted image.


What this means is that simply because the minimum wage in one country may be higher in one country than in another, does not necessarily mean that the higher wage creates a better situation. All of the variables and economic concepts must be taken into consideration.


International Economic Systems


There are a number of large organizations, such as the International Labor Organization, which provide comprehensive reports on wages on a global scale. These organizations allow you to view how wages have changed over time in different economic environments. The reports generated by these different organizations can provide a snapshot of comparative levels in different areas of the world.


Making Comparisons around the World


In the U.S., where there is a great deal of controversy concerning current wages, the minimum wage is $7.25. There is a call from American fast-food workers to increase the minimum wage from its current level to as much as $15.00 per hour. One might be wondering where workers would come up with a number that is so astronomically high in comparison to the current rates. The answer is Australia. Deputy reports that until recently Australia had a minimum wage of $16.88 AUD. That has actually increased over the summer by a total of three percent.


What most people who use the Australian minimum wage as an argument for substantially raising the minimum wage in America don’t understand is that there are multitudinous variables that go into arriving at the minimum wage. Additionally, Australia is an anomaly when it comes to countries with a minimum wage. As a general rule, countries that have a set minimum wage are faring worse than those who do not have a minimum wage. For instance, out of the top nine countries in Europe that have a minimum wage, all but one are doing worse than the countries that don’t have a minimum wage.


According to the Business Insider, currently, the U.S. is ranked seventh among industrial nations that have a minimum wage. To give a point of reference of disparity, Sierra Leone has the lowest minimum wages at only $0.03 per hour. So, there are minimum wages that run the gamut.


America’s two closest neighbors represent the great polarities of economic concepts and the environments that they produce, with each having a minimum wage that is reflective of their economic environment. In Canada, the minimum wage is $9.75 per hour, whereas in Mexico the minimum wage is $0.66 per hour. The economic infrastructure in each of these countries is completely different and the poverty lines are worlds apart as well.


Minimal to No Impact


Based on a report released by The Fiscal Times, 1,400 real world minimum wage increases had no impact on the employment in that country or region. This is important because there are certain organizations that have asserted that raising the minimum wage to $10.10 per hour, which is what the current administration is proposing, would increase the unemployment rate. This conclusion is based widely on the perception that raising the minimum wage would cause some companies to have to lay off employees.


The differences of opinion have to do with the perceived elasticity of the employment rate in America. What this means is the level of sensitivity the employment rate is concerning the fluctuation in wage rates. The study revealed by the Congressional Budget Office reveals that the employment rate has little to no responsiveness to the change of the minimum wage.


The truth is that there is still a great deal of research that needs to be done to gain an accurate bearing, but all of the initial indicators point to the fact that raising the minimum wage would not be as devastating to the job market as many would have the majority of people believe.

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