MBR_ISSUE 49_MARCH_lowres

WORLD ECONOMIC FORUM SURVEY
THESE COUNTRIES HAVE THE
Malta Business Review
HIGHEST
MINIMUM
WAGES
By Emma Charlton
Minimum wages offer a route out of poverty, but they aren’t without controversy.
Image: REUTERS/Francois Lenoir
Where should workers move to in order to
earn the best minimum wage?
The answer is Australia or Luxembourg,
according to data from Germany’s
Wirtschafts-und Sozialwissenschaftliches
Institut (WSI), which compared pay in
different countries on a purchasingpower
basis.
The hourly rate in Australia yields the
equivalent of 9.47 euros (US$10.78)
of purchasing power, according to the
report, almost six times that of Russia’s,
which is worth only 1.64 euros ($1.87)
in purchasing power terms. European
nations made up the rest of the top five;
while Brazil, Greece and Argentina were
among the lower earners.
Image: WSI data, World Economic Forum
Supporting low-paid workers is a key
objective for governments around the
world, particularly after the financial
crisis exacerbated inequality in many
countries. While minimum wages
offer one route out of poverty, they
aren’t without controversy, often
sparking politically charged debates and
generating headlines.
Recently, Spain’s government said its
minimum wage will jump by 22% in 2019,
the biggest annual increase in more
than 40 years, while French President
Emmanuel Macron said his nation’s
threshold will increase as well. Even in
Australia, which has one of the highest
levels, there’s tension between the Fair
Work Commission, that sets the rate, and
the unions who want more.
Those in favour say businesses have
a responsibility to pay their workers
enough to live on, while those
against argue that a high minimum
wage destroys jobs and hampers
entrepreneurship. A report earlier this
year by the Institute for Fiscal Studies
warned that a rise in the living wage
could expose more jobs to automation.
"Thirty years ago, most
economists expressed
confidence in surveys
that minimum wages
had a clear negative
impact on jobs. That is
no longer true today.
Academic studies have been mixed,
calling into question long-held ideas that
minimum pay thresholds lead to job cuts
and fewer hours offered to employees,
while also harming small businesses and
pushing up prices.
“Thirty years ago, most economists
expressed confidence in surveys that
minimum wages had a clear negative
impact on jobs. That is no longer true
today,” Arindrajit Dube, a professor
of economics at the University of
Massachusetts at Amherst said in an NPR
podcast. “The weight of the evidence to
date suggests the employment effects
from minimum wage increases in the US
have been pretty small; much smaller than
the wage increases.”
In reality, many minimum-wage earners
in developed nations work in the service
sector, where it can be easier to pass
pay increases on to customers via higher
prices. And some companies don’t mind
paying more because it lowers staff
turnover, lessening outlay on recruitment
and training.
Even so, there’s regional variation. In
the US, the threshold varies by state,
with some areas planning to boost their
minimum wage to as much as $15 an
hour. Cities tend to be where pay levels
rise faster, because consumers can
tolerate higher prices.
Wage increases haven’t kept up with inflation.
Image: US department of Labor
The cost of living also makes a difference.
While the absolute level of pay in the US
has risen in the past 50 years, workers are
poorer because increases haven’t kept
pace with inflation.
There’s still some way to go in researching
and exploring the effects of minimum
wages and their impact on the job market.
Keeping track of the evolution of these
thresholds relative to median wages may
offer a guide to how much they can rise
without leading to visible job losses, but
most researchers agree that more work is
needed. “The minimum wage has a much
bigger bite in lower-wage areas,” Dube
says. For him, it’s about keeping a close
eye on the data to locate the "sweet spot,
beyond which it may not be a good idea
to increase further”. MBR
Creditline: World Economic Forum
www.maltabusinessreview.net
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