Minimum Wage Systems in Other Countries
1 This appendix presents updated information on minimum wage systems in the other countries we examined in our previous reports. We report on the introduction of a minimum wage in Jersey, the different minimum wage rates currently in place in France and on recent debate about a possible national minimum wage in Germany. Changes to the uprating of the minimum wage in Spain and new rules on the treatment of workers with reduced working capacity in Portugal are also described.
2 Ten countries joined the European Union (EU) on 1 May 2004, and according to Eurostat (2004), nine have a minimum wage in place (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia). However data from Eurostat indicate that, with the exception of Malta, their minimum wages are lower than those within the established membership of the EU, ranging from ¤121 per month in Latvia to ¤471 per month in Slovenia. The highest monthly rate among the new members is in Malta at ¤543 per month, slightly higher than rates in Portugal and Spain1. When the relative purchasing power of these countries is considered, the new EU members remain at the lower end of the scale among the 18 EU members which have a minimum wage in place, again with the exception of Malta. As lessons for the UK from the new EU members are likely to be limited, we have continued to concentrate on the group of twelve Organisation for Economic Co-operation and Development (OECD) member countries we examined in previous reports, many of which are also members of the EU.
3 We are grateful to the OECD, the German Embassy in London, the Jersey Government and a number of British Embassies and High Commissions for their assistance with our research.
4 Table A4.1 compares minimum wage levels across countries and Table A4.2 describes adult minimum wages as a percentage of full-time median earnings. As noted in previous reports we need to be cautious about direct comparisons: there are differences between countries in the definitions of what counts towards the minimum wage, the definitions of earnings used, the age coverage and the sectors covered. In addition minimum wage rates are set at different dates from country to country.
5 In previous reports we highlighted the approaches adopted across countries for uprating their minimum wages and enforcing the provisions. This information has been updated in Tables A4.3 and A4.4 respectively. We have also updated information on age variations provided in previous reports in Tables A4.5 and A4.6.
Specific Country Updates
6 Although the hourly statutory national minimum wage rate is currently ¤7.61 (equivalent to ¤1,154.18 per month based on a 35 hour week), a number of guaranteed monthly salary rates are also in place to reflect the staggered implementation of the 35 hour working week. This was designed to ensure that when employers switched to the 35 hour working week, employees' salaries were not cut by the same proportion as their statutory working time. The guaranteed monthly rates range from ¤1,178.54 to ¤1,197.37. These will gradually be brought into line with the highest rate, resulting in a single minimum wage by 1 July 2005.
7 Currently there is no national minimum wage in Germany, although a large number of bargaining agreements are in place which vary by sector and region. But with the exception of the agreement for construction, the bargaining agreements are only binding on those employers who belong to the relevant employer associations.
8 There is now considerable political debate within Germany, however, about whether there should be a national minimum wage. The issue has become more prominent as a result of proposed revisions to the benefits system, which would require people who had been unemployed for more than 12 months to accept any offer of a legal job; in the absence of a minimum wage, a jobseeker might be required to accept a job offering very low rates of pay. However, we understand that in general most trade unions and industry are opposed to a national minimum wage and it seems unlikely that the Government will proceed in the near future.
9 The States of Jersey (the Jersey Government) has approved the introduction of a minimum wage which is due to come into force on 1 April 2005. The rates from that date will be £5.08 per hour for all employees over school leaving age (16 years old) and £3.82 per hour for an employee of any age undertaking accredited training for up to one year, in a new job with a new employer. In addition, employers may deduct an offset of up to £55.65 per week for accommodation and up to £74.20 per week where accommodation and meals (defined as three adequate meals per day) are provided. Enforcement of the new minimum wage will be the responsibility of Compliance Officers from the Employment and Social Security Department and complaints will be handled by an Employment Tribunal.
10 The Government brought in new legislation effective from August 2004, which introduced a new flexibility in determining pay for workers with reduced working capacity (such as those with physical disabilities). A reduction may be applied which corresponds to the difference (in percentage terms) between the worker's actual ability and full working ability and may be applied where that difference exceeds 10 per cent. The maximum reduction is 50 per cent.
11 A number of changes to the way in which the minimum salary is uprated took effect from 1 July 2004, together with a 6.6 per cent uprating to make up for lower than inflation increases between 1996-2004. The Government has removed the existing automatic links between increases in the minimum salary and a range of benefits. Welfare payments, which will be set annually at the time of the budget, are now tied to a new indicator (indicator público de rentas de efectos multiples (IPREM), which roughly translates as the public index of various goods). This means that increases in public expenditure (specifically benefits) are no longer tied to increases in the minimum wage and it should enable the Government to meet its manifesto pledge of an increase in the minimum salary to ¤600 per month by 2008 (currently ¤490 per month).
Comparison of Minimum Wage Systems
Table A4.1 Comparison of Level of Minimum Wages(a) Across Countries, end 2004
Sources: OECD Minimum Wage Database. British Embassies and High Commissions. For PPPs, OECD, Main Economic Indicators. For exchange rates, Bank
of England monthly average spot exchange rate.
(a) In all cases, the minimum wage refers to the basic rate for adults.
(b) For countries where the minimum wage is not expressed as an hourly rate, the rate has been converted to an hourly basis assuming a working time of 8 hours per day, 40 hours per week and 173.3 hours per month.
(c) August 2004.
(d) Purchasing Power Parities (PPP) for private consumption, August 2004.
(e) Exemptions and special rules apply in many cases. For example, in France and the United States the full adult rate applies to young workers with a tenure of more than 6 and more than 3 months respectively. See Table A4.5 for further details.
(f) Federal minimum wage.
(g) For white collar workers. Blue collar workers receive a minimum hourly rate of €7.35.
(h) Weighted average of provincial rates.
(i) Date of last uprating varies between provinces. For example the rate was last increased on 1 October 1999 in Alberta and 1 February 2004 in Ontario.
(j) Rate applies to workers who are not covered by the garanties mensuelle de remunération, or monthly guaranteed salary.
(k) Not including annual supplementary pay of two additional months of salary for full-time workers.
(l) For blue collar workers.
(m) Weighted average of prefectural rates.
(n) Excludes 8 per cent supplement for holiday pay.
(o) Rate last reviewed July 2004.
(p) Federal minimum wage. Tipped employees receive a special minimum wage of $2.13 per hour in direct wages.
Table A4.2 Adult Minimum Wages Relative to Full-time Median Earnings, Mid-2004(a)
Sources: (Except UK) Minimum wages and mean and median earnings for full-time workers: OECD estimates and OECD Earnings Structure Database.
(a) In all cases, the minimum wage refers to the basic rate for adults. In some cases, the median earnings data for full-time workers for mid-2004 are estimates based on extrapolating data for earlier years in line with other indicators of average earnings growth. All earnings data are gross of employee social security contributions.
(b) Two estimates of median earnings are available based on the Labour Force Survey (LFS) and an enterprise survey (ES). In each case, the data refer to weekly earnings. The minimum wage refers to the Federal Minimum Wage.
(c) The ratio including annual supplementary pay of two additional months of salary is given in parentheses.
(d) The ratio including 8 per cent supplement for holiday pay is given in parentheses.
(e) LPC calculation using Annual Survey of Hours and Earnings (including supplementary information), applying the adult rate of £4.50 (applicable in mid-2004). On the basis of the minimum wage of £4.85, the figure would be 46.6 per cent.
Table A4.3 Uprating of Minimum Wages
Source: British Embassies and High Commissions.
Table A4.4 Enforcement of Minimum Wages
Source: British Embassies and High Commissions.
Table A4.5 Age Variations Under Minimum Wage Systems
Source: British Embassies and High Commissions.
Table A4.6 Youth Minimum Wages as Percentage of Adult Minimum Rates, end 2004
Sources: OECD Minimum Wage Database. British Embassies and High Commissions.
(a) As prescribed in the NSW Shop Employees Award. These rates are broadly representative of the reduced rates for younger workers prescribed in other awards.
(b) All provinces except Ontario.
(c) For France and the United States, the reduced rates apply to young workers with a tenure of less than 6 months and less than 3 months, respectively.
(d) Some variation in specific industries in certain prefectures (see Table A4.5).