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An Overview 1 This appendix updates the information on overseas minimum wage systems contained in the Commission's 2005 Report. It also provides brief, country-specific information where there is the possibility of a minimum wage being introduced, or where there has been interesting debate or developments in a country's minimum wage arrangements. Since our 2005 Report we have been consulted about the operation of our minimum wage arrangements by representatives from a number of countries, including Germany, Australia, New Zealand, Malaysia and Hong Kong. 2 Among the states with an established minimum wage, we describe changes to minimum wage arrangements in Australia and Portugal. We also provide information on developments in the last couple of years in France, the Netherlands, New Zealand and the United States. In Ireland the social partners were unable to agree a new rate for 2007 and the matter was consequently referred to the Labour Court to make a recommendation. 3 Among those states contemplating the introduction of a minimum wage, there has been continued public debate in Germany and the States of Guernsey (the Guernsey Government) has been conducting a public consultation. 4 As in previous reports, the information provided here has been derived from contributions provided by British Embassies and High Commissions and the Organisation for Economic Co-operation and Development (OECD). We are grateful for the assistance they have given us. 5 Eurostat (2006) looked at the minimum wage rates of EU member states and certain candidate countries on 1 January 2006. It found that these countries could be divided into three groups in respect of the level of the minimum wage. The first group had a monthly minimum wage ranging from 82 to 331 Euros mainly Eastern European countries. The second group Southern European had a monthly minimum wage ranging from 437 to 668 Euros, and included Portugal, Slovenia, Malta, Spain and Greece. Group three with a monthly minimum wage of over 1,200 Euros was made up of the Northern European states of France, Belgium, the UK, the Netherlands, Ireland and Luxemburg. When differences in purchasing power were taken into account, the disparity between member states (in Euros) reduced, but the ranking remained virtually unchanged. Therefore, as in previous reports, we have compared the UK's minimum wage arrangements with those systems in the longer established EU states, as opposed to those which joined since 2004, and which in the main have substantially lower rates. We also include other selected OECD countries so that the information presented is consistent with that presented in previous reports. 6 We provide a comparison of minimum hourly wage rates across the selected OECD countries, as at the end of 2006 (Table A4.1). As always, caution should be taken in drawing comparisons between countries as definitions of what counts towards the minimum wage differ. Not only this, there are also differences with regard to the age at which the minimum wage rate(s) apply, whether there are any exemptions, and in the overall coverage of the respective mechanisms. In addition, anniversary dates vary, with some countries expected to increase their wage rates again in early 2007 detailed under Specific Country Updates. 7 When measuring minimum wage rates against the general level of earnings in the UK economy, we have regarded median, rather than average (mean), earnings as the more appropriate comparator. This is because of the disproportionate influence on the UK's earnings distribution of a relatively few high earners which drives up the mean earnings figure. The OECD has again supplied data on minimum wage rates as a proportion of median earnings, with Table A4.2 giving this information for mid-2005 (the latest available period). This ranks the UK minimum wage in mid-table among the group of countries shown. For comparisons with mean earnings, the Government provided evidence to the Commission which can be seen at www.dti.gov.uk. 1 Contained in Australian Pay and Classification Scales (derived from pre-reform awards). 8 As in previous reports, we also describe the approaches adopted across countries for uprating their minimum wages, enforcing the provisions and any age variations. In most cases these remain the same as reported in 2005 (Tables A4.3 to A4.6). Specific Country Updates Australia 9 The wage-setting and adjusting functions of the Australian Industrial Relations Commission have been replaced by the Australian Fair Pay Commission. The Fair Pay Commission was established on 14 December 2005 under the Workplace Relations Amendment (WorkChoices) Act 2005 as a statutory body independent of the Australian Government. It is responsible for setting and adjusting the Federal Minimum Wage and other minimum rates of pay1. It also sets minimum wage rates for juniors, apprentices, trainees and employees with a disability. Its wage setting powers commenced on 27 March 2006. The Fair Pay Commission carried out a public consultation throughout the middle of 2006 and announced its first wage-setting decision on 26 October 2006. This raised the Federal Minimum Wage to Aus $13.47 per hour (an increase of 5.6 per cent), effective from 1 December 2006. The Fair Pay Commission has announced a minimum wage review in 2007, with a decision expected mid-year. It will also conduct reviews of junior and trainee wage rates. France 10 After several years in which a range of minimum wages applied, the national minimum wage rise in July 2005, combined with lower rises in various special guaranteed monthly wage rates for workers who had moved to the 35 hour week, meant these different rates converged so there was once again a single rate. The minimum wage rose by 3.05 per cent to ¤8.27 per hour in July 2006, with the Government deciding to go beyond the minimum price-based increase required by law which would have seen a 2.75 per cent rise. Germany 11 In our 2005 Report we noted that a public debate was taking place in Germany over the possibility of introducing a national minimum wage, and this continued during 2006. As well as the principle of introducing a minimum wage, debate has taken place on such matters as the level at which it might be introduced; whether it should be a 'living wage' or a wages 'floor'; and the role of collectively agreed sector minimum rates in any statutory minimum wage system. Discussion has also centred on the impact of a minimum wage on work incentives for those receiving social payments. 12 At present an approximation to a minimum wage in Germany is achieved by way of the posted workers' law, which requires all employers in a particular sector to pay the collectively negotiated rate for the job. Previously the law was used only in the building industry. In 2006 the Government announced its intention to extend the use of this law, effectively to introduce a minimum wage for office cleaners. Other sectors are being considered, including agency work, agriculture, hotels and catering, security and meat processing. The Government is expected to produce proposals in March 2007 on a wider reform package, but at present it is still unclear whether a minimum wage will be included and, if so, what form it will take. Chancellor Merkel has ruled out a universal UK-style national minimum wage. Guernsey 13 Consultation is currently taking place about the possible introduction of a statutory minimum wage in Guernsey. Jersey has had a minimum wage since April 2005; its introduction featured in our 2005 Report. At the end of 2006, the States of Guernsey Government's Commerce and Employment Department conducted a public consultation on the implications of minimum wage legislation should it be introduced. Following consideration of the comments received, the Department will report back to the States on whether a minimum wage is required, and if so, make recommendations as to its scope, application and enforcement. Ireland 14 Employer and trade union representatives failed to agree the minimum wage revision due to commence at the beginning of 2007. The matter was referred to the Labour Court and in early December 2006 the court recommended an increase from the existing rate of ¤7.65 to ¤8.30 on 1 January 2007 and to ¤8.65 on 1 July 2007. The final decision rested with the Minister for Labour Affairs, who later in December confirmed these new minimum wage rates. Netherlands 15 Following an agreement between the Government and the social partners for a wage freeze in 2004 and 2005 in line with the Government's policy of restoring Dutch competitiveness, the minimum wage was uprated in January and July 2006, with a further rise in January 2007 to take the rate to ¤300.20 per week or ¤7.51 per hour. New Zealand 16 Recent developments in New Zealand have concentrated on the youth rate. In 2000 the youth rate was increased from 60 per cent to 80 per cent of New Zealand's adult minimum wage and adult rates were applied to 18 and 19 year olds. Following the general election in September 2005, the Labour Government announced that it would increase the adult minimum wage to NZ $12.00 per hour in 2008 'if economic conditions allow' (the rate currently in force is NZ $10.25 per hour, up from NZ $9.50 in March 2006, and due to rise to NZ $11.25 in April 2007). Under this agreement youth rates would remain at 80 per cent of the adult wage rate. However a private member's bill was introduced to Parliament in February 2006 seeking to abolish youth rates. If the proposed legislation is passed, the adult minimum wage will be extended to cover 16 and 17 year olds. The bill has so far progressed through its legislative stages, with support from Labour, and the Select Committee will report back in May 2007. 17 Outside of the legislative process there has been a union-led campaign aimed at increasing the minimum wage to NZ $12.00 per hour and abolishing youth wages, so that young people receive the adult wage rate. This has subsequently led to some companies abolishing a separate youth wage or, as in one case in the restaurant sector, agreeing to raise youth staff pay to 90 per cent of the adult minimum wage. Portugal 18 In December 2006 new rules were agreed between the Government and the social partners for Portugal's national minimum wage. The agreement provided that the minimum wage for 2007 would be set at ¤403 per month (up from ¤385.90 in 2006), and that it should reach ¤450 by 2009 and ¤500 by 2011. Under this new multi-annual approach, aimed at providing both workers and employers with increased stability, a new tripartite committee will be set up, bringing together representatives from the Government, unions and employers. This committee will monitor Portugal's economic conditions looking in particular at the sectors and/or regions with the highest shares of low-paid workers and/or more exposed to international competition as well as the economic and social impact of the minimum wage. It will issue, at the end of each year, a recommended upgrade for the national minimum wage. The Government will then consider this recommendation and, following a final consultation with the social partners, set the wage for the subsequent year. United States 19 At the end of 2006 the federal minimum wage, last increased in 1997, remained at US $5.15 an hour, or US $2.13 an hour for employees who earn tips. This looks set to change. Increasing the minimum wage is a top priority for the Democratic-led 110th Congress that convened on 4 January 2007. Many states have not waited for federal action. More than half of the US population lives in the 22 states, and the District of Columbia, which have passed legislation requiring employers to pay more than the federal minimum. Current state levels range from US $6.15 in Delaware, Maryland and Minnesota to US $7.93 in Washington State. Comparison of Minimum Wage Systems Table A4.1 Comparison of Level of Minimum Wages(a) Across Countries, End 2006
Sources: British Embassies and High Commissions. OECD Minimum Wage Database. LPC calculation of exchange rates and PPPs. PPPs derived from CPLs, OECD Main Economic Indicators, October 2006. For exchange rates, Bank of England monthly average spot exchange rate, October 2006. Notes: (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) October 2006. (d) Purchasing Power Parities (PPPs) derived by applying OECD Comparative Price Levels (CPLs) ratio of PPPs for private consumption to exchange rates for October 2006. (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 expressed as hourly rate under Fair Pay Commission arrangements. (g) Weighted average of provincial/territorial rates. (h) Date of last uprating varies between provinces. (i) For blue collar workers. (j) To increase on 1 January 2007 to ¤8.30 (in UK £=5.58 using exchange rates, and £=4.69 using PPPs), and on 1 July 2007 to ¤8.65 (in UK £=5.82 using exchange rates, and £=4.89 using PPPs). (k) Weighted average of prefectural rates. (l) Excludes 8 per cent supplement for holiday pay. (m) Not including annual supplementary pay of two additional months of salary for full-time workers. (n) Federal minimum wage. Tipped employees receive a lower minimum wage of $2.13 per hour in direct wages. Table A4.2 Adult Minimum Wages Relative to Full-time Median Earnings, Mid-2005(a)
Sources: Minimum wages and median earnings for full-time workers: OECD estimates and OECD Earnings Structure Database. Notes: (a) In all cases, the minimum wage refers to the basic rate for adults. Except for the UK and US the median earnings data for full-time workers for mid-2005 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 8 per cent supplement for holiday pay is given in parentheses. (d) Differs from the LPC estimate in Chapter 2 (Table 2.2), as the OECD estimate is for full-time, rather than all, employees. (e) The ratio including annual supplementary pay of two additional months of salary is given in parentheses. Table A4.3 Uprating of Minimum Wages
Source: British Embassies and High Commissions. LPC. Table A4.4 Enforcement of Minimum Wages
Source: British Embassies and High Commissions. LPC. Table A4.5 Age Variations Under Minimum Wage Systems
Source: British Embassies and High Commissions. LPC. Table A4.6 Youth Minimum Wage Rates as a Percentage of Adult Minimum Wage Rates, End 2006
Sources: OECD Minimum Wage Database. British Embassies and High Commissions. LPC. Notes: (a) As prescribed in the Pay Scales derived from New South Wales Shop Employees Award. These rates are broadly representative of the rates for younger workers prescribed in other Pay Scales. (b) All provinces except Ontario. (c) For France and the United States, the reduced rates apply to young workers with a tenure of fewer than 6 months and 3 months, respectively.
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