|
An Overview
|
|
1.
|
This appendix presents updated information
on minimum wage systems in the other countries we examined in our first
and second reports. Since our second report, Ireland has implemented a
minimum wage and we include a case study on this new system. We also include
a case study on the Netherlands, and we report progress on proposals for
a minimum wage in Jersey.
|
|
2.
|
We are grateful to the Netherlands Ministry
of Social and Economic Affairs, the Irish Department of Enterprise, Trade
and Employment, the Organisation for Economic Co-operation and Development
(OECD) and a number of British Embassies and High Commissions, all
of which assisted with our research.
|
|
3.
|
Tables A6.1 and A6.2 compare minimum wage
levels across countries and as a percentage of full-time median earnings
in 2000. These tables were discussed in more detail in Volume 1 of this
report, and are repeated here for completeness. The Government has accepted
our recommendation that the main rate should rise to £4.10 per hour from
October 2001. As we noted in Volume 1, we need to be cautious about the
figures in Tables 6.1 and 6.2 because minimum wage rates are set at different
dates from country to country and we cannot simply put the UK’s proposed
October 2001 rate into these tables which relate to 2000. Moreover, the
relationship between the minimum rate and median earnings will be influenced
by the stage in the uprating cycle: the relative value will be higher
at the time of uprating.
|
|
4.
|
The approach to reviewing and uprating varies
from country to country, as can be seen from Table A6.3. Some, like those
in France and the Netherlands, are based around a formula while others,
like Ireland, seek a recommendation from the social partners. These different
approaches helped inform our thinking when we formed our recommendations
in Chapter 6.
|
|
5.
|
Most countries enforce their minimum wages
through a labour inspectorate (see Table A6.4). The inspectorates’
powers, and the extent to which they are proactive or reactive, vary.
In some countries, for example France and Spain, the inspectorates are
responsible for a wide range of labour issues. The Department of Labor
in the United States is proactive, with a number of enforcement initiatives,
compared with the inspectorate in New Zealand which, we understand, carries
out no proactive investigations.
|
|
6.
|
Table A6.5 shows that most countries in our
sample have special treatment for young workers. The exceptions are Greece,
Spain and Portugal, which pay the full rate at 16 or below, and Canada,
where most provinces pay the full rate at all ages. The ages at which
the full rate becomes payable range from 18 in France, for example, to
23 in the Netherlands. A number of countries apply lower rates to some
young workers over age 18. Some countries, for example France and the
United States, limit the period to which a lower rate can apply.
|
|
7.
|
There is wide variation in the differential
between youth rates and full rates across countries, as can be seen from
Table A6.6. In those countries which have lower rates for young workers,
the percentage of the full rate payable at ages 16 and 17 varies from
80 per cent in New Zealand and France to less than 40 per cent in the
Netherlands.
|
|
Case Studies
|
| |
Ireland
|
|
8.
|
Following the recommendations of the Irish
National Minimum Wage Commission in 1998, and the submission of the Final
Report of the Inter-departmental Group on Implementation of a National
Minimum Wage in June 1999, Ireland introduced its minimum wage in April
2000 at a rate of IR£4.40 per hour. The social partners were consulted
in the preparation of the Final Report, and further consultations took
place prior to the drafting of the proposed legislation.
|
|
9.
|
Although Ireland does not apply age-related
rates beyond 18, a lower rate applies for people in the first two years
in employment over 18. This is not conditional on receiving training.
Apprentices are exempt for the duration of their apprenticeship. There
is also a tapered rate for structured training, which can apply for a
minimum of three months and a maximum of three years. The training rate
varies from IR£3.30 per hour in the first third of the period to IR£3.96
per hour in the final third of the period.
|
|
10.
|
The minimum wage rate is set by the Government
following a recommendation by the social partners. If the social partners
do not, or cannot, agree a recommendation, representative organisations
of employers or employees can apply to the Labour Court for an examination
of the rate. The Court can then make a recommendation to the Government.
An application to the Court can be made only if 12 months have elapsed
since the last announcement of an uprating. The Irish Government has agreed
to increase the minimum wage from IR£4.40 to IR£4.70 per hour from 1 July
2001 and to IR£5.00 per hour from 1 October 2002.
|
| |
The Netherlands
|
|
11.
|
The national minimum wage was introduced
in 1970 and was initially linked to average earnings, although special
increases meant that it rose faster than earnings. By the 1980s the minimum
wage was generally thought to be too high, which led to it being reduced
by 3 per cent in 1984 and not increased until 1991. Concerns about the
level led to the introduction of the current uprating system in 1992.
|
|
12.
|
The Netherlands has a biannual uprating system
through a formula linked to earnings. The uprating indicated by a formula
can be overruled by the Government if the ratio of those on benefits,
including pensions, compared to those in work is over 82.6 per cent —
the ratio when the system was introduced. In practice this is done in
consultation with the social partners, although there is no legal requirement
for them to be involved. The Government is required to conduct a review
of the level of the minimum wage every four years, considering changes
in income and employment.
|
|
13.
|
There is a tapered system of youth rates
beginning at 30 per cent of the adult rate for 15 year olds and rising
on each birthday until the full adult rate is payable at age 23. Apprentices
are exempt for the duration of their apprenticeship. There is no other
provision for lower rates for training.
|
| |
Jersey
|
|
14.
|
The introduction of a minimum wage policy
in Jersey has been agreed by the Island’s States. But legislation
to introduce it awaits consideration of proposals to establish an overall
strategy dealing with employment legislation on the Island. These proposals
include legislation on unfair dismissal and pay statements, both of which
would be necessary elements of the minimum wage system. The proposed employment
legislation strategy is included in a Report and Proposition entitled
Employment Legislation (P99 of 2000) which was debated and approved
in the Island’s States in December 2000. A consultation programme
is currently under way. The aim is to implement minimum wage legislation
by late 2002.
| Table
A6.1 |
|
Comparison of Level
of Minimum WagesaAcross
Countries, 2000
|
| |
In UK £s, using
|
| |
Exchange rates b
|
PPPs c
|
|
Australia d
|
3.67
|
5.06
|
|
Luxembourg
|
4.15
|
4.88
|
|
Netherlands
|
3.86
|
4.87
|
|
Belgium
|
3.89
|
4.79
|
|
France
|
3.86
|
4.57
|
|
Canadae
|
3.03
|
3.93
|
|
Ireland
|
3.23
|
3.75
|
|
United States d
|
3.62
|
3.71
|
|
United Kingdom
|
3.70
|
3.70
|
|
New Zealand
|
2.14
|
3.45
|
|
Japan f
|
4.13
|
2.73
|
|
Greece
|
1.55
|
2.36
|
|
Spain
|
1.48
|
2.09
|
|
Korea
|
1.09
|
1.90
|
|
Portugal
|
1.11
|
1.81
|
|
Sources: OECD, Minimum Wage Database;
and OECD, Main Economic Indicators 2000
Notes:
a. In all cases, the minimum wage refers to the basic rate for adults.
b. As of 30 November 2000.
c. Purchasing Power Parities for private consumption as of November
2000.
d. Federal minimum wage.
e. Weighted average of provincial rates.
f. Weighted average of prefectural rates.
g. For countries where the minimum wage is not usually 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.
|
| Table
A6.2 |
|
Adult Minimum Wages
as a Percentage of Full-time Median Earnings (Men and Women), 2000
a
|
| |
(%)
|
|
France
|
69.6
|
|
Portugal
|
64.8
|
|
Australiab — LFS
|
60.8
|
|
Belgium
|
59.1
|
|
Greecec
|
56.9
|
|
Australiab — ES
|
56.6
|
|
Ireland
|
55.5
|
|
Netherlands
|
52.1
|
|
New Zealand
|
49.9
|
|
United Kingdomd
|
46.0
|
|
Canadae
|
43.8
|
|
Japanf
|
41.1
|
|
United Statesg
|
38.0
|
|
Spain
|
35.8
|
|
Korea
|
34.4
|
|
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. In some cases, the
average earnings data for 2000 for the different groups of full-time
workers and for manual workers in manufacturing 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 average earnings
are available based on the Labour Force Survey (LFS) or an Enterprises
Survey (ES). The minimum wage is the Federal rate.
c. Manufacturing workers only.
d. Based on ONS central estimate.
e. Weighted average of provincial
rates.
f. Weighted average of prefectural
rates.
g. Federal minimum wage.
|
|
Table A6.3
|
|
Uprating of Minimum
Wages
|
|
Country
|
Method of Uprating
|
|
Australia
|
Independent
body (Australian Industrial Relations Commission) is responsible
for setting minimum 'safety net' rates for awards and the Federal
Minimum Wage. Reviews are triggered by the Australian Council of
Trade Unions and usually, but not necessarily, take place each year.
Reviews consider economic factors and the needs of the low paid.
|
|
Belgium
|
Uprating is
by indexation, triggered by the social security system. Indexation
is supplemented by collective bargaining every two years.
|
|
Canada
|
Uprating is
based on recommendations from provincial Labour Ministries from
time to time, taking into account cost of living and views of employers
and employees. The recommendations are reviewed and voted on by
the provincial Parliament.
|
|
France
|
Uprating takes
place annually, at least in line with a statutory minimum indicated
by a formula. Uprating is calculated on the basis of the annual
rate of price increases (excluding tobacco) in the year to May,
added to half the value of the averaged increase in hourly purchasing
power of manual workers in the first quarter. In the past the Government
often increased the level above this statutory minimum increase.
|
|
Greece
|
Minimum wages
are set under National General Collective Labour Agreements, which
are valid for two years. Negotiations take place in January—March
and the Agreement comes into force retrospectively from 1 January.
|
|
Ireland
|
The rate is
set by the Government, following a recommendation from the social
partners. If there is no agreed recommendation the Labour Court
can be asked to make a recommendation to the Government. There is
no set timetable for upratings.
|
|
Japan
|
The system operates
regionally. The minimum wage is reviewed and amended each Autumn.
Regional Minimum Wage Councils, comprising representatives of labour
unions, employees and public agencies, make a proposal based on
their consideration of cost of living, salary of workers in similar
industries, and the financial capability of employers. The final
decision is made by the Director of the Regional Labour Standard
Agency.
|
|
Netherlands
|
The Ministry
of Social Affairs uprates twice yearly (1 January and 1 July) taking
account of the increase in average wages, unless wages and/or the
social security bill have risen too fast. If the ratio between the
number of people claiming social benefits (including pensions) and
the number of people working exceeds the level of 82.6%, the Government
may decide not to link the wage to average contractual wage increase
(as it did between 1993 and 1996). If the ratio is lower than 82.6%
(as has happened since 1996), the minimum wage must be linked to
wage growth. Every four years the Government is obliged to review
whether the minimum wage is too high or too low.
|
|
New Zealand
|
The Minister
of Labour conducts annual reviews in accordance with the Minimum
Wage Act. The review considers the effectiveness of the minimum
wage in meeting its objectives, and the impact on employment and
unemployment. The Minister invites submissions from the New Zealand
Council of Trade Unions and the New Zealand Employers' Federation,
as well as other organisations, as part of the review.
|
|
Portugal
|
An Inter-Ministerial
annual review considers the social and economic effects of the minimum
wage. This includes the expected inflation rate and productivity
levels. Following consultation with the social partners, the wage
is usually uprated annually and implemented from January of each
year.
|
|
Spain
|
The Government
uprates annually in December following consultation with the social
partners. The Government is obliged to take account of inflation,
average national productivity, participation levels and general
economic conditions.
|
|
UK
|
Uprating takes
place periodically. The Government considers recommendations from
an independent Commission, which reports following wide-ranging
consultation and consideration of the effects on the economy, sectors
and groups of workers.
|
|
US
|
Changes are
voted on by Congress intermittently.
|
|
Source: British
Embassies and High Commissions
|
|
Table A6.4
|
|
Enforcement
of Minimum Wages
|
|
Country
|
Method of Enforcement
|
|
Australia
|
In the Federal
jurisdiction complaints are lodged with the Department of Employment,
Workplace Relations and Small Business and are investigated by inspectors.
Employees can also refer to a Small Claims Court. Similar processes
apply in State jurisdictions.
|
|
Belgium
|
Labour inspectorate.
|
|
Canada
|
Labour inspectorate.
Usually the employee contacts the Labour Board and files a claim
for lost wages, then the problem is investigated. The inspectorate
can perform random investigations.
|
|
France
|
Labour inspectorate
(which is also responsible for general conditions of work, health
and safety). There are approximately 500 inspectors and 2,000 assistants.
They carry out random checks and investigate complaints from trade
unions and individual employees.
|
|
Greece
|
Labour inspectorate.
Employers can be sued by employees, who have to pay their own costs,
or by inspectors.
|
|
Ireland
|
Labour inspectorate
carries out inspections, both routine and in response to complaints.
An employee may instead opt to bring a complaint to a Rights Commissioner
for investigation.
|
|
Japan
|
Labour inspectorate.
|
|
Netherlands
|
Labour inspectorate.
It is not able to take employers to court; the employee must do
this.
|
|
New Zealand
|
Labour inspectorate
can recover any wages owing or refer the case to an Employment Tribunal,
which will hear claims going back six years. Employees can also
go to the Employment Tribunal themselves. The majority of investigations
are resolved without tribunal. No proactive investigation.
|
|
Portugal
|
Labour inspectorate.
|
|
Spain
|
Labour inspectorate
(which also has the power to enforce a wide range of labour issues,
including collectively-bargained rates). It can fine employers;
or the employee can take the case to tribunal to obtain back pay.
Both reactive and proactive. There are around 600 inspectors and
800 assistants, stationed on a provincial basis.
|
|
UK
|
Inland Revenue
has enforcement agency. Conducts both proactive, targeted enforcement
and investigation of complaints. Employees also have the right to
take their case to an Employment Tribunal.
|
|
US
|
Wage and Hour
Division in Department of Labor. Both pursues complaints and investigates
likely areas of non-compliance. There is a team of approximately
950 inspectors, spread over 54 offices.
|
|
Source: British
Embassies and High Commissions
|
|
Table A6.5
|
| Age
Variations Under Minimum Wage Systems |
|
Country
|
Treatment by
Age
|
|
Australia
|
Full minimum
wage at 21 in most awards. Below 21 a sliding scale applies from
age 16 (40—50% of the minimum wage) through age 18 (65—80%)
to age 20 (85—100%). The remainder of awards provide the full
minimum at 18, 19 or 20 or provide the full minimum to all ages.
|
|
Belgium
|
Full minimum
wage applies at age 21. An additional premium is payable to workers
aged 21 1/2 who have been employed for at least 6 months and to
workers aged 22 who have been employed for at least 12 months. There
is a 6% deduction from the minimum wage for each year below age
21.
|
|
Canada
|
Full minimum
wage at all ages except in Alberta, Ontario, and the North West
Territories.
|
|
France
|
Full minimum
wage at 18. Workers aged 16 receive 80%; workers aged 17 receive
90% (both for first 6 months only, then the full rate).
|
|
Greece
|
Full minimum
wage at 15 (but variation by marital status). There are restrictions
on the terms and conditions under which 15—17 year olds are
allowed to work.
|
|
Ireland
|
Full minimum
wage two years after first employment over age 18 unless undergoing
structured training. All employees under age 18 are entitled to
70% of the full adult rate.
|
|
Japan
|
Full minimum
wage at 18. Under 18s and over 65s usually receive the lower regional
minimum wage rather than the sectoral rate.
|
|
Netherlands
|
Full minimum
wage at 23. Youth rates are 30% at 15, 45.5% at 18, 72.5% at 21,
and 85% at 22.
|
|
New Zealand
|
Full minimum
wage at 18. 16—17 year olds get 80% of the main rate. Youth
rate only introduced in 1994; young workers previously exempt.
|
|
Portugal
|
Full minimum
wage at all ages. Exception is apprentices and trainees in qualified
or highly qualified jobs, who can receive 80% for up to a year,
or 6 months if the course is technical/professional.
|
|
Spain
|
Full minimum
wage at 16.
|
|
UK
|
Full minimum
at 22. 18—21 year olds receive a lower rate. 16—17 year
olds are exempt.
|
|
US
|
Full minimum
wage at all ages, except below 20 where lower rate can apply (approx.
80% of full minimum wage) for first 90 days in the job.
|
|
Source: British
Embassies and High Commissions
|
| Table
A6.6 |
|
Youth Minimum Wages
as a Percentage of Adult Minimum Rates, 2000
|
|
Country
|
Percentage
at age 16
|
Percentage
at age 17
|
Average percentage at
ages 18/19
|
|
Australia (a)
|
50
|
60
|
75
|
|
Belgium
|
70
|
76
|
86.4
|
|
Canada
|
100 (b)
|
100 (b)
|
100
|
|
France (c)
|
80
|
90
|
100
|
|
Greece
|
100
|
100
|
100
|
|
Ireland
|
70
|
70
|
85
|
|
Japan (d)
|
|
|
|
|
Netherlands
|
34.5
|
39.5
|
49
|
|
New Zealand
|
80
|
80
|
100
|
|
Portugal (e)
|
100
|
100
|
100
|
|
Spain
|
100
|
100
|
100
|
|
UK
|
Exempt
|
Exempt
|
86
|
|
US (f)
|
82.3
|
82.3
|
82.3
|
|
Source: OECD 2000 and British Embassies
and High Commissions
Notes:
a. Actual rates vary according
to individual awards. This example uses the rates applicable to
a key award in retail, a major employer of young people, and is
broadly indicative of youth minimum wages generally.
b. In most provinces.
c. The reduced rates apply only
to youth with tenures of less than 6 months.
d. Varies by prefecture.
e. Except for apprentices and
trainees, as explained in Table A6.5.
f. The reduced rates apply only
to youth with tenures of less than 3 months.
|
|
