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1. In Chapter 3 we analyse the impact of the National Minimum Wage on incomes, the income distribution, the numbers of people living in poverty, and incentives to work. The impact of the minimum wage in these areas is influenced by the tax and benefits system. In this appendix we describe the main components of the tax and benefits system which are relevant to low-paid workers and the effect which they have on the incomes of these workers.

Tax and Benefits System

2. The main components of the tax and benefits system which affect low-paid workers are income tax, National Insurance contributions, and a number of tax credits and benefits payable to people in work. This section briefly describes each in turn. Unless otherwise noted, the rates and amounts shown are those applying from April 2001.

Income Tax and National Insurance

3. Income tax liability depends on the income and the allowances of tax-free income to which each person is entitled. Table A3.1 shows the allowances and the tax-free incomes which these allowances represent. The value of each allowance is a maximum, available only where the individual has sufficient tax liability to use the full allowance. Table A3.1 also shows the different income tax rates and the slices of taxable income to which they apply. In addition, families with at least one child under age 16 living with them can claim the Children's Tax Credit. This reduces their income tax by £10 per week or £520 per year (less for higher-rate tax payers). In the HM Treasury Budget 2001 report, the Government announced that, to recognise the additional costs of a new child in the first year, from April 2002 the Children's Tax Credit will be increased by £10 per week for families in the year of a child's birth, bringing it to £20 per week.

Reports & Publications

Appendix 6: Minimum Wage Systems in Other Countries

>>Back to main report index

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 A3.1*
Income Tax Allowances and TaxBands 2001/02
Allowance	Annual amount £	Weekly equivalent £
Personal allowance:
Age under 65	4,535	87.21
Age 65—74	5,990	115.19
Age 75 and over	6,260	120.38
Blind person's allowance	1,450	27.88
Income Tax Rate	Band of taxable income £ per year	Band of taxable income £ per week

Starting rate 10 per cent	Up to 1,880	Up to 36.15
Basic rate22 per cent	1,881 — 29,400	36.15 — 565.38
Higher rate 40 per cent	Over 29,400	Over 565.38
Source: Inland Revenue

4. Employees are liable to pay National Insurance contributions (NICs) on earnings between the primary threshold of £87 per week and the upper earnings limit of £575 per week. The contribution rate is 10 per cent of earnings between these amounts. The threshold for paying NICs has been increased to align it with the income tax personal allowance. Table A3.2 shows the income tax and NICs payable by workers earning the National Minimum Wage. Workers with at least one child under age 16 living with them and working for 35 hours per week for the minimum wage do not pay income tax.

*Table A3.2*
Income Tax and National Insurance Payable by a Worker Earning the National Minimum wage
A person of working age works for 35 hours per week for the National Minimum Wage (£3.70 per hour in April 2001, £4.10 per hour in October 2001).
	April 2001	October 2001
Income Tax: £ per week
Worker with at least one child under age 16	Nil	Nil
Worker with no child under age 16	4.96	8.04
National Insurance: £ per week	4.25	5.65
Source: Inland Revenue

In-work Support

5. People in work can, depending on their circumstances, receive a number of types of in-work financial support. The main types are Child Benefit, Working Families' Tax Credit, Disabled Person's Tax Credit, Housing Benefit and Council Tax Benefit. Apart from Child Benefit, these are all means-tested.

Child Benefit>

6. Child Benefit is payable to families — whether in work or not — who are bringing up at least one child under age 16; under age 19 and studying full-time up to A level, NVQ level 3 or equivalent; or under age 18 and registered with the appropriate agency, such as (in England) the Careers Service or Connexions. Child Benefit, which is non-contributory, non-means-tested and tax-free, is £15.50 per week for the first child and an additional £10.35 per week for each subsequent child.

Working Families' Tax Credit>

7. Working Families' Tax Credit is the main in-work support for families with at least one child on low or middle incomes where one or both partners work(s) for at least 16 hours per week. It is non-contributory and tax-free. The maximum Working Families' Tax Credit payable depends on the number and ages of children in the family, net income and savings, the number of hours worked and whether the family pays eligible childcare costs (childcare provided by, for example, registered childminders, nurseries or out-of-school clubs). Child Benefit, Housing Benefit, Council Tax Benefit and some other benefits are ignored when calculating entitlement to Working Families' Tax Credit.

8. Working Families' Tax Credit is built up from individual credits, as shown in Table A3.3. The maximum credit is payable where the family's net income does not exceed the Working Families' Tax Credit income threshold of £92.90 per week. For each £1 by which the family's net income exceeds £92.90 per week, the Working Families' Tax Credit payable is reduced by 55 pence.

*Table A3.3*
Working Families' Tax Credit 2001/02
	£ per week
Basic tax credit	54 — increasing to 59 from June 2001
30 hour tax credit, where one adult works at least 30 hours per week	11.45
Tax credit for each child:
Under age 16	26
Age 16—18	26.75
Extra tax credit for each disabled child	30
Childcare tax credit:
For 1 child — 70% of eligible childcare costs up to a maximum	Maximum cost £100 — increasing to £135 in June 2001
For 2 or more children — 70% of eligible childcare costs up to a maximum	Maximum cost £150 — increasing to £200 in June 2001
Source: Inland Revenue

9. Example 1 shows that a two parent family with one child aged under 16 and with one adult working for 35 hours per week in April 2001 for the National Minimum Wage would receive Working Families' Tax Credit of £73.66 per week.

Example 1 — Working Families' Tax Credit
In a two-parent family with one child aged under 16, one partner works 35 hours per week in April 2001 for the National Minimum Wage (£3.70 per hour).
Gross pay Income tax National Insurance Net pay	£129.50 Nil £4.25 £125.25 per week
Maximum tax credit = basic tax credit (£54) + 30 hour credit + tax credit for the child = £91.45 per week.
Net income exceeds WFTC income threshold (£92.90) by £32.35 per week.
So WFTC payable = maximum credit (£91.45) less 55% of £32.35 = £73.66 per week.
Note: Any income from Child Benefit, some other social security benefits and maintenance payments is ignored when calculating entitlement to Working Families' Tax Credit. Assumes that net income taken into account comprises net pay only.

10. Working Families' Tax Credit includes a childcare credit to help with the cost of eligible childcare. To qualify, both partners in a couple, or a lone parent, must work at least 16 hours per week. Example 2 shows that a lone parent working for 35 hours per week in April 2001 for the National Minimum Wage and paying eligible childcare costs of £100 per week would receive Working Families' Tax Credit of £143.66 per week.

Example 2 — Working Families' Tax Credit
A lone parent with one child aged under 16 works 35 hours per week in April 2001 for the National Minimum Wage (£3.70 per hour) and pays eligible childcare costs of £100 per week.
Gross pay Income tax National Insurance Net pay	£129.50 Nil £4.25 £125.25 per week
Maximum tax credit = basic tax credit (£54) + 30 hour credit + tax credit for the child + 70% of the £100 childcare costs = £161.45 per week.
Net income exceeds WFTC income threshold (£92.90) by £32.35 per week.
So WFTC payable = maximum credit (£161.45) less 55% of £32.35 = £143.66 per week.
Note: Any income from Child Benefit, some other social security benefits and maintenance payments is ignored when calculating entitlement to Working Families' Tax Credit. Assumes that net income taken into account comprises net pay only.

Disabled Person's Tax Credit

11. Disabled Person's Tax Credit supplements low earnings of disabled people working at least 16 hours per week. Disabled Person's Tax Credit is non-contributory and tax-free. The calculation is similar to that of Working Families' Tax Credit, except that separate credits apply to single adults and to couples/lone parents (respectively £61.05 and £91.25 per week from June 2001). Additional credits for people working at least 30 hours per week, for children and for eligible childcare costs are the same as for Working Families' Tax Credit.

Housing Benefit and Council Tax Benefit

12. Housing Benefit and Council Tax Benefit are payable to people on low incomes — whether in work or not — to meet the cost of rented accommodation and council tax. They are non-contributory and tax-free. Entitlement is calculated on the same basis as for Income Support and Income-based Jobseeker's Allowance, which are the main means-tested benefits for people working below 16 hours per week or not in work. Housing Benefit and Council Tax Benefit also take account of childcare costs.

13. A significant feature of these benefits is that they take into account other tax credit and benefit income such as Working Families' Tax Credit and Child Benefit. For each £1 by which the household's net income exceeds statutorily-prescribed levels, the Housing Benefit and Council Tax Benefit payable are reduced by 65 pence and 20 pence respectively. Example 3 shows the Housing Benefit and Council Tax Benefit calculation for the two-parent family from Example 1. It indicates that — for a family paying average local authority rent and with one adult working for 35 hours per week at the minimum wage of £3.70 per hour — income from net pay, Working Families' Tax Credit and Child Benefit approaches the level at which entitlement to Housing Benefit and Council Tax Benefit will cease. The increase of £5 per week in the basic tax credit in Working Families' Tax Credit in June 2001 lifts such a family above entitlement to Housing Benefit and Council Tax Benefit altogether.

Example 3 — Housing Benefit and Council Tax Benefit
In a two-parent family with one child aged under 16, one partner works 35 hours per week in April 2001 for the National Minimum Wage (£3.70 per hour).
(a) The family is paying average private sector rent and council tax:
Average rent	£78.40 per week
Average council tax	£12.90 per week
Net income is: Net pay WFTC Child Benefit Total	£125.25 (see Example 1) £73.66 £15.50 £214.41 per week
Housing Benefit = Rent less 65% of income taken into account (see note) = £78.40 less £41.44 = £36.96 per week.
Council Tax Benefit = Council tax less 20% of income taken into account (see note) = £12.90 less £12.75 = £0.15 per week.
(b) The family is paying average local authority rent and council tax:
Average rent Average council tax	£43.32 per week £12.90 per week
Housing Benefit = Rent less 65% of income taken into account = £43.32 less £41.44 = £1.88 per week.
Council Tax Benefit = Council tax less 20% of income taken into account = £12.90 less £12.75 = £0.15 per week.
Note: Average rent and council tax figures are for 2000/01 financial year. Income taken into account is net pay, Working Families' Tax Credit and Child Benefit, less the first £10 of earnings, another £11.45 of earnings disregarded for working 30+ hours, any childcare costs up to a maximum of £70, and a statutorily prescribed amount based on household composition which for this family is £129.20 per week. Calculation assumes no other income.

New Tax Credits

14. In Budget 2001 the Government re-affirmed its intention to introduce two new tax credits from 2003. One will be a single new tax credit for families with children, whether or not someone is in work. This will bring together the different strands of support for children in Working Families' Tax Credit, Disabled Person's Tax Credit, Income Support/Jobseeker's Allowance and Children's Tax Credit, building on the foundation of universal Child Benefit. Budget 2001 indicated that this new credit, which will be assessed on the basis of household income, will be accompanied by a new Employment Tax Credit for people in work and without children, and that more details on these tax credits would be published in Summer 2001.

In-work Income

15. The tax credits and benefits described above supplement the incomes of many low-paid workers. The examples in Tables A3.4—A3.6 show the composition of the net incomes of illustrative households working for the National Minimum Wage and receiving tax credits and/or benefits.

16. Table A3.4 shows the minimum income guarantee for a family with one adult working for 35 hours per week: £214 per week in April 2001, rising to £225 per week in October 2001. Table A3.5 shows the minimum income guarantee for a family with one adult working for 16 hours per week: £154 per week in April 2001, rising to £166 per week in October 2001. And Table A3.6 shows the net income of a single person without children.

*Table A3.4*
In-work Income — Two-parent Family, with One Partner Working 35 Hours per week for the National Minimum Wage
Family has one child under age 16.		April 2001: £ per week	October 2001: £ per week
Net income before housing costs	Net pay WFTC Child Benefit Total = Minimum income guarantee	125.25 73.66 15.50 214.41	137.85 71.73 15.50 225.08
Per hour equivalent	Net	6.13	6.43
If paying average private sector rent £78.40 per week	HB CTB New total	36.96 0.15 251.52	30.02 0 255.10
Per hour equivalent	Net	7.19	7.29
If paying average local authority rent £43.32 per week	HB CTB New total	1.88 0.15 216.44	0 0 225.08
Per hour equivalent	Net	6.18	6.43
Note: Average rent and council tax figures are for 2000/01 financial year. Assumes average council tax of £12.90 per week. Net income increases part-way through this period due to the £5 increase in the Working Families' Tax Credit basic tax credit in June 2001, partly offset by reductions in any Housing Benefit and Council Tax Benefit payable.

*Table A3.5*
In-work Income — Lone Parent, Working 16 Hours per week for the National Minimum Wage
Family has one child under age 16. No childcare costs.		April 2001: £ per week	October 2001: £ per week
Net income before housing costs	Net pay WFTC Child Benefit Total = Minimum income guarantee	59.20 80.00 15.50 154.70	65.60 85.00 15.50 166.10
Per hour equivalent	Net	9.67	10.38
If paying average private sector rent £78.40 per week	HB CTB New total	58.45 3.76 216.91	51.04 1.48 218.62
Per hour equivalent	Net	13.56	13.66
If paying average local authority rent £43.32 per week	HB CTB New total	23.37 3.76 181.83	15.96 1.48 183.54
Per hour equivalent	Net	11.36	11.47
Note: Average rent and council tax figures are for 2000/01 financial year. Assumes average council tax of £9.90 per week. Net income increases part-way through this period due to the £5 increase in the Working Families' Tax Credit basic tax credit in June 2001, partly offset by reductions in any Housing Benefit and Council Tax Benefit payable.

*Table A3.6*
In-work Income — Single Person, Working 35 Hours per week for the National Minimum Wage
Family has one child under age 16. No childcare costs.		April 2001: £ per week	October 2001: £ per week
Net income before housing costs	Net pay	120.29	129.81
Per hour equivalent	Net	3.44	3.71
If paying average private sector rent £68.50 per week	HB CTB New total	28.05 0 148.34	21.86 0 151.67
Per hour equivalent	Net	4.24	4.33
If paying average local authority rent £39.56 per week	HB CTB New total	0 0 120.29	0 0 129.81
Per hour equivalent	Net	3.44	3.71
Note: Average rent and council tax figures are for 2000/01 financial year. Assumes average council tax of £8.80 per week and that the worker is age 25+.

When Earnings Increase 17. The impact of an increase in the National Minimum Wage on net income will vary considerably, depending on the circumstances of the individual worker, in particular whether the household receives Working Families' Tax Credit and/or Housing Benefit and Council Tax Benefit. The interaction between the 40 pence increase in the minimum wage adult rate — due to take effect in October 2001 — and the tax and benefits system is shown in Table A3.7 for workers with and without a child who work for 35 hours per week for the adult rate of the minimum wage. The table also shows the marginal deduction rates relating to particular combinations of in-work benefits and Working Families' Tax Credit. Marginal deduction rates show how much of every extra £1 in gross pay that a worker earns is lost as they pay more tax and NICs and have their benefits reduced.

*Table A3.7*
Interaction of October 2001 Increase in the National Minimum Wage with Tax Credits and In-work Benefits
In October 2001 a person working for 35 hours per week for the National Minimum Wage receives a gross pay increase of 40 pence per hour or £14 per week.
Tax credit/in-work benefits in payment	Income tax/NICs increases and tax credit/benefit decreases resulting from pay increase: £ per week		Rise in net income: £ per week	Marginal deduction rate:per cent
(a) Worker has at least one child under age 16 living with them
None	NICs (10% of £14) Total reduction	1.40 1.40	12.60	10
WFTC	NICs WFTC (55% of £12.60) Total reduction	1.40 6.93 8.33	5.67	60
WFTC and HB	NICs WFTC HB (65% of £5.67) Total reduction	1.40 6.93 3.69 12.02	1.98	86
WFTC, HB and CTB	NICs WFTC HB CTB (20% of £5.67) Total reduction	1.40 6.93 3.69 1.13 13.15	0.85	94
(b) Worker has no child under age 16 living with them
None	Tax (22% of £14) NICs (10% of £14) Total reduction	3.08 1.40 4.48	9.52	32
HB	Tax NICs HB (65% of £9.52) Total reduction	3.08 1.40 6.19 10.67	3.33	76
HB and CTB	Tax NICs HB CTB (20% of £9.52) Total reduction	3.08 1.40 6.19 1.90 12.57	1.43	90
Note: Marginal Deduction Rate = Total reduction as a percentage of £14 per week increase in gross pay. A worker who has at least one child under age 16 living with them and who works for 35 hours per week for the National Minimum Wage does not pay income tax (Table A3.2).

*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.