Other Countries Have Higher Minimum Wages. They Also Have Higher Something Else...

Kevin Drum argues our minimum wage in the US is really low

blog_minimum_wage_median

 

A few quick thoughts:

  • I have a constant frustration that we never see these comparisons just on a straight purchasing power parity absolute dollar number.  Numbers related to income distribution are always indexed to a number that is really high in the US, thus making our ratio low.  I seriously doubt Turkey has a higher minimum wage in the US, it just has a much lower median wage.  Does that really make things better there?  I have this problem all the time with poverty numbers.  The one thing I would like to see is, on a PPP basis, a comparison of post-government-transfer income of the US bottom decile or quintile vs. other countries.  Sure, we are more unequal.  But are our poor better or worse off?  The fact that no one on the Left ever shows this number makes me suspect that the US doesn't look bad on it.    This chart, from a Leftish group, implies our income distribution is due to the rich being richer, not the poor being poorer.

  • Drum or whoever is his source for the chart conveniently leaves off countries like Germany, where the minimum wage is zero.  Sort of seems like data cherry-picking to me (though to be fair Germany deals with the issue through a sort of forced unionization law that kind of achieves the same end, but never-the-less their minimum wage is zero).
  • All these European countries may have a higher minimum wage, but they also have something else that is higher:  teen unemployment (and I would guess low-skill unemployment).

click to enlarge

Admittedly this only has a subset of countries, but I borrowed it as-is from Zero Hedge.  By the way, by some bizarre coincidence, the one country -- Germany -- we previously mentioned has no minimum wage is the by far the lowest line on this chart.

  • Spruance

    The days of zero minimum wage in Germany seem to be over. The new coalition government (if it emerges indeed as such) plans to intruduce a global minimum wage of € 8.50.

  • slocum

    It's not hard to find international comparisons of minimum wage levels based on purchasing power. Here's one that includes both the U.S. and Turkey. And you're right -- when adjusted for PPP, Turkey's minimum is just a bit over half of the U.S. level:

    http://www.ibtimes.com/minimum-wage-purchasing-power-parity-only-nine-countries-have-higher-minimum-wage-us-infographic

  • Joe_Da

    If you read Krugman, you would belief that minimum wage has no effect since the studies he cites show little or no change in the unemployment rates (with the exception of teen unemployment)
    What he fails to mention is that while unemployment rates remain stable (or nearly stable) the hours worked get cut so that total wages remain approximately the same. ie
    at a $6hour minimum wage, the worker works 30 hours, minimum wage goes to $7, and hours worked goes to 26 hours, basically the same pay. Virtually all the studies supporting minimum wage increases acknowledge this effect, though often only in passing or in footnote as if it is not relevant. The leftist studies are too busy trying to prove that increases the minimum wage do not effect unemployment rates while ignoring what the law of supply and demand actually predict.

  • morgan.c.frank

    also note:

    the german unemployment rate has fallen sharply since the labor reforms that allowed for mini jobs and contract work not governed by union deals.

    such people are easier to hire and fire and not bound by union wage and benefit deals.

  • Elam Bend

    There area a couple of other things also. For instance, Australia. It has a high minimum wage and gets used a lot as an example of 'why can't we do that.' However, it look at the actual law, the minimum wage often quoted is the highest of a graduated minimum wage scale that has much lower wages based upon age and experience. Also, Oz is a much smaller country with certain industries that require lots of man power, i.e. mining. They are also very strict on their immigration. This has the effect of forcing non-regulated wages up. (and even then, they still couldn't get enough able bodied Aussies to move to NW OZ to mine, thus a bunch of Ukrainians, among others, were imported.

  • sch

    Poverty in the US as commonly defined omits non-earned income, so SNAP, EITC, rental supplements are not included in "income". Inclusions of these would markedly change
    'poverty' numbers, but as with so much else (eg: war on drugs) there is a large bureacracy that thrives on high poverty numbers.

  • Dan Wendlick

    Alternative interpretation of the upper graph: The bars measure the difficulty in obtaining a job that pays higher than the minimum wage, either because of high unemployment or a general low wage level. It also likely does not include the effect of casual employment, such as day labor, subsistence farming, and other non-reported and non-taxed income

  • Gil G

    So how do youth break the cycle of unemployment then? A 20-year old who can't get employed will become an unemployable 30-year old then an unemployable 40-year old, etc. After all, no one seems to care that the unemployment rate for children is virtually 100%.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    That is exactly what is happening with US millenials, and a good portion of Europe.

    We are dangerously close to destroying a generation of productivity in the US, and Europe basically already has done.

    I maintain it is the goal of radical leftists like Obama to maximize government dependency and collectivize as much as he can while in power, thereby creating a permanent constituency of impoverished wards of the state.

    We are well on the way towards that goal. The effects of these 8 years of radical regressive leftist rule will be felt for decades, if not forever.

  • Skeptiker

    Also there are several other factors, like productivity (one of the lowest working hours of Western countries), infrastructure and culture itself.

    But make no mistake there is a real experiment coming since the new grand coalition will introduce a minimum wage of 8.5 EUR.