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Home Publications Blogs Beat the Press Comparing Minimum Wages Across Countries

Comparing Minimum Wages Across Countries

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Friday, 13 December 2013 08:01

The Economist ran a useful piece on the minimum wage in the United States. However in making cross country comparisons it shows the minimum wage relative to the median wage. This can give a somewhat misleading impression of the relative size of the minimum wage in different countries, since the median wage itself reflects distribution.

The median wage in the United States has fallen by roughly 20 percent relative to the average wage over the last three decades. This means that if the minimum wage had kept the same relationship to the median, it would have fallen by 20 percent relative to the average wage, which roughly reflects productivity in the economy. This is also important in considering international comparisons, since the median is lower relative to the average in the United States than in other wealthy countries.

Comments (2)Add Comment
Why not show the minumum wage as percentage of rents in the ecomomy?
written by Perplexed, December 13, 2013 11:38
-"relative to the average wage, which roughly reflects productivity in the economy."

It isn't now but might be if you deducted monopoly, price discrimination, and other forms of rents. Why is it again economist don't think we need to measure and report on rents again?

Note: If they need help with the math, I'm sure there are physicists and other mathematicians that would be willing to lend a hand.
...
written by watermelonpunch, December 13, 2013 12:25

Thank you for pointing this out.
This is the kind of confusion & lack of context & lack of explanation of the math... that leads people in low-wage-low-cost-of-living areas to get all crazed thinking about how their job, which requires a college degree, is only paying $14/hr, and therefore when they hear about someone working at McDonalds in New York City wanting $15/hr they get angry, thinking about the young person who messed up their order at Wendy's in some rural small town, at 10pm Friday night, getting paid more than them - (because they're not thinking about context, remember).

They're not realizing that they'd also get a raise. And what's more that as it shakes out, they'd have more options and be able to bargain for more.
But they're not thinking about how they'll have an extra $40/wk to spend & more bargaining power.
Instead, they're thinking about how the fast food worker will have just as much to spend as them, and it irrationally pokes at their sense of fairness to the point where they don't even think about their own benefit.

It's exactly like the study I heard about where scientists had people play games to measure their sense of fairness... People were willing to give up their own gains, just to punish others they thought had gotten gains unfairly. In other words, they were willing to take less themselves, just to make sure they got more than the other guy they thought deserved less than them.

Apparently humans are wired for a race to the bottom!

I've even heard people with modest incomes, who seem to think that if the minimum wage were abolished completely, that they would get paid more!
They somehow have the idea that if people in retail & fast food restaurants were making .25 cents per hour, they'd get a raise at their office job, because more money would've been freed up for their skills/experience.
Not kidding on this.
Seriously.
Like say a lady working in an office doing Accounts Receivable clerical work, for about $10/hr is thinking that if the cleaning lady who gets paid $8/hr were put down to $5/hr, somehow the accounts receivable clerk would be paid better, because obviously she (thinks she) has more skills/experience. But if the minimum wage were raised to $10/hr, and the cleaning lady made $10/hr, the accounts receivable clerk would then be getting a raw deal.

This is how people are thinking about this.
IE: they're not thinking!

Because nobody in the major media bothers to give people basic information about context about how the minimum wage works as a floor in the bigger picture of the labor market, let alone the economy as a whole.

And also because low income people have been pitted against slightly lower income people.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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