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.