5 Great Countries for Minimum-Wage Workers

Raising the minimum wage has become a hot-button issue in the U.S. recently, with President Obama having called for a raise in the federal minimum wage in his 2013 State of the Union address. Many U.S. states have followed suit with proposals of their own to raise their minimum wages, with nearly 20 states already having set wage levels above the $7.25 federal minimum.

When you look around the world, the U.S. ranks among the top countries for its minimum wage. But you can find several countries that pay workers a lot more. Let's look at five of the highest-paying countries for minimum-wage workers, with wages given in U.S. dollar terms using current currency-exchange rates.


Image source courtesy World Atlas.

New Zealand, $11.13 an hour
New Zealand workers are entitled to minimum wages of 13.75 New Zealand dollars an hour. The most recent rise came earlier this year, with a boost of NZ$0.25 coming in February. However, along with that rise came a controversial new "Starting Out" wage program for younger workers, under which those aged 16 to 19 can receive as little as 80% of the adult minimum. Proponents argue that with youth unemployment soaring over 30% in New Zealand, the measure will encourage greater job creation for young workers. Opponents, however, argue that the wage is discriminatory and that similar measures in the past to promote job growth have failed.

Ireland, $11.15 an hour
In Ireland, workers are entitled to 8.65 euros per hour, having been raised from 7.65 euros as of mid-2011. For workers who are under 18, a lower minimum equal to 70% of the full minimum wage applies, while those 18 or older who are in their first or second years of employment can be paid as little as 80% and 90% of the minimum wage, respectively. In addition, lower rates ranging from 75% to 90% apply to workers in approved structured training courses.

France, $12.21 an hour
French minimum-wage workers just got an increase in their pay at the beginning of 2013, with a small rise to 9.43 euros an hour coming after a larger increase in June 2012. The French government said 2.6 million workers would benefit from the higher minimum wage. France ranks among the top countries in the world in terms of worker-pay equality, with the minimum wage representing more than 60% of the median wage across all full-time workers.

Luxembourg, $14.02 an hour
The tiny country nestled between France and Germany pays unskilled workers 10.83 euros an hour, with 16-year-olds entitled to 75% of that amount and 17-year-olds getting 80%. However, for skilled employees, the minimum wage is 20% higher, putting a tangible premium on improving job skills.

Australia, $15.40 an hour
Australia pays full-time adults 15.96 Australian dollars an hour. But there are a wide variety of sub-categories in the minimum-wage laws. For instance, workers under 16 can get paid as little as A$5.87 an hour, with a sliding scale for those ages 16 to 20 that goes from A$7.55 to A$15.59. In addition, apprenticeships have special amounts, ranging from A$10.22 in the first year to A$17.65 in the fourth year.

What national minimum wages mean for investors
It's important to realize that minimum-wage laws affect companies only to the extent of their operations in their home countries. For instance, in Australia, mining giants BHP Billiton (NYSE: BHP  ) and Rio Tinto (NYSE: RIO  ) have to follow minimum-wage laws for their Australian operations, but elsewhere around the world, both companies have faced labor disputes over pay levels that in some cases are much lower than what Australian law would require domestically. Moreover, even as Eaton (NYSE: ETN  ) , Actavis (NYSE: ACT  ) , and other companies have moved or are in the process of moving their corporate headquarters to Ireland, you shouldn't expect a huge shift of employees that would require higher pay.

In addition, wages are only part of the labor cost that companies bear. With countries having different tax rates and social programs and requiring different levels of benefits, you have to look at the entire labor-cost picture to get a true sense of what businesses pay on behalf of their employees.

Nevertheless, in terms of competitiveness, labor costs are a key component of profitability. With every dollar that workers receive taking a dollar of profits away from the bottom line, companies will inexorably seek out places where productivity-adjusted wages are as low as they can find. That makes national minimum-wage legislation an important aspect of preventing a race to the bottom for wage rates worldwide.

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  • Report this Comment On May 28, 2013, at 12:30 PM, mdk0611 wrote:

    Two thoughts:

    1. It looks like all of those nations save France have lower minimum wages for the high school kids pouring sodas at McDonalds or the equivalent.

    2. Do any of those nations have an Earned Income Tax Credit? That might lower the gap between what workers in those nations receive and what a US worker nets.

  • Report this Comment On May 29, 2013, at 10:42 AM, damilkman wrote:

    I am generally against setting a high minimum wage because if it is too high certain menial tasks are either automated or are just removed. Decades ago my first job in the labor force was an unskilled part time job as menial labor in a superstore. Those who worked hard on the bottom rung were given first crack at the higher level jobs as positions opened up. Thus the managers were using the menial positions to evaluate the work ethic of individuals. When the bottom rung is raised higher certain opportunities go away. My guess is that is why the countries listed in the article all have exceptions for younger workers as they found their attempts at diverging pay from value distorted the marketplace. I know my first two entry level jobs were ultimately impacted by the rising minimum wage. My first job was bottle return. When the minimum wage went up automated can and bottle counters were installed and customers counted their own. My second job was handing out a plastic tab at a university computer lab and hand counting the number of users. When wages went up an automated logging system was installed.

  • Report this Comment On May 30, 2013, at 5:21 AM, devoish wrote:

    damilkman,

    Why is it a bad thing to replace your bottle return job with an automated can and bottle counter?

    Best wishes,

    Steven

  • Report this Comment On May 30, 2013, at 11:31 AM, damilkman wrote:

    There is nothing wrong with automation. My point is that by increasing the cost by raising the minimum wage, automation is often accelerated.

    The point I was attempting to make is that by diverging value of a task from actual compensation, the market reacts to what it perceives is the most efficient method.

    In my unique case, it was worth 3.35 for the store to have attendants count bottles & cans and later for the university to staff a human body at a computer lab for 5.50. When the minimum wage increased, it immediately became more efficient to install the automated can counter and the remote logging system.

    Both of these innovations would have eventually occurred anyway. That is the nature of market. They were just accelerated.

    As a thought experiment imagine if there is a continued push for a living wage for fast food workers whom the majority are part time young people just getting into the employment picture. What prevents a smart person from figuring out an automated fast food machine. Maybe this also eventually happens. But it will happen a lot sooner if you are forced to pay your employees 15 dollars an hour verses 7.50.

  • Report this Comment On May 30, 2013, at 8:53 PM, devoish wrote:

    I think it would be great if some smart person freed minimum wage workers from the drudgery of having to flip burgers! Just as the vending machines freed you. They could go to school, visit museums, etc.

    By the way, slightly less than half of minimum wage workers are youths just getting into the job market. Not a majority.

    Best wishes,

    Steven

  • Report this Comment On June 02, 2013, at 4:51 AM, Risky88 wrote:

    If the country is in a race to the bottom

    specifically in wages

    how does it EVER rise to the top?

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