A maximum minimum? Minimum wages compared

The UK minimum wage is currently £6.31 per hour for people aged 21 and over, equivalent to about £12,000 a year for someone working a 37-hour week. But how does the UK compare to other countries that have some kind of minimum wage?
Real minimum wages, 2007-2012
The OECD calculates real minimum wages adjusted for differences in prices between countries.  These show that in 2012 the UK minimum wage was higher than that in the United States, Canada, Japan and Spain but lower than that in Australia, France, Ireland or the Netherlands.

These figures are not adjusted for differences in overall patterns of wages across the countries.   If we look at minimum wages as a percentage of median wages for full-time workers (the median is the middle level of wages across all workers) we see that while the UK continues to rank below Australia and France and above the United States and Japan, it had very similar values to the Netherlands and Ireland, and falls only just above Canada and Spain.
Minimum wage as a percentage of median earnings, 2007-2012
Of course, these international comparisons are only one factor that might be considered in trying to work out whether the UK minimum wage is set at the right level.  An increased minimum wage has the potential to increase incomes for the low paid, increasing the Treasury’s tax and National Insurance take and reducing benefits payments, and to increase the attractiveness of low paid work to potential employees.   Paying an increased minimum wage would however cost employers more and it may therefore affect how many people they employ or the number of hours they employ them for.

It is the job of the Low Pay Commission – an independent body drawn from drawn from a range of employee, employer and academic backgrounds – to judge how far the minimum wage can be increased without a significant adverse impact on employment or the economy.  The Low Pay Commission is due to make its next set of recommendations to the Government in February.

Author: Lorna Booth