WASHINGTON, D.C. — This past Thursday, the state of Massachusetts voted to raise its minimum wage to $11 per hour over the next few years. The change follows President Obama’s call for an increased national wage and Seattle’s approval of a movement toward a $15 per hour wage. While opponents have criticized the increase as introducing a new hardship on employers in a recovering economy, labor advocates point out that the $11 per hour figure still fails to reach the $11.31 per hour wage that would match the average Massachusetts’ cost of living and does not address inflation. Further, the true hourly minimum wage (wage adjusted for inflation) often depends on the area, varying from $8.66 in St. Louis to $11.90 in New York City.
Even as certain parts of the country increase the minimum wage, the United States as a whole remains in line with other developed nations whose labor production has significantly outgrown hourly wages. In its 2012/2013 Global Wage Report, the International Labour Organization (ILO) details the growing trend since its emergence in the 1980s through the Great Recession.
Growing Gap in the Western World
With the economic crisis came a drop in wage growth in developed nations both in 2008 and 2011. But the wage-profit gap has been widening for decades, and as Westerners acquire more debt to meet living costs, the time in which they can rid themselves of the burden becomes dangerously longer. Experts list changes in technology and growing financial globalization as factors in the trend.
As part of austerity in European crisis countries, wage cuts have led to a decline in aggregate demand. Greece, for example, lowered its minimum wage to USD $5 per hour – a shift that has placed exceptional pressure on the younger generation. Although the ILO’s report advises states against such drastic policies, they also highlight the financial market investment process and taxation systems as areas to review.
Still, France and Australia have some of the highest hourly minimum wages in the world at approximately USD $12 and USD $15 (for those older than 21-years-old) respectively.
New Powers Raising Standards
In 2009, in spite of the recession, China alone was responsible for 62.5 percent of the world’s total average real wage growth. The provinces set the minimum rates with a government-imposed nation-wide increase set for every two years. Wage growth in Asia, collectively, nearly doubled in eleven years.
Brazil is largely to blame for wage growth in South America. President Rousseff’s government began the year with legislation that will raise the monthly minimum wage by nearly nine percent in an effort to confront the country’s most extreme poverty.
Although wage growth levels in many developing countries remained steady throughout the 2008 recession, roughly half of their workers are wage-earners, and those who are, often live below the poverty line. The ILO suggests that closing the wage-profit gap could increase purchasing power and hence lower poverty rates.
As ILO Director-General puts it, “…the path to sustained and balanced economic growth must come through increased domestic consumption in surplus countries, based on wages that grow in line with productivity. International coordination can contribute to achieving equitable outcomes that benefit all countries.”
– Erica Lignell
Sources: The Boston Globe, The New York Times, Reuters, The International Labour Organization