Minimum Wages under the Conditions of the Global Economic Crisis
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1 Minimum Wages under the Conditions of the Global Economic Crisis Thorsten Schulten Global Labour University Conference (ETUC) Berlin, September
2 Content Framework: Structural cause for the crisis Minimum Wage levels in the OECD Countries Development of minimum wages under the crisis (2009/2010) Outlook: Should there be a Global Policy on Minimum Wages? 2 Dr. Thorsten Schulten
3 Background: Structural causes of the crisis Growing inequality of income Inadequate wage developments/declining wage share Promoted through the deregulation of labour market institutions/shift of power relations Structural lack of aggregate demand Credit based and export-led growth models are creating global imbalances and are not sustainable A new more sustainable growth model needs Stronger wage-driven demand Higher equality of income A reinforcement of labour market institutions in order to re-balance power relations 3 Dr. Thorsten Schulten
4 The meaning of minimum wages Impact on wages: set an overall wage floor compress the wage structure have an important impact on the overall wage developments 4 is the most important point of reference in developing countries (including the informal sector) Economic function: stabilise or increase private demand support the function of wages as a nominal anchor for the price level Dr. Thorsten Schulten
5 Luxembourg France Ireland Netherlands Belgium Australia UK 9.08 Canada* 7.93 New Zealand 7.88 Japan* 7.63 USA 7.25 Greece Spain Slovenia Portugal Korea Czech Republic Slovakia Minimum Wages per hour, in US $ (January 2010) Poland 2.45 Estonia 2.41 Turkey 2.41 Hungary Brazil Source: WSI Minimum Wage Database
6 Netherlands Luxembourg Australia France Belgium UK Ireland New Zealand Canada* USA Japan* Greece 5.44 Slovenia Spain Korea Portugal Poland Turkey Czech Republic Minimum Wages per hour, in US$ PPS (January 2010) Hungary 2.96 Slovakia 2.90 Estonia Brazil Source: WSI Minimum Wage Database
7 Minimum Wages in % of Median and Average Wages for Full-time Workers 2008 (Kaitz Index) France New Zealand Greece Ireland Australia Belgium Slovenia Portugal Romania Hungary UK Poland Spain Slovakia Netherlands Lithuania Luxembourg Korea Czech Republic Japan Median Source: OECD USA Average not available
8 Relative Value of MW, 2000 and 2008, in % of Median France New Zealand Hungary Poland Greece Korea Czech Republic UK Portugal Spain Ireland Australia Belgium Slovakia Canada Luxembourg Japan USA 42.9 Netherlands
9 Minimum Wages under the crisis Strong pressure from employers and governments to freeze or cut minimum wages ILO Global Jobs Pact (2009) Government should consider minimum wages to Reduce poverty and inequality Increase demand Contribute to economic stability Avoid deflationary spirals 9 Dr. Thorsten Schulten
10 Brazil USA Turkey Canada Greece Portugal New Zealand Slovakia Poland Hungary Korea Luxembourg Netherlands France Spain Japan Slovenia UK Australia Belgium Czech Republic Estonia Ireland Changes of 22.9 Minimum Wages 2009/2010 in % Source: WSI Minimum Wage Database
11 Brazil USA Portugal Canada Greece Turkey Slovakia Japan Luxembourg New Zealand Spain France Ireland Netherlands Slovenia Korea Belgium Estonia Czech Republic Poland UK Hungary Australia Changes of Minimum Wages 2009/2010 in % Real Value Source: WSI Minimum Wage Database
12 Minimum Wages under the crisis Conclusion: Huge differences in minimum wage policies shows: there are alternatives! No cuts in the nominal minimum wage levels Cuts in the real level of minimum wage due to freeze or only small increase of nominal level Very low minimum wage level in many countries Some countries follow a strategy of a more substantial increase of minimum wages 12 Dr. Thorsten Schulten
13 Proposals for an International Minimum Wage Policy Basket-Approach: Living wage according to a certain basic living standard Asian Floor Wage Initiative Distributive Approach: Harmonisation of Relative Minimum Wage Levels e.g. 60% of the average wage European Parliament 13 Dr. Thorsten Schulten
14 Is there a need for a Global Minimum Wage Policy? United Nations: Universal Declaration of Human Rights (1948) Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity (Article 23, 3) 14 Dr. Thorsten Schulten
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