The Minimum Wage Debate

By Julia Mazurek

“Dear Potential Employer, I would be grateful if you could specify the wage I would be earning in this position.” – I started writing a brief email, excited about the possibility of beginning a new side job in the upcoming weeks.

“As per regulation, your pay would be based on the hourly minimum wages set by the Dutch government, which are dependent on age.” – I read the reply out loud a few hours later, with a grim look caused by sheer confusion forming on my face.

How much should an hour of a person’s work be worth? What is the wage one should be willing to accept for being engaged in a job for a specified amount of time? When asked such questions, an average person bluntly shrugs their shoulders and states that the government always dictates the rules. And always will. It appears, however, that governments are not unilateral in the lengthy decision-making process concerning wages. This begins at the level of the most vulnerable group – those dependent on minimum wages – the mysterious monetary amounts that determine the numbers on the front page of all remaining paychecks.

After receiving the email that initiated my puzzlement, I quickly proceeded to learn that in the Netherlands, hourly wages are based on the age of the worker, until they reach their twenty-first birthday. Employees until the age of twenty receive only a percentage of the wage rate that applies to those aged twenty-one and over. The government aims to keep these quantities up-to-date through semi-annual adjustments which take place on January 1st and July 1st and are based on collective wage bargaining in the Netherlands, which incorporate matters such as inflation adjustments, amongst others. What is also taken into consideration in the process of setting wages are unemployment levels, the pace of economic development, and social security benefits. So, while it is true that the government decides what amounts will be transferred to one’s bank account every paying period, it seems that the methods applied in the process differ from country to country, which is quite intriguing.

Great numbers of methods are used to set wages around the world. At one end of the spectrum, the government is in complete control, as in the United States. The process in this case, however, is exceptional, as it is the individual states that possess the majority of control over wages, as opposed to the politicians residing in Washington D.C (DeSilver, 2021). Furthermore, American law does not predict the need to update minimum wages on a systematic basis, which in itself passively creates a catalyst for persistent dissatisfaction among citizens.

On the other end, in multiple countries, an elaborated system of collective bargaining establishes the minimum quantities, as in Austria and, until recently, in Germany (Dickens, 2015). Such negotiations most frequently happen at industry or sector level. That what is agreed upon is meant to swiftly translate into universal laws, which gives negotiators an exceptional power to influence minimum wage regulations.

There are also numerous other method variants. Some countries, for instance, apply derived formulas for uprating the minimum, as in the case of France, where the government aims to keep the minimum wages closely intertwined with current inflation rates. In addition to these basic differences in how the rates are set, countries also often differ in whether they apply a single minimum wage or different rates for divergent groups of workers. Many governments seem to be loyal supporters of lower rates being applicable to younger workers, although the discount methods applied in the process differ significantly between nations, as they must be adjusted to social norms. A handful of countries set multiple rates, which can differ significantly not only by age, but also by working sector, inhabited region and overall occupation title.

 One may pose a question – does a universal method of rightly assessing the value of labor exist, and if so, on what grounds can it be derived? This constitutes an extensive topic extremely dependent on variables such as national norms, the level of economic divergence between sectors, national currency regulations, and, first and foremost, governmental structures. The mechanisms of setting minimum wages worldwide remains to be a matter thirsting for increased public attention and decreased passiveness.

Bibliography

 DeSilver, D. (2021, May 20). The U.S. differs from most other countries in how it sets its minimum wage. Pew Research Center. https://www.pewresearch.org/fact-tank/2021/05/20/the-u-s-differs-from-most-other-countries-in-how-it-sets-its-minimum-wage/

Dickens, R. How are minimum wages set?. IZA World of Labor 2015: 211 doi: 10.15185/izawol.211

 Minimum Wages Regulations - Netherlands. (2022). WageIndicator Subsite Collection. https://wageindicator.org/labour-laws/labour-law-around-the-world/minimum-wages-regulations/minimum-wages-regulations-netherlands