• Insights

Minimum wage all over the world: we looked at the numbers in 40 countries

Written by
Toffoletto de Luca Tamajo, working in employment law since 1925.
A Ius Laboris survey of statutory minimum wage provisions in over 40 countries reveals both similarities and differences in approach across Europe and beyond. This article picks out key trends and explores minimum wage laws in key jurisdictions.

Minimum wage is one of the key issues relating to employment law both at national and international level.

Even the newly elected President of the European Commission, Ursula von der Leyen, has expressed her intention to introduce a legal instrument which will ensure that every worker in the European Union has a fair minimum wage that allows them a decent living in the country in which they work.

Italy does not provide for a generally binding statutory minimum wage. Currently, only National Collective Bargaining Agreements (NCBAs) provide for minimum wages and these only apply to employees working in organisations that adopt an NCBA. It should be noted that, in general, it is not mandatory for organisations to apply an NCBA.

Italian case law tries to compensate for the lack of a statutory minimum wage. In particular, Italian courts make reference to the constitutional principle of ‘fair salary’ (article 36 of the Constitutional Charter, according to which employees are entitled to receive a salary proportionate to their work activity and sufficient to ensure a free and dignified existence for themselves and their family) in applying parameters for minimum wages in NCBAs.

In harmony with the European trend, two new bills pending approval by the Italian Parliament set out a statutory minimum wage. The most recent bill (July 2019) makes reference to the total economic remuneration of employees (not only to ‘basic pay’) and identifies two parameters.

The first parameter can be classified as ‘contractual’: according to the bill, a salary can be considered ‘fair’, if it is not less than the total economic remuneration provided for in the NCBAs stipulated by the most representative trade unions at national level.

The second parameter can be classified as ‘legal’: the bill (as well as the other bill pending approval) provides that, in any event, an hourly wage cannot be less than EUR 9 gross.

However, several criticisms have already been made of these new proposals. On the one hand, unions are worried that the introduction of a statutory minimum wage could reduce the collective autonomy of social partners and employers’ interest in adhering to collective agreements and collectively agreed wages.

Furthermore, a minimum hourly wage of EUR 9 is considered extremely high and if applied in the Italian legal system would cause disruption in terms of employers’ total costs. In fact, it is not clear if the EUR 9 takes into account the portion of additional payments set by law. For example, pro-rata instalments of additional monthly salary (i.e. the ‘tredicesima’, 13th month) and the portion of the severance payment (‘Trattamento di Fine Rapporto’, or ‘TFR’ due to employees on termination of the employment relationship) equal to 7.4% of annual gross salary. Given these issues, a serious review of the wording of the current proposals is expected.

In a European context, Italy is one of the few countries that does not provide for a generally binding statutory minimum wage. Specifically, according to the survey carried out by Ius Laboris in more than 40 jurisdictions on minimum wages (i.e. how the respondent countries set the minimum wage, the current rates, etc.), 22 out of 28 Member States of the European Union provide for a statutory minimum wage.

The Member States that do not provide for one (in addition to Italy) are Austria, Cyprus, Denmark, Finland and Sweden. These countries are characterised by a system of industrial relationships in which trade unions are present in the majority of organisations and sectors. As in Italy, minimum wages are defined by collective bargaining agreements.

In Austria, for example, there are more than 850 different collective agreements that provide for different minimum wage levels.

In Cyprus, according to the Minimum Wage Law, the Council of Ministers may issue decrees to fix minimum wage rates for any occupation in which workers receive unreasonably low salaries (e.g. childcare and sales assistants).

There are different methods of setting statutory minimum wage levels; in some countries, for example, it depends on employees’ role, age or type of job, among other factors, while in other cases such criteria are not considered.

In January 2018, Germany established a legal minimum wage applicable to all types of organisations.

In Bulgaria, the Council of Ministers sets the minimum monthly wage by also taking into consideration elements such as economic development and inflation, but no adjustment is made for different positions or categories of employee. In Croatia, Estonia and Poland no distinction is made according to the type of activity carried out by employees, their age or even other factors.

In France, the law establishes the ‘SMIC’, a minimum wage per hour, regardless of seniority or the role of the worker.

Conversely, in the United Kingdom there are four categories of workers, differentiated by age, to which different minimum wages apply. In Ireland, whether or not to apply the statutory minimum wage in full depends on the age of the employee.

In Greece, a new mechanism for setting the minimum wage was recently introduced. The minimum wage is set through a step-by-step consultation process. This process lasts approximately four months and involves social partners and institutions, specialised public agencies, scientific institutions and related bodies. The consultation is run by a coordination committee, which is specifically set up for this purpose and consists of the President of the Organisation for Mediation and Arbitration (OMED), one representative from the Ministry of Labour and one from the Ministry of Finance.

Minimum wages are usually updated and here too approaches differ.

In Bulgaria, Croatia, Poland, and Slovakia the government has unilaterally set the minimum level for 2019. In Serbia, the minimum hourly wage is revised every year and cannot be lower than the previous year’s minimum wage.

Other countries, such as Luxembourg, Belgium and Estonia provide for a predetermined formula to adjust the minimum wage every year.

In France, the United Kingdom, Ireland and Germany, expert committees are involved in the process of setting new rates of minimum wages.

With reference to member states that have a statutory minimum wage, it should be noted that increases have been implemented this year. In particular, the largest nominal increases in the minimum wage rate were in Spain (22%), Greece (11%, as of February 2019) and Bulgaria (10%).

Ius Laboris survey also covers countries outside Europe. In most non-European countries surveyed, minimum wages are set by law.

In Brazil, there is a federal minimum wage, which applies if there are no specific rules either at individual state level or provided for by a collective bargaining agreement.

In Argentina, national minimum wage rates exist and are defined by the so-called Committee for Minimum Wage, composed of representatives from the government, employers and employees.

In the US, most states have a legal minimum wage, but there is also a federal minimum wage.

In Canada the minimum wage varies between provinces and territories and is subject to periodic increases.

In Japan, minimum wages are set by the Minimum Wage Law in each prefecture.

Debates and social dialogue on the question of minimum wage rates continue, rendering this issue an increasingly hot topic, especially since, as described above, it affects and is affected by multiple aspects of employment law.

Emanuela Nespoli
Partner - Italy
Toffoletto De Luca Tamajo