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The Global Minimum Wage Debate

April 25, 2014

 

mcdonalds

The minimum wage debate has been ongoing for as long as I can think back. Proponents for minimum wages argue that income below a set level is insufficient to provide a foundation for self-sustaining existence. Opponents of the same law argue that businesses cannot afford to raise wages beyond productivity and remain profitable. Unfortunately, both sides are right in this debate. It is certainly true that living on $8 an hour before taxes makes it impossible to live meaningfully in modern-day America, especially when children need to be supported as well. At the same time, nobody can expect any Company to pay $12 an hour for an employee that adds $8 in profitability and endure a significant loss by hiring that Person. After all, business is “for profit”, not charity, by definition.

Interestingly, in Switzerland, the same debate is currently going on as well. While the Swiss economy is notoriously strong, the debate remains the same. In the article “World’s highest Minimum wage on Ballot in Switzerland” Bloomberg reports that “The Swiss will vote in a national referendum May 18 on whether to create a minimum wage of 22 francs ($25) per hour, or 4,000 francs($5000) a month. While about 90 percent of workers in Switzerland already earn more than that, employers say setting Switzerland’s first national wage floor would push up salaries throughout the economy. When adjusted for currency and purchasing power, it would be the highest minimum in the world. ”

Minimum wage

Should the level of minimum wage make a difference in this discussion and/or who should determine appropriate minimum wage levels? Would unemployment rise along with minimum wage increases?

Unfortunately, the answers to these questions are found in politics which is not part of my mission here. I will say, however, that a sound and growing economy should raise the profitability of labor to the point where minimum wage is a relic of the past. Hopefully, this debate will disappear soon and the economy will brighten for low-cost labor as well as everybody else. That in itself would be a healthy indicator for the global economy. Let us hope that the Swiss can return to blowing their horns rather than argue about making at least $25 an hour…

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2 Comments
  1. Jen permalink

    Wow $25 am hour? That’s almost what I make.

    Sent from my iPhone

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