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Minimum wage laws are one of the most frequently used policies to combat poverty around the world.
Back to Glossary
Minimum wage laws are one of the most frequently used policies to combat poverty around the world.
The minimum wage is the lowest monetary benefit that an employer is obliged to provide to employees, usually of the lowest qualification and performance. It is the lowest cost of an employee’s work, providing him or her with a certain reasonable standard of living, at the minimum recognised social threshold.
According to the International Labour Organization, minimum wage is a nearly universal policy instrument and applied in around 90% of all countries.
Countries set minimum wages in different ways, and some countries set different wages for different groups of workers. The processes that countries use to set their minimum wage rate and structure differ greatly, as do the methods for adjusting it. The different approaches have merits and shortcomings.
In the UK, the Low Pay Commission (LPC) is an independent body established in 1997 to define the National Minimum Wage (NMW) and recommend appropriate wage rates. Comprising a balanced partnership model with three independent members, three employer representatives, and three employee representatives, the LPC engages in a detailed evidence-based decision-making process. This process utilizes the latest data, economic analysis, and stakeholder perspectives to consider factors such as economic growth, average earnings, productivity, employment, and the impacts of past wage increases. It pays close attention to small and medium-sized enterprises (SMEs) and sectors known for lower pay, like retail, care, and hospitality.
Minimum wages can protect low-paid workers against hefty losses of purchasing power at times of high inflation. However, for this to be effective, it is necessary that minimum wages be adjusted regularly to take into account the needs of workers and their families, along with economic factors.
An adjustment of minimum wages would make a positive contribution to alleviating the current cost of living crisis while helping to sustain the economy at a time when the global economy is slowing down as a result of simultaneous crises.
In times of price inflation, if minimum wages are not adjusted – or if they are not adjusted sufficiently to keep up with rising prices – their real value diminishes. Even where the minimum wage is adjusted for CPI increases, this may be insufficient to fully compensate for the rise in the cost of living faced by low-income households.
Minimum wages are widely used around the world to protect the incomes and purchasing power of low-paid workers and their families. According to the International Labor Organization, The adequacy of minimum wage levels depends crucially on the ability to review and adjust rates regularly. This requires a flexible adjustment mechanism that considers prevailing circumstances, the needs of workers and their families, and economic factors.
Some benefits of implementing wage floors are listed below:
In the UK, the minimum wage rate is closely tied to the worker's age group and whether they are an apprentice. The national minimum wage caters to workers of at least school leaving age, while those aged 23 and up are eligible for the national living wage.
From April 2024, the eligibility for the national living wage will be expanded to include workers aged 21 and over, reflecting a commitment to adapt the wage rates to the cost of living. Apprentices who have completed the first year of their apprenticeship and are over 19 are paid the correct minimum wage for their age, rather than the apprentice rate.
In the US, the Fair Labor Standards Act mandates a federal minimum wage of $7.25 per hour for nonexempt workers. For tipped employees, the base minimum wage is $2.13 per hour, but total earnings must equal at least the standard minimum wage when tips are included; otherwise, employers must compensate for the shortfall.
Beyond the federal rate, many states and cities set higher local minimum wages—where there's a discrepancy, the higher wage prevails. It's essential to check each state's regulations, as they may also stipulate a higher minimum wage for tipped workers.
Can Workers Challenge Non-Compliance with Minimum Wage Laws?
How Often are Minimum Wage Rates Reviewed or Changed?
Are Tips Considered Part of the Minimum Wage Calculation?
The minimum wage is the lowest monetary benefit that an employer is obliged to provide to employees, usually of the lowest qualification and performance. It is the lowest cost of an employee’s work, providing him or her with a certain reasonable standard of living, at the minimum recognised social threshold.
According to the International Labour Organization, minimum wage is a nearly universal policy instrument and applied in around 90% of all countries.
Countries set minimum wages in different ways, and some countries set different wages for different groups of workers. The processes that countries use to set their minimum wage rate and structure differ greatly, as do the methods for adjusting it. The different approaches have merits and shortcomings.
In the UK, the Low Pay Commission (LPC) is an independent body established in 1997 to define the National Minimum Wage (NMW) and recommend appropriate wage rates. Comprising a balanced partnership model with three independent members, three employer representatives, and three employee representatives, the LPC engages in a detailed evidence-based decision-making process. This process utilizes the latest data, economic analysis, and stakeholder perspectives to consider factors such as economic growth, average earnings, productivity, employment, and the impacts of past wage increases. It pays close attention to small and medium-sized enterprises (SMEs) and sectors known for lower pay, like retail, care, and hospitality.
Minimum wages can protect low-paid workers against hefty losses of purchasing power at times of high inflation. However, for this to be effective, it is necessary that minimum wages be adjusted regularly to take into account the needs of workers and their families, along with economic factors.
An adjustment of minimum wages would make a positive contribution to alleviating the current cost of living crisis while helping to sustain the economy at a time when the global economy is slowing down as a result of simultaneous crises.
In times of price inflation, if minimum wages are not adjusted – or if they are not adjusted sufficiently to keep up with rising prices – their real value diminishes. Even where the minimum wage is adjusted for CPI increases, this may be insufficient to fully compensate for the rise in the cost of living faced by low-income households.
Minimum wages are widely used around the world to protect the incomes and purchasing power of low-paid workers and their families. According to the International Labor Organization, The adequacy of minimum wage levels depends crucially on the ability to review and adjust rates regularly. This requires a flexible adjustment mechanism that considers prevailing circumstances, the needs of workers and their families, and economic factors.
Some benefits of implementing wage floors are listed below:
In the UK, the minimum wage rate is closely tied to the worker's age group and whether they are an apprentice. The national minimum wage caters to workers of at least school leaving age, while those aged 23 and up are eligible for the national living wage.
From April 2024, the eligibility for the national living wage will be expanded to include workers aged 21 and over, reflecting a commitment to adapt the wage rates to the cost of living. Apprentices who have completed the first year of their apprenticeship and are over 19 are paid the correct minimum wage for their age, rather than the apprentice rate.
In the US, the Fair Labor Standards Act mandates a federal minimum wage of $7.25 per hour for nonexempt workers. For tipped employees, the base minimum wage is $2.13 per hour, but total earnings must equal at least the standard minimum wage when tips are included; otherwise, employers must compensate for the shortfall.
Beyond the federal rate, many states and cities set higher local minimum wages—where there's a discrepancy, the higher wage prevails. It's essential to check each state's regulations, as they may also stipulate a higher minimum wage for tipped workers.
Can Workers Challenge Non-Compliance with Minimum Wage Laws?
How Often are Minimum Wage Rates Reviewed or Changed?
Are Tips Considered Part of the Minimum Wage Calculation?
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