Minimum wage: How it works in Japan, Germany, UK and France

PARIS (AFP) – The minimum wage, which United States (US) President Joe Biden aims to raise to USD15 per hour in the US, can take different forms in different countries. Here is how it works in Japan, Germany, Britain and France.

Japan has a range of different minimum wages. Each of the country’s 47 prefectures sets its own, taking into account the results of annual national negotiations between representatives of employers, employees and the labour ministry. There are also specific minimum wages for certain sectors in each prefecture, such as the manufacture of auto parts.

The minimum wages are higher in urbanised areas. The highest is in Tokyo at JPY1,013 (USD9.68, EUR7.98) per hour. The lowest is JPY792 in rural areas such as the northern prefecture of Akita or Okinawa in the southeast.

According to the labour ministry, 1.9 per cent of employees are paid the minimum wage or less (there are exceptions) in companies with at least five employees.

The minimum wage was raised by just JPY1 at the start of the current fiscal year on April 1, the smallest hike in 16 years. The previous four years it was increased by more than JPY20 as governments tried to boost domestic consumption and, indirectly, chronically low inflation.

Following intense debate, Germany introduced a national minimum wage on January 1, 2015.

A special commission, the Mindestlohnkommission, made up of representatives of employers and trade unions and headed by an independent president, is responsible for reviewing it.

Each of Japan’s 47 prefectures sets its own minimum wage, taking into account the results of annual national negotiations between representatives of employers, employees and the labour ministry

At EUR9.50 (USD11.50) per hour before taxes, it is relatively low compared to other European countries, and the commission has recommended it be hiked gradually to EUR10.45 (USD12.70) by July 1, 2022.

Much of the debate about the introduction of the minimum wage focussed on whether it would lead employers to cut jobs. A study published in January 2021 by the Research Institute for the Future of Work found that the minimum wage had not led to an increase in unemployment. It found that that small and medium-sized companies had actually transformed temporary jobs into permanent ones.

The IW think-tank, which is close to employers, found last year that the minimum wage had little effect on the risk of falling into poverty (defined as income less than 60 per cent of the median), mostly because most minimum wage workers have other sources of income, such as that of a partner.

On the contrary, part-time work, which is common in Germany, was linked to a higher risk of poverty.

In Britain, the minimum wage, or National Living Wage, was created in its current form in 2016. Any increases are decided by the government on the recommendation of the independent Low Pay Commission.

The objective in creating the new system was to increase the minimum wage to the level of 60 per cent of the median wage by 2020, a goal which has been achieved according to a government commission.

The hourly minimum wage for employees over the age of 25 was hiked by 6.2 per cent on April 1, 2020 to GBP8.72 (USD11.98, EUR9.86). Depending on the employee’s age, it can fall as low as GBP4.15 (USD5.69, EUR4.69) for apprentices under 16.

About two million Britons are expected to benefit from an increase in the minimum wage to GBP8.91 (USD12.21, EUR10.06) coming into effect in April, and the age of people receiving it has been lowered from 25 to 23.

While there is currently no public debate on the minimum wage, there is much discussion about a minimum income for those on unemployment benefits or others with low incomes.

France’s minimum wage, or Smic, celebrated its 50th anniversary in 2020.

Since 2008 it has been recalculated automatically each year based on inflation and purchasing power. In January, it was increased by just under one per cent to EUR10.25 (USD12.45) per hour before taxes.

Some 2.25 million workers, or 13 per cent of the private-sector workforce, benefitted from a 1.2-per cent increase in the Smic at the beginning of 2020.

The proportion of people receiving the minimum wage is three times higher for those in part-time work or employed in small companies, compared to the average of nine per cent for employees on full-time contracts. Every year, a number of trade unions call on the government to raise the minimum wage by a greater amount than the automatic increase in order to give a “helping hand” to low-income workers.

However, the last time that happened was in 2012, as governments were concerned that bigger hikes would harm the job prospects of low-qualified workers.

Instead, the French government introduced a bonus for those earning the minimum wage, which was last raised to EUR90 (USD109) per month at the end of 2019. Some 4.3 million households received the bonus at the end of 2019.

At the same time, the government has reduced the social charges for companies employing low-paid workers, which has helped increase the attractiveness of employing workers in France.