Understanding the drivers of minimum wage-setting: an analysis of 146 countries

Abstract

The current body of knowledge regarding statutory minimum wages ((S)MWs) addresses issues such as employment effects, median - minimum wage ratios (Kaitz index), and wage-setting mechanisms. In contrast, hardly any studies classify the issues with which MW rates are connected. This paper aims to do so by clustering such issues into dimensions, using a new database, the WageIndicator Minimum Wage Database. Currently this database contains 14,362 MW rates from 146 countries: 11 without SMW, 62 single rate-MWs and 73 multiple rate-MWs. Concerning the number of MW rates, India goes on top with 7,783 rates, followed by Ecuador (2,179 rates), Pakistan (1,426), and Sri Lanka (943). Countries’ MW setting has been positioned on four dimensions: full versus partial coverage (66% of countries have full coverage); purchasing power policies (13% include the relevant geogra-phical breakdown); mimicking collective bargaining (32% of countries), and differentiating MW rates according to special groups (37%). We found that the purchasing power dimension goes along with both full coverage and mimicking collective bargaining, but full coverage dimension is negatively associated with the mimicking bargaining dimension.

Keywords: minimum wages, 146 countries, collective bargaining, purchasing power, special groups

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