Is It Time For A European Minimum Wage?

Tyler Durden's picture

Much has been made of President Obama's non-deficit-increasing desire to raise the minimum wage by around 20%. This all sounds so good in front of a teleprompter but, as we noted here, a higher price for a good (low cost labor) simply means less of it will be demanded (higher unemployment). However, while setting a federally mandated minimum wage may make sense in the mind's eye of a President's panderers, a glance at Europe will blow most people's minds. The disparity across the nations of the European Union is 12-to-1: from Romania's EUR157 to Luxembourg's EUR1874 per month. This compares with an equivalent EUR998 for the US. As Bloomberg's Niraj Shah notes, this disparity drops to 6-to-1 if adjusted for local prices but two critical points come to mind; first, how can a 'union' with such massive disparity in labor function under a single monetary policy (hint: it can't); and second, with nations such as France, UK, and Ireland offering higher minimum wages than the US, it is hardly inspiring for any benefits Obama hopes to reap from his new deal.


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Aunty Christ's picture

Huh does Germany not have minimum wages?

GetZeeGold's picture



How do those guys even still have any money left after paying for everyone else's minimum wages?

jay28elle's picture

Doesn't Ben send some of our $'s over every month?

WayBehind's picture

Like it wasnt obvious they took the Eastern block just to expend the market for the rich countries

GetZeeGold's picture



Doesn't Ben send some of our $'s over every month?


Watchoo Talkin' Bout, Willis!?

Sudden Debt's picture

A 52% payroll tax and a 25% VAT on goods... THAT'S HOW THOSE FUCKERS PAY FOR IT!!!




I sometimes get a bit upset about stuff like that...

GetZeeGold's picture



I sometimes get a bit upset about stuff like that...


Controlled breathing seems to work for me.

Hobbleknee's picture

When 75% of your income is stolen by the government, at what point are you considered a slave?  You're more slave than not, anyway, but when will the sheeple realize this?

Buckaroo Banzai's picture

Holy shit, they don't have a minimum wage in Germany. I just checked. This is funny:

EXACTLY what you'd expect from Pravda on the Hudson.

tarsubil's picture

LOL, I'm surprised NY Times even touched that story since it is so out of the narrative. The kicker is youth unemployment which Germany has about two thirds less of than France.

Nussi34's picture

Merkel is now supporting a minimum wage.... Most Germans support it and do not understand that is absolute nonsense.

Let´s assume it is EUR 10 per hour. I will find noone in Munich who woud be willing to work for that kind of money and in East Germany very few businesses can pay that much money.

The logic must be that everything in the EU must be the same. Currency union, minimum wage union, feces union....

vs-trader's picture

There is no legal minimum wage. Usually it is set by collective agreements. But I guess that is how it should be.

The Phu's picture

I think that this is proof that a high minimum wage equals high prosperity.  Lux has the highest min wage and one of the highest per capita incomes and high quality of life.  Romania... um... the opposite.  There must clearly be a strong correlation.  Onward, Comrade Obama!  All the Proletariat of the World, Unite!  </sarc>

hardcleareye's picture

"...a higher price for a good (low cost labor) simply means less of it will be demanded (higher unemployment)."


With that logic perhaps we should be considering re instituting slavery, it might the solution to our unemployment problems.  <major sarc>

moriarty's picture

Thought we had that already, albeit with none too visible shackles and chains that most folks willingly (or unwillingly if they see the game and have no choice) don.

Cognitive Dissonance's picture

While everyone watches underdeveloped country after underdeveloped country's labor force be used and abused until local wages begin to rise, only to watch the manufacturing circus leave town for the next low wage spot......has anyone noticed that the US has slowly moved from one of the highest wage nations around 2000 to near the middle of the pact now?

I can't wait until the manufacturing circus comes back to town here in the good old US of A.

forwardho's picture

I sold my soul to the company.....Store

Dr. Engali's picture

It will come back when we get down below Romania's level.

NuckingFuts's picture


And I spent a couple of weeks in Romania in the late 90's.  That place sucks.   Now Bulgaria on the other hand is OK.


Spastica Rex's picture

Workers competing to offer their labor at the lowest possible cost - competition is a win for everybody.

Henry Ford was a Fascist.

shovelhead's picture

I, for one, will be proud to affix the MADE IN USA sticker for cheap rubber flip flops to be sold in Chinese 'Yuan Stores' next to the canned horsemeat Spam from France.

It Takes A Village.

jay28elle's picture

anyone know what the minimum in Germany is, by chance?


Tango in the Blight's picture

Germany doesn't have a minumum wage. In Germany 450 euro mini jobs are popular. 450 euro per month for a full working week. That's why Germany is so competitieve.

thisandthat's picture

Just like China. Still can't match early/mid 40s' labour cost, though...

Nussi34's picture

Currently in EUR, in a few weeks it is Marks again!

larz's picture

Wow cool graphs is this what you pay six figures to learn in higher education?


SafelyGraze's picture

gratuitous use of polar coordinates? check.

gratuitous use of graph? check.

in the green segment between slovenia and the us, what exactly are the in-between values interpolating between the countries? ocean, maybe. 

sociologist's picture

Author, you say that increasing the minimum wage reduces the demand for low cost labor. Makes sense, I buy that we'd have higher unemployment if the minimum wage was raised to $50/hr. The problem is that we have no idea the strength of the mechanism you describe, and how higher purchasing power among low income households might speed deleveraging or increase consumer spending. 

So, I ask you, how many jobs will be "destroyed" if we raise the minimum wage by $0.50? what about $1.00? How would you go about making your calculations? Its easy to assert a plausible mechanism without empirical evidence. 

Clowns on Acid's picture

Wow.... you must be a sociologoist to ask a question that has been answered at least 100 times over the past 50 years....

q99x2's picture

The world is strange because of how old and antiquated the existing system that is shown on TV is compared to the reality brought about by technology. It reminds me of reading old English literature that depicts a society much like today and I then imagine the characters in the stories having modern technology. Something is going to break.

Haus-Targaryen's picture

Germans are getting minimum wage this year.  :(


Inflation here we come!

Nussi34's picture

No inflation will be small, the job just moves to Slovakia etc, but unemployment will be higher!

Heil Euro!

Freewheelin Franklin's picture

a higher price for a good (low cost labor) simply means less of it will be demanded (higher unemployment).


Why is so difficult to get people to understand this? Costs are passed on to the consumer. Do they think it is going to come out of my pocket? I'll just lay off workers. Eventually, I might get to the point where I can no longer do any business. Then, I'll be stuck working on the Gubmint farms. But that's what these Pinko Commies want, isn't it? They want everyone to be poor.

sociologist's picture

You need to pay workers enough so that they can afford to buy the stuff they make. Smart capitalists know this.

DOT's picture

Kewl, so if I get a job at a luxury yacht company...

btw We used to refer to sociologists as bussiness majors that couldn't do math. Now we know that neither of them can. ;)

Freewheelin Franklin's picture

I need to pay them what the market will bare. No more, no less. If someone is willing to do the same job for less, guess what? That's who I am hiring. If one of my workers can get more money from another employer, guess what? They quit and go work for the other employer. 


Smart business owners know this. 



Clowns on Acid's picture

Surely you mean the Fed Gov't with their taxation and regualtion policies ?

slightlyskeptical's picture

If everyone who works for you is poor then you deserve to be poor as well.

There is a price wage equilibrium that can be reached even when paying everyone a living wage. Labor is generally about 20% of the cost of doing business. So if you raised wages 50%, prices would only have to go up 10% to keep the same profit margins. I'm sure the working class would be happy to pay 10% more if they are getting paid 50% more. Biz owners still make the same profit. Not sure why anyone has a problem with this.

Stuck on Zero's picture

Obama didn't bother explaining that the minimum wage needs to be hiked because inflation is eating away at the value of the dollar.  And who causes inflation?



IridiumRebel's picture

At this point, does it really matter?
Or to quote a "great stateswoman"..."what difference does it make?"

ebworthen's picture

Somewhat OT but Verifone down ~38% because they were honest about things in Europe ("weak", "not looking good").

So...they are being punished.  Harbinger for the entire markets when reality hits?

pomlad5's picture

adjust gdp per capita

Man Who Was Thursday's picture

Something is wrong in that graph, minimum wage in Portugal is less than 500€...

Svendblaaskaeg's picture

Equal gravity for all planets now!!!

Artful Dodger's picture

It must be time for a European minimum wage to prevent price discovery of labo(u)r -- let's see, if 1500 people apply for 7 barrista jobs, the private market would probably settle at about 50 EURO-CENTS an hour... (don't forget the tips! you're working for the tips, honey!)