Australia had the highest minimum wage in the world in 2019

The OECD recently updated its comparison of global minimum wages for all countries that have a national minimum wage. In 2019, Australia overtook Luxembourg as having the highest minimum wage in the world.

In the previous year’s comparison, Australia had the highest minimum wage in the world in 2018 but these data calculations were revised retrospectively. This revision saw Australia’s minimum wage dip below Luxembourg’s in 2018 but regain top spot in 2019.

Australia has been neck and neck with Luxembourg and France for the world’s highest minimum wage over the past decade. Australia previously had the highest minimum wage globally in 2000, 2004 and 2007 when calculated by the OECD based on ‘purchasing power parity’ (PPP), which adjusts the various national currencies for their real purchasing power and differences in pricing levels between countries[1].

These OECD comparison data do not include the increase of 1.75% for Australia’s minimum wage that came into effect on 1 July 2020 and will be applied to various industry awards at different dates during 2020-21. The Australian minimum wage was $12.59 per hour in USD in 2019, on a PPP basis. In Australian dollars, the minimum wage increased to $19.49 per hour on 1 July 2019 and to $19.84 on 1 July 2020.

The 2019 OECD data compares minimum wages across 32 countries. Not all countries have a national minimum wage. Even among high-income and highly developed countries, some have state, regional or industry-based minimum wages but no national minimum pay rate. Other countries use agreements or other methods to ensure that minimum payments and employment conditions are met[2].

In the visualisation below, you can select up to five countries to compare their minimum wages over time, on a PPP basis. Australia has been in the top three countries for highest minimum wages since at least 1985, when the current OECD data series commenced.

How much is Australia’s Minimum Wage in 2020?

Australia’s minimum wage is the legal minimum pay rate per hour that must be paid to all adult employees (aged 21 years or older). It is set by the Fair Work Commission (FWC) and is reviewed annually.

From 1 July 2020, Australia’s minimum wage is $19.84 per hour, or $753.80 for a full-time adult employee working 38 hours per week. This is a pre-tax base rate for permanent employees. It does not include casual work loadings, overtime and other penalty rates, superannuation payments or any other labour on-costs paid by the employer.

How many Australian workers are paid the minimum wage?

The FWC estimates that 180,200 employees (1.7% of all Australian employees) were paid according to the adult minimum wage rate with no other awards or agreements governing their pay and conditions in 2019. Permanent employees are paid the minimum wage rate, with permanent part-time employees paid on a pro-rata hourly basis. Casual employees are paid the minimum wage rate plus a ‘casual loading’ of 25% of the minimum wage, as specified in the FWC’s minimum wage determination and in most modern awards.

Australia also has a detailed system of industrial award-based wages that are layered on top of the national minimum wage. This complexity is in contrast with other countries with minimum wage rates, which tend to have only a single minimum wage for all industries. A further 19% of Australian employees, or 2 million workers, are paid at ‘minimum wage rates’ that are set by a modern award with reference to the statutory minimum wage (typically set as equal to or a multiple of the minimum wage).

Many other non-award workers are employed through enterprise agreements covering all employees in their workplace or individual agreements made with their employer. These agreements can also include pay calculations that are based in the minimum wage (e.g. the same annual pay increase or a multiple of it).

It is estimated that in total, pay rates for 40% of all Australian employees are directly or indirectly affected by the Fair Work Commission’s annual wage review.

[1] More specifically, the resulting estimates by the OECD “are deflated by national Consumer Price Indices (CPI). The data are then converted into a common currency unit using US $ Purchasing Power Parities (PPPs) for private consumption expenditures”.

[2] The OECD data do not include Finland, Sweden, Denmark, Norway, Iceland, Austria, Switzerland and Italy as these countries do not have a general minimum wage. These countries instead have a high-level collective bargaining system which enabled extensive minimum wage protection through collective agreements.

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Andy joined Ai Group as an Economist in 2017. He is responsible for analysis and commentary on Australian and international economic developments. Prior to joining Ai Group he worked for the Commonwealth Department of Industry, Innovation and Science and for a private economic consulting firm in Brisbane. He holds a Bachelor of Economics and Finance from the University of Queensland.

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