The origin story of minimum wage laws, part 2

Part 2: Why did some industrialized nations wait so long to get a minimum wage? When did the UK, Germany, and France get minimum wage laws? Why do some industrialized nations still not have legal minimum wages? || This original research was produced for The Globalist Research Center and Arsenal For Democracy.

Why did some industrialized nations wait so long to get a minimum wage?

From a historical perspective, minimum wage laws were implemented first in countries where trade union movements were not strong. Countries such as the UK that traditionally had strong labor unions have tended to be late adopters on minimum wage laws.

In those countries, powerful unions were able to bargain collectively with employers to set wage floors, without needing legislative minimums.

The early gold standard guideline for government participation in wage setting was the International Labor Organization’s Convention No. 26 from 1928 – although many industrialized countries never adopted it.

The convention said that governments should create regulatory systems to set wages, unless “collective agreement” could ensure fair effective wages. This distinction acknowledged that, by 1928, there was already a major split in approaches to creating effective wage floors: leaving it to labor organizers versus using statutes and regulators.

When did the UK, Germany, and France get minimum wage laws?

Much like pioneers New Zealander and Australia, the United Kingdom did adopt “Trade Boards” as early as 1909 to try to oversee and arbitrate bargaining between labor and management. However, its coverage was far less comprehensive than Australian and New Zealand counterparts and cannot be considered a true minimum wage system. Instead, UK workers counted on labor unions to negotiate their wages for most of the 20th century.

The Labour Party introduced the UK’s first statutory minimum wage less than two decades ago, in 1998, when it took over the government following 18 years of a Conservative government that had focused on weakening British unions. The country’s current hourly minimum wage for workers aged 21 and up is £6.50 (i.e. about $8.40 in purchasing power parity terms), or about 45% of median UK wages.

Despite opposition to minimum wages in some quarters, The Economist magazine noted recently that studies consistently show that there is little impact on hiring decisions when the minimum wage level is set below 50% of median pay. Above that level, some economists believe low-level jobs would be shed or automated, but this is also not definitively proven either.

In fact, not all countries with minimum wages above that supposed 50% threshold — a list which includes at least 13 industrialized economies, according to the OECD — seem to have those hypothesized problems. True, some of them do, but that may indicate other economic factors at work.

Germany, Europe’s largest economy, only adopted a minimum wage law after the 2013 federal elections. Previously, wages had generally been set by collective bargaining between workers’ unions and companies.

As a result of the postwar occupation in the western sectors, Germany also uses the “codetermination” system of corporate management, which puts unions on the company boards directly. This too encourages amicable negotiations in wage setting, to ensure the company’s long-term health, which benefits the workers and owners alike.

The new minimum wage amounts to €8.50 per hour ($10.20 in PPP-adjusted terms), or more than 45% of median German pay.

However, in some areas of Germany, the local median is much lower. There, the minimum wage affords significantly more purchasing power. In eastern Germany, the minimum is about 60% of median wages.

In France, where unions have long had a more antagonistic relationship with management, a minimum wage law was adopted much earlier – in 1950. It is now €9.61 per hour (about $10.90 in PPP-adjusted terms), or more than 60% of median French pay.

N.B. Purchasing-power currency conversions are from 2012 local currency to 2012 international dollars rounded from UN data.

Why do some industrialized nations still not have legal minimum wages?

Because of their generous social welfare systems, one might assume that the Nordic countries were early adopters of minimum wage laws. In fact, Denmark, Sweden, Norway, Finland, and Iceland all lack a minimum wage, even today.

Instead, wages in these countries are virtually all set by collective bargaining in every sector – conducted between workers’ unions, corporations, and the state. (This is known as tripartism.) Non-union workers generally receive the same pay negotiated by the unions.

A prevailing minimum or average lower-end wage can usually be estimated, but there is no law. In U.S. dollar terms, Denmark’s approximate lowest wage level is higher than almost every minimum wage in the world. Mid-level wages are even higher. Even McDonald’s workers in Denmark reportedly make the equivalent of $20/hour.

 
Missed part one? New Zealand, Australia, Massachusetts, the New Deal, and China: How governments took an active role initially, and how they balance economic variability now.

Real-world costs when the Left sells out immigrants

I’ve recently written here about two different topics, which are now becoming closely related.

First, I looked at how Denmark’s Social Democrats, who headed the government until last month, took a much harder line on immigration — in an unsuccessful attempt to hold off the anti-immigrant Danish People’s Party on the far-right — ahead of the June 2015 election.

Second, I also looked at a UN report on how the government of Eritrea — a huge source-country of asylum-seeking immigrants to Europe — literally enslaves and murders its own people to try to prevent them from leaving the country’s brutal conditions. It is illegal to exit the country without permission (rarely granted), and the government reacts very harshly to its citizens all across the world if they manage to make it out anyway.

Now the new Danish government, headed by the center-right Venstre Party and supported by the Danish People’s Party, has adopted an appalling new policy to send Eritrean asylum-seekers back to Eritrea. This decision was made on the basis, according to the BBC, of a (widely criticized) report commissioned last fall … under the Social Democrat-led government … claiming it was now safe to send back Eritreans. Skimming over the report (English version), it’s clear how thinly sourced and dubious many of the claims are. By most sound accounts, anyone sent back will be executed or tortured and sentenced to decades of hard labor.

By the report’s own admission (p. 16), as of “a few years ago,”

[…] returning evaders and deserters were routinely subjected to severe punishment including torture and detention under severe conditions over a prolonged period of time. It was further added that those refusing or failing to participate in National Service would risk to lose a number of his or her citizen’s rights and, in exceptional cases risk indefinite incarceration or loss of life. Returning evaders or deserters that were known for political oppositional activities abroad upon return to Eritrea were taken to underground cells at a prison outside of Asmara while they were under investigation.

 
There has been no change in leadership in Eritrea since then. At the moment, 5,000 people are fleeing the country each month to seek asylum, in spite of shoot-to-kill border control orders.

The report’s suggestion that “the government’s attitude […] seems to be more relaxed” these days is essentially ludicrous. But Denmark’s new policy toward asylum-seekers from Eritrea is premised upon that claim.

This is a real-world consequence of center-left politicians triangulating to be “tough on immigration.” The Danish Social Democrats conveniently managed to lose the election just in time to not get the blame for the policy change, ostensibly undertaken by the anti-immigrant center-right coalition and its parliamentary bloc. But they laid all the groundwork for it: not only failing to defend desperate asylum-seekers and defenseless refugees to voters during the election campaign (instead adopting much of the anti-immigrant talking points and propaganda from the opposition), but literally also writing the fraudulent report that will now get people killed. Denmark’s Social Democrats will have blood on their hands from their pandering to anti-immigrant sentiments.

I don’t expect better from the Conservative governments in Britain and Norway, which issued similarly roundly attacked reports on how “safe” Eritrea now is, based on vague promises by the Eritrean dictatorship to do things differently in future. I do demand better from center-left parties.

U.S. Democrats, take note: Don’t make the same mistake here. Don’t triangulate on this issue. Don’t turn your back on people in need. Don’t sell out immigrants coming to this country for a better life and freedom from want and fear.

Do the right thing.

July 1, 2015 – Arsenal For Democracy 133

Posted by Bill on behalf of the team.

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Topics: Co-host Kelley returns from the Peace Corps in Guatemala; Nate explains the wider significance of Denmark’s recent elections. People: Bill, Kelley, and Nate. Produced: June 28th, 2015.

Discussion Points:

– The Peace Corps experience in the globalized internet age, and the challenges facing Guatemala.
– Danish People’s Party: Why the far-right’s huge success in Denmark is a big problem beyond Denmark.

Episode 133 (46 min):
AFD 133

Related Links

AFD: January 31, 2013 – Arsenal For Democracy 35
AFD: When bad people are good at politics
AFD: Meanwhile in Denmark, more bad news
AFD: Denmark’s Thorning-Schmidt: Preview of a Hillary 1st term?

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When bad people are good at politics

This should be interesting: The third-largest party in Denmark’s parliament after the recent elections (full story➚) — the center-right “Venstre, Liberal Party” — will be trying to run the government with only 19% of the seats.

The second-largest party, the socially right-wing (and economically left-populist) Danish People’s Party (DPP), will not join a coalition. One of the most frightening things about the Danish People’s Party, given their monstrously exclusionary social and racial politics, is how absurdly good at politics they are. They don’t just do well in elections by running on demagogic populism against immigrants and Muslims, they’re not just supremely polished, and they don’t just know which economic buttons to push; no, they also know how not to lose, which is harder.

Refusing to co-rule, even when they probably could, is a great way to never expose yourself as incompetent and unready for primetime before you actually run the government:

So far, [party leader Kristian] Thulesen Dahl has declined to commit, saying only that he is after “influence” rather than “power.”
[…]
Mr. Thulesen Dahl and his party are maneuvering carefully to avoid the fate of right-wing parties in other Nordic countries. In Norway, the D.P.P.’s sister party suffered heavy losses after becoming members of a right-wing coalition government. For a party that built its appeal by claiming to represent the “people” against the “system,” it is hard to wield power without being perceived as part of the establishment that voters rejected. Therefore, Mr. Thulesen Dahl wants to pull the strings without being seen to do so, just as his party did during the first decade of this century.

 
Per that influence versus power scheme, the DPP plans to vote on a case-by-case basis, according to The Guardian. So that will be really unstable:

Denmark has a history of minority coalition governments – the defeated centre-left administration of prime minister Helle Thorning-Schmidt depended frequently on Liberal support over the past four years. However, itis be more than four decades since a cabinet had fewer seats,: Liberal leader Poul Hartling held office from 1973-75 with only 22 but his administration lasted just 14 months.
[…]
“It is very likely that an election will be called before the four-year period is over,” Martin Larsen, a political commentator from Copenhagen university, told Reuters. “On average, one-party governments sit for two-and-a-half years.”

 
The right of center parties (including DPP) collectively have only one seat more than 50% so this is basically a permanent nightmare for governance. It also, in practical terms, means that the Social Democrats — the main center-left party, which finished first but too isolated to form a government — will likely be forced to support the center-right government on very unpopular proposals. This means the main center-left and center-right parties will both be rapidly losing popularity in the voting public together, without much to show for it, and the constantly looming threat of a very early election.

It seems to me that there’s a good chance that in 18 months to 2 years, there will be another election, and that time and the Danish People’s Party will finish first and take control of government in Denmark.

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Meanwhile in Denmark, more bad news

Not only did the conservative/”centrist” coalition collectively win the 2015 Denmark elections this week but the country’s second largest party — and largest conservative party — in parliament is now the far-right (but highly polished) Danish People’s Party. The DPP, which primarily exists to bash immigrants and insist on draconian immigration controls while putting a classy “euroskeptic” spin on it all, has previously served in center-right governments before as a minor partner. But now, while still not expected to lead the government, it is still a formidable force, rather than a background player. A few more points and it would have finished first. Soon it probably will.

In my January list of 15 national elections to watch in 2015, I included Denmark. I gave one simple explanation for its inclusion:

Denmark: Will the far-right continue to be treated as a legitimate and not at all terrifying part of the country’s politics? (Yes.)

 
That’s exactly what happened. The ruling center-left Social Democrats’ main strategy involved campaigning as almost-as-tough on immigration as the DPP. That a fool’s errand: people generally pick the real thing over the pale imitation that they believe is openly posturing rather than committed to the position, if that issue is a major motivation in their voting decision. But is also just mainstreams (and “confirms” the validity of) extremist positions. The left should not have conceded to milder versions of DPP talking points and thrown immigrants under the bus. They should have argued the matter and fought back against vile framing. Doing the opposite confirmed my fears about Denmark’s increasingly casual treatment of political extremism like the anti-immigrant DPP.

Not only did the DPP increase from 22 to 37 seats since 2011, but it remained virtually at the same vote share it had captured in the low-turnout 2014 EU elections, which were dominated by hardline populists across the continent but which did not translate later into big wins in national elections in most countries. In the EU vote just over a year ago, the DPP came in first with 26.6%. In the national elections this past week, the DPP captured 21.1% of the vote (up from just 12.3% in 2011).

Center-right parties like Venstre and CPP lost 15 seats between them…exactly the number that the far-right DPP gained. The other big losers were the left-of-center-left parties, which is ultimately why the left-leaning constellation of parties ended up with fewer seats collectively than the right-leaning coalition, despite the Social Democrats finishing first, ahead of the DPP.

Denmark’s Thorning-Schmidt: Preview of a Hillary 1st term?

I think it’s likely that the first term (and first re-election campaign) of Denmark’s first female Prime Minister, Social Democrat leader Helle Thorning-Schmidt, probably gives us a forecast of what a hypothetical first term for President Hillary Clinton would look like and how she would likely position herself during her re-election effort. You can make of that what you will, but I think it would prove to be more than a passing comparison between the two.

Here are some excerpts from an Irish Times report on the closing weeks of the incredibly close campaign for the 2015 Danish parliamentary elections on June 18:

Her centrist – some would say [market] liberal – reform drive has won over Denmark’s business leaders. Now she hopes to win over reform-weary voters with a promise of €5 billion in additional social spending.
[…]
she launched a publicity campaign appearing to take a tougher line on immigration. Her party hopes this will peel away voters from the traditionally anti-immigration Danish People’s Party. Posters went up around Danish cities with a smiling prime minister and statements such as “If you come to Denmark you should Work”.

Thorning-Schmidt has been praised by some Danes for her straight-talking on a longtime taboo issue. Others are uncertain whether she is trying to beat or join the People’s Party on immigration. Some left-wing Danes see a danger of fanning intolerance towards foreigners, whether eastern Europeans or asylum seekers.
[…]
Social Democrat strategists are confident voters will reward their immigration policy they believe is tough without being heartless.

“What we have said on immigration is clear and common sense,” said Niels Fuglsang, a Social Democrat election strategist. “We have tightened requirements of how many immigrants we have, so our society can absorb and handle them. And we ask of immigrants here nothing more than we ask of Danes – that they work and contribute to our society.”
[…]
“Helle has stolen two shiny weapons from her rivals: economic reform from the Liberals, immigration from the People’s Party,” said Annette Juhlers, a news anchor and political adviser. “She’s more confident recently and I see a sparkle in her eye. She’s fighting tough and I think she’s realised that she likes it.”

 
The 2015 Danish parliamentary elections are on my 15 elections in 2015 to watch list from January. I highlighted the political mainstreaming of the People’s Party anti-immigrant ideology as a continuing problem likely to worsen in this election.

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The Questions Posed by the World’s 2015 Elections

15 national elections I’m watching on 2015 and the questions I’m asking about them, organized in chronological order.

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Greece: Can modern Greek democracy survive the combined effects of years of extraordinary fiscal mismanagement, a devastating recession, and a sudden day of reckoning (austerity) stage-managed from Berlin? That’s the bigger question the world is asking when Greece heads to the polls this coming weekend, behind narrow questions of what might happen in the next six months. Newcomer “Syriza” – a party with moderate rhetoric, yet still an unknown quantity – has led the polling average since November 2013, more than a year before snap elections were called. Syriza could shake things up — for good or ill — in the country whose ancestors founded much of Western democracy. On the other hand, the ancient Greeks also formalized the concepts of “oligarchy,” “aristocracy,” and “tyranny,” so that’s not a huge comfort. Modern Greek democracy is just 40 years old, and Plato might forecast a turn to a less participatory form of The Kyklos (the cycle of governance between such forms) is about due. The rise of the neo-Nazi “Golden Dawn” as a potent force in Greek politics offers that grim path.

Nigeria: Should a young democracy re-elect a civilian president from the same party that has won every election since 1998? Should it do so despite his record of extreme incompetence in handling an insurgency that has now seized more territory than ISIS controls in Africa’s most populous nation and largest economy? What if the alternative choice is a former military dictator and perennial also-ran? These are the basic questions facing Nigerians in February’s election that will see once-accidental President Goodluck Jonathan of the People’s Democratic Party face off against Gen. Muhammadu Buhari at the head of an increasingly powerful opposition coalition and amid plunging oil prices. The legislative chambers are also up for election. Even if Jonathan is re-elected, he may face a hostile majority.

Israel: Can the Israeli left make a serious comeback in the country’s politics after Israel voters increasingly veered to the right and after significant party changes shattered the Labor Party for almost a decade? Would it make any difference to Israel’s relations with its neighbors and the world at large? Would it change the economic fortunes of average Israelis?

United Kingdom: Is the Westminster System — as it has traditionally existed in its tripartite form since the arrival of universal male suffrage — finished in Westminster itself? UKIP, the Scottish National Party, and other parties outside the Big Three make another coalition government of some kind almost a certainty – likely with huge effects for the British populace and their place within the European Union.

Mexico: Will the insulated Federal District finally be shaken out of its slumber by a growing protest movement and other reactions to the total capture of Mexican state and local government by the cartels? The Congress is up for election, but without a sea change in the foreign-focused Peña Nieto administration, few expect serious policy shifts at home, whatever the outcome of the midterms. Still, nobody expects the Spanish Inquisition any more than they expect a spontaneous mass uprising that forces just such a sea change. Could be too early to tell.
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