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COVID-19's Essential Workers Shake Up Minimum Wage Debate

Why are some of society's most crucial employees still fighting to get paid a fair wage?

The bitter irony of the effect of the health crisis on the world of work has begun to fuel the simmering worldwide debate about minimum wage. 
The bitter irony of the effect of the health crisis on the world of work has begun to fuel the simmering worldwide debate about minimum wage. 
Carl-Johan Karlsson

After the arrival of COVID-19, we started calling them "essential workers," as the pandemic gave long overdue recognition to those driving our buses, sweeping our floors, stocking our supermarket shelves. These are the people formerly known simply as "low-paid workers."

The bitter irony of the effect of the health crisis on the world of work, compounded by the overall disproportionate effect of the virus on poorer communities, has begun to fuel the simmering worldwide debate about minimum wage.

As the pandemic sparks a global recession, it has amplified the perennial economic dilemma of how to ensure a decent living for workers on the one hand, and protect the survival of vulnerable businesses on the other.

In places such as the U.S., a clear majority of the population is for the first time supporting a raise in the federal minimum wage to $15. Other countries, including Australia, have put scheduled minimum wage increases on hold following pushback from cash-strapped employers.

Biden and the federal 15: The first federal minimum wage was set in the U.S. in 1938. Since then, it has been raised 22 times by 12 different presidents. However, while living costs have skyrocketed there in the last decade, the minimum wage hasn't budged in 11 years. The Democratic Party did make a $15 minimum wage part of its platform ahead of the 2016 election season. And President-Elect Joe Biden has now pledged to push through the highest federal minimum wage increase in U.S. history, from its current $7.25 to $15.

• Biden's opportunity comes at a time when an unprecedented 67% of Americans surveyed (2019) expressed support for raising the federal minimum wage to $15 per hour.

• There are also signs that minimum wage in the U.S. is moving beyond bipartisanship, with 60% of voters in Florida recently voting for a ballot initiative to raise the state minimum wage from $8.56 to $15 per hour by 2026. Considering Donald Trump secured more than half of the votes in the state, upwards of 1 million Florida voters cast a ballot for the president and the minimum wage increase.

• A handful of states — California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey and New York — have already adopted laws that will raise the minimum wage to $15 over time, and 29 states and the District of Columbia have minimum wages higher than the federal level.

Arguments against: Outgoing President Donald Trump has claimed that raising the minimum wage would crush small businesses — the most common argument among skeptics. Pennsylvania assemblyman Andrew Lewis said a proposal to incrementally raise that state's minimum to $15 as part of a recovery plan would be "artificially inflating wages," and likely to have an inverse effect: job losses.

Almost 10% of workers in the European Union are living in poverty

Europe, one-size-fits-all? A similar dynamic of the federal v. state system is also playing out in the European Union. The pandemic has given new urgency to the idea of establishing the first EU-wide minimum wage framework, as lockdowns across member states have crippled some of the industries that pay minimum wages, such as tourism and hospitality.

• The idea of an EU-wide minimum wage has been floated several times in the past but has been palmed off by both governments and economists as unrealistic. What the European Commission is now considering is not a common minimum wage level, but rather a framework for standards.

• Of the EU's 27 countries, 21 already have statutory minimum wages set by national governments, but workers are often affected by inadequacy and gaps in the coverage of minimum wage protection.

• Therefore, the directive is not intended to be a one-size-fits-all figure for the whole bloc but rather a legal guarantee that workers in all states can make a decent living. Current proposals suggest that the threshold should be 60% of the median wage and 50% of the average wage.

• Six EU member states — Sweden, Denmark, Finland, Austria, Italy and Cyprus — have wages set in collective bargaining between employers and trade unions. These countries will not be forced to install statutory minimum wages but thresholds will instead be set for bargaining deals.

A group of local workers joining together for the ""Latinos for Raise the Wage"" in Miami, U.S. — Photo: TNS/ZUMA

What's behind the EU proposal? According to the Commission, almost 10% of workers in the European Union are living in poverty. It is mainly among the countries that joined in 2004 or after — such as Czech Republic, Estonia, Bulgaria, Poland and Slovakia — where minimum wage levels are below average and wages are also lower in absolute terms.

• Bulgaria currently has the EU's lowest minimum wage with €312 per month, while Luxembourg has the highest, at €2,142.

• Levels of trade unions also vary widely across the 27 EU states and weak trade unions affect workers' ability to demand higher wages or affect their country's growth model.

• Low salaries and weak unions in turn creates a basis for social dumping, which is the practice of employers using cheaper labour than is usually available at their site of production or sale. They are also among the reasons for large-scale migration and population decline.

• The Commission has summarized the goal of their proposed directive to be reducing wage inequality, help sustain domestic demand, strengthen work incentives and reduce the gender pay gap. It adds that the proposal will also help protect employers that pay decent wages to workers by ensuring fair competition.

A global trend? If the EU's proposal is passed and implemented successfully, it could create a ripple effect on other countries that have already taken initial steps towards setting wage standards. Besides, the pandemic-induced exposure of the gap between the value of frontline workers and the low wages they receive could further bolster such an effort.

• More than 90% of the International Labour Organization's (ILO) 187 member states already have one or more minimum wages set through legislation or binding collective agreements.

• In the Americas and the Caribbean, there are very few exceptions, such as Suriname; and in Asia, there is no minimum wage in Singapore and Brunei. In Africa, exceptions include Ethiopia, Eritrea and Somalia. Among Arab states, no minimum wage exists in Bahrain or the United Arab Emirates.

• This doesn't mean that in every other country minimum wages cover a majority of workers or that they are regularly adjusted according to inflation. A global poll from the International Trade Union Confederation found that 84% of all respondents judged their national minimum wage to be insufficient for a decent life.

Increased flexibility: In most countries, the ILO has stated that national policy debates focus not so much on whether to have a minimum wage, but on how to make one work effectively. As the pandemic has forced governments to new levels of economic flexibility, countries are also finding more short-term solutions for the minimum wage.

• Australia's fair work commission ordered a 1.7% minimum wage raise to $19.84 per hour in June, but the move faced pushback from employers recommending a wage freeze during the pandemic. The outcome is a compromise where most workers will get a raise, but employees in the sectors hardest hit by the coronavirus, including tourism and aviation, will have their wage increase delayed until February, The Sydney Morning Herald reports.

• Another example comes out of the Philippines, where minimum wage, as well as micro-insurance, are offered to casual workers who have temporarily lost their livelihood during the pandemic.

• In Qatar, the government has also decided on a delayed increase. After introducing a minimum wage in 2017, the government decided in August this year to raise the minimum with 25% which will come into effect in six months.

The gig economy: However, flexibility also has a darker underbelly, as digitization and an increasingly "gig"-oriented economy allows certain companies to sidestep labor policies.

• While technology has eliminated some of the more mundane tasks, it has also created new forms of exploitation such as crowdsourcing platforms dodging minimum wage requirements by using "independent contractors' rather than employees.

• For example, job platforms such as Appen, Clickworker and Amazon"s Mechanical Turk are not subject to paying their workers the national minimum wage. They have instead been reported to sometimes pay "contractors' as little as a few cents per hour or even wages in the form of gift cards.

• According to a 2019 ILO study, two-thirds of American workers surveyed on the Amazon Mechanical Turk platform earned less than the federal minimum wage of US$7.25 per hour.

• The same study showed that only 7% of German workers surveyed on the Essen-based Clickworker platform reported earnings above the national minimum wage of €8.84 per hour.

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