There is much debate in the United States about the minimum wage. Many people feel it should be higher, since those who earn the current federal minimum wage of $7.25 per hour are often just barely making it. Others feel any minimum wage discourages businesses from hiring more employees, so the issue of how much employees are paid should be left to the free market to determine.
Advocates of both options often cite the minimum wage laws of other nations as evidence of the validity of their views. One oft-cited fact is many developed nations without minimum wages have drastically lower unemployment rates. Proponents of repealing the minimum wage in the U.S. believe this points to the fact that countries that abolish baseline salary requirements have thereby encouraged companies to increase hiring.
However, the truth is most developed countries that have no legal minimum wage still have minimum wages set by industry through collective bargaining contracts. The majority of their working populations are unionized. These unions negotiate a fair baseline pay rate on behalf of the participating workers so the government does not have to do it. Since each industry may require vastly different things of its employees, it makes sense the minimum wage varies from business to business. Five developed nations that have no legal minimum wage are Sweden, Denmark, Iceland, Norway and Switzerland.
Sweden is often touted as the poster-child for abolishing the minimum wage. However, the Nordic nation is certainly no free-market free-for-all. Instead, minimum wages are set by sector or industry through collective bargaining. Nearly all Swedish citizens belong to one of about 60 trade unions and 50 employers' organizations that negotiate wage rates for regular hourly work, salaries and overtime. The minimum wage tends to hover near 60-70% of the average wage in Sweden.
Swedish law limits the workweek to 40 hours, just like in the U.S. However, it also dictates that all workers are entitled to 25 paid vacation days and 16 additional public holidays each year, which is far more generous than the U.S. standard.
Relations between workers and employers in Denmark have been deemed downright harmonious due to the lack of a federally mandated minimum wage. Once again, trade unions take care of ensuring that workers are paid a reasonable wage and seem to be doing a fine job of it, keeping the average minimum wage across industries at a healthy $20 per hour.
Iceland does not receive very much attention except for its breathtaking scenery. However, this tiny island nation consistently ranks among the happiest countries on earth, along with every other nation listed here, because of its low crime rates, high wages and happy, healthy populace.
Employees in Iceland are automatically enrolled in trade unions, which are responsible for negotiating baseline salaries for the industries they represent. A recent Gallup poll showed nearly unanimous support for a plan put forward by the Icelandic Professional Trade Association to increase the negotiated minimum monthly wage to ISK 300,000, or roughly $2,233, within the next three years.
Norway is yet another northern nation that has eschewed a federally mandated minimum wage in favor of having union-negotiated wages set by industry. Norwegians enjoy good job security, healthy wages and ample vacation time. Basic hourly wages vary by industry. However, unskilled workers in the agriculture, construction, freight transport and cleaning industries, for example, earn minimum rates ranging from $16 to $21 per hour, with increases based on experience and skill level.
Switzerland saw a proposal for a legally enforced minimum wage soundly rejected in 2014. The decisive vote against a $25 per hour base salary was touted as evidence the Swiss do not want or need government intervention, which might cause low-wage workers to lose jobs if employers are unable to pay more. However, like all the countries listed in this article, Switzerland relies heavily on trade unions and employee organizations to negotiate fair wages for each industry, meaning 90% of the Swiss earn more than the proposed minimum anyway.