Comparing the cost of living between different countries is always difficult. News from the US this week that President Barack Obama would like the American minimum wage to rise to $US9 an hour prompted blogger and statistician Matt Cowgill to compare the minimum wages mandated in Australia and the US over time. Among the data he unearths? OECD measures suggest that you might need to earn $15.50 in Australia to purchase the same volume of goods that $9.50 would buy you in America.
Money picture from Shutterstock
Those estimates of ‘purchasing parity power’ are based on 2011 numbers (the most recent available; note that we saw Australia/US dollar parity in 2010 and have stayed near there ever since, so the exchange rate factor isn’t massive in terms of explaining the difference). Curiously, while the minimum hourly wage in Australia at that point in 2011 was $15.50, in the US it was well below $9.50 (as the current Obama push makes only too clear).
It’s a reminder that complaints about the costs of goods in Australia can’t be considered in isolation from what we earn. If goods cost more than the US but we’re also earning more, our ability to purchase those items doesn’t differ as radically as complaints about the cost of technology would suggest.
Few IT workers outside of very basic support jobs will be paid the minimum wage, but the level at which it is set will impact the cost of other goods. Cowgill also points out that global economic data doesn’t support the idea that a higher minimum wage translates to either lower or higher employment levels; both scenarios exist. The ratio of the minimum wage to the median wage also varies over time; there’s no obvious consistent pattern in Australian salaries on this point. Hit Cowgill’s post for a much more detailed analysis.
How does Australia’s minimum wage compare? [We are all dead]