Minimum Wage (Meaning and Explanation)

We explain what the minimum wage is and the mechanisms to calculate it. Also, a list of minimum wages for various countries.

What is the minimum wage?

It is known as the minimum wage, minimum remuneration or minimum wage. Minimum amount of money that a worker must earn monthly as established in the current laws of your country, calculated based on a relationship between the amount of money and the number of hours worked.

In theory, a minimum wage also corresponds to the minimum amount of money that a formal worker must receive monthly to cover their most fundamental common expenses, and provide their family with the minimum physical, social and cultural conditions essential for a dignified life.

The latter, however, may not be met in periods of crisis, given that the minimum wage is susceptible to inflation the devaluation and loss of purchasing power of the local currency. To compensate for this trend, a salary update is usually given at least once a year, taking the minimum wage as the base reference amount for the increase.

The idea of the minimum wage was the product of a long history of union and working class struggle, and was first applied in Australia and New Zealand at the end of the 19th century, when the State passed the Employers and Employees Act. and Employers) in 1890.

Since then, the defense of the minimum wage and its periodic updating has been part of the most common purposes of the workers' struggle, since this must allow them access to decent housing a monthly basket of basic food products, access to urban transportation and school supplies for their children.

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This measure, together with the reduction of the working day to a maximum of 8 hours and a maximum of 40 a week, are part of the benefits for improving the standard of living of the world's working class.

How is the minimum wage set?

The minimum wage It is the result of calculations made by the State considering various factors and variables often in agreement with labor unions and other forms of professional membership or organization.

In some countries there are organizations in charge of this, as is the case of Mexico, whose Labor Law establishes the existence of the National Minimum Wage Commission (Conasami); or that of Argentina, with its National Council of Employment, Productivity and the Minimum Living and Mobile Wage (CNEPSMVM). This always depends on the legislation of each country. There are even countries that do not yet contemplate the figure of the minimum wage at all, although they are the least.

Similarly, there are four usual mechanisms, according to the International Labor Organization (ILO) through which a minimum wage can be set:

Universal state. A rate set by the State for the minimum wages of the entire country, without distinction of productive area, as long as it is formal employment.
Multiple state Various rates stipulated by the State depending on the labor sector in question.
Collective universal. A universal rate for the entire country, but determined by collective bargaining of the labor sectors.
Collective multiple Different rates depending on the labor sector, but determined by collective bargaining.

To determine the amount of the minimum wage, according to the ILO, two methods can be used:

Evaluate the cost of living. It is calculated taking into account the cost of basic goods and services for life that a worker should be able to cover in his or her home, always stipulating a “type” (average) family, and generally based on the cost of living in the city. capital of the country.
Take salary statistics Compile information regarding the lowest salary within a stipulated range of remunerations, to find a minimum compared to the average. This method seems simple, but it does not take into account that labor sectors may have different social protection mechanisms.

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