Authored by: Matt Palumbo
Here’s an interesting argument for raising the minimum wage: that one famous American fast food franchise is already paying big bucks overseas.
“I’m making $21 an hour at McDonalds. Why Aren’t You?” asked one article on Reuters written by a Danish employee of the franchise named Louise Marie Rantzau. “You see, I work for McDonald’s in Denmark, where an agreement between our union and the company guarantees that workers older than 18 are paid at least $21 an hour. Employees younger than 18 make at least $15 — meaning teenagers working at McDonald’s in Denmark make more than two times what many adults in America earn working at the Golden Arches.”
So not only is their “minimum wage” $21 an hour, even teenagers earn $15?
What’s important to understand here is that wages are relative to prices, and that the cost of living in Denmark is overwhelmingly higher than in the U.S.. Denmark ranks sixth in terms of cost of living (based on the average prices of rent and consumer goods and services). Restaurant prices for instance over 100% higher than in the United States.
When taking into account the cost of living differences between Denmark and the United States, Rantzau’s $21 per hour becomes around $12 an hour in terms of what it can actually buy (43 percent lower). This is still significantly more than the $10 per hour that the average American US McDonald’s employee’s made (as of 2016, at company owned stores), but much smaller than her original $21 per hour claim.
Regardless, our initial $21 has been cut to $12, and it still hasn’t been fully adjusted for yet. The average citizen in Denmark pays 45 percent of their income in taxes, and it’s not hard to see why. Denmark has a value added tax (VAT) of 25% of all purchases (acting like a massive sales tax), and that’s after income and local taxes are paid.
If we were to be generous and suppose our Danish McDonalds worker pays “only” 30% of their income in tax, their $21 an hour would be reduced to $14.7 post-tax, which would have the purchasing power of approximately $9.84 – or about what the average American McDonalds worker earns. Of course, this is likely an understatement given the overwhelming tax burden that Danes face.
One can only wonder what those pushing this myth think the explanation for it is – that McDonalds just arbitrarily decided to start dishing out the big bucks in a random country? Wages are relative to the cost of living, and once that’s adjusted for, there ain’t much different.