The Correlation between Minimum Wage and Economic Strength in Europe

Sep 6, 2017
Scatter plot of shadow economies and GDP

In Europe, the correlation between economic strength and the minimum wage is pretty strong.  Just like with the shadow economy data, minimum wage tends to be similar to geographically proximate countries.

Findings

  • The correlation coefficient between per capita Gross Domestic Product (GDP) in Purchasing Power Parity (PPP) and minimum wage in Europe is 0.85.
  • As economic strength increases in Europe, the minimum wage also increases.
  • Belarus has the lowest minimum wages on the continent but manages to have the seventh smallest per capita GDP PPP.
  • Moldova has the smallest per capita GDP PPP but has the second lowest minimum wages.
  • Luxembourg has the largest per capita GDP PPP but the second highest minimum wage on the continent.
  • San Marino on the other hand, has the highest minimum wage but only the third largest per capita GDP PPP.

Caveats

  • As always, correlation does not imply causation.
  • Albania, Andorra, Austria, Denmark, Faroe Islands, Finland, Vatican City, Iceland, Italy, Liechtenstein, the Former Yugoslav Republic of Macedonia, Monaco, Norway, Russia, Sweden, and Switzerland were missing data.
  • Minimum wages sometimes vary by profession and other variables.

Details

Only Belarus and Moldova have an annual minimum wage of less than 4,500 international dollars.

Western European countries have both the highest annual minimum wages and per capita GDP PPP.

Per capita GDP PPP as a multiple of minimum wage, ranges from 1.14 in Ukraine to 18,000.00 in Moldova.

Country Codes

CodeCountry
AGAntigua and Barbuda
BBBarbados
BZBelize
CACanada
CRCosta Rica
DMDominica
DODominican Republic
GTGuatemala
HNHonduras
HTHaiti
JMJamaica
KNSaint Kitts and Nevis
MXMexico
NINicaragua
PAPanama
SVEl Salvador
TTTrinidad and Tobago
USUnited States
VCSaint Vincent and the Grenadines

Sources

US Department of State.  2017.  "Country Reports on Human Rights Practices for 2016."  Accessed September 2, 2017.  https://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm#wrapper.

"Report for Selected Country Groups and Subjects (PPP Valuation of Country GDP)."  https://www.imf.org/external/pubs/ft/weo/2017/01/weodata/weorept.aspx?pr.x=43&pr.y=19&sy=2017&ey=2017&scsm=1&ssd=1&sort=country&ds=.&br=1&c=512%2C672%2C914%2C946%2C612%2C137%2C614%2C546%2C311%2C962%2C213%2C674%2C911%2C676%2C193%2C548%2C122%2C556%2C912%2C678%2C313%2C181%2C419%2C867%2C513%2C682%2C316%2C684%2C913%2C273%2C124%2C868%2C339%2C921%2C638%2C948%2C514%2C943%2C218%2C686%2C963%2C688%2C616%2C518%2C223%2C728%2C516%2C558%2C918%2C138%2C748%2C196%2C618%2C278%2C624%2C692%2C522%2C694%2C622%2C142%2C156%2C449%2C626%2C564%2C628%2C565%2C228%2C283%2C924%2C853%2C233%2C288%2C632%2C293%2C636%2C566%2C634%2C964%2C238%2C182%2C662%2C359%2C960%2C453%2C423%2C968%2C935%2C922%2C128%2C714%2C611%2C862%2C321%2C135%2C243%2C716%2C248%2C456%2C469%2C722%2C253%2C942%2C642%2C718%2C643%2C724%2C939%2C576%2C644%2C936%2C819%2C961%2C172%2C813%2C132%2C199%2C646%2C733%2C648%2C184%2C915%2C524%2C134%2C361%2C652%2C362%2C174%2C364%2C328%2C732%2C258%2C366%2C656%2C734%2C654%2C144%2C336%2C146%2C263%2C463%2C268%2C528%2C532%2C923%2C944%2C738%2C176%2C578%2C534%2C537%2C536%2C742%2C429%2C866%2C433%2C369%2C178%2C744%2C436%2C186%2C136%2C925%2C343%2C869%2C158%2C746%2C439%2C926%2C916%2C466%2C664%2C112%2C826%2C111%2C542%2C298%2C967%2C927%2C443%2C846%2C917%2C299%2C544%2C582%2C941%2C474%2C446%2C754%2C666%2C698%2C668&s=PPPGDP&grp=0&a=.  International Monetary Fund.

Filed under: Correlations