Friday, October 31, 2014

Do Danish Fast Food Workers REALLY earn $20 per hour? It depends on how you define $20

A popular article making the rounds in the Econ and Politics blogoshere is this one:

Living Wages, Rarity for U.S. Fast-Food Workers, Served Up in Denmark

COPENHAGEN — On a recent afternoon, Hampus Elofsson ended his 40-hour workweek at a Burger King and prepared for a movie and beer with friends. He had paid his rent and all his bills, stashed away some savings, yet still had money for nights out. is because he earns the equivalent of $20 an hour — the base wage for fast-food workers throughout Denmark and two and a half times what many fast-food workers earn in the United States. can make a decent living here working in fast food,” said Mr. Elofsson, 24. “You don’t have to struggle to get by.”With an eye to workers like Mr. Elofsson, some American labor activists and liberal scholars are posing a provocative question: If Danish chains can pay $20 an hour, why can’t those in the United States pay the $15 an hour that many fast-food workers have been clamoring for?
The quoted dollar amount of $20 is in current market exchange rates between the Danish Kroner and the US dollar.  However, people don't buy exchange rates with their earnings they buy "stuff" in their local economies.

Saying a Danish worker earns the equivalent of $20 US dollars per hour says nothing about the purchasing power of their earnings.

At this link you will find Comparable Price Levels among developed countries as measured by the OECD for August 2014.  If you locate Denmark and the US you will find an index of "149".  This means that comparable goods and services are 49% more expensive in Denmark than they are in the US.

I found some examples of minimum wages in the Restaurant and Hospitality sector that were negotiated between the unions and industry in Demark.

See graphic below.  Along with those minimum wages in Kroners I converted them to US dollars at the current exchange rate (middle column) AND deflated them by 49% to equalize purchasing power between Danish workers and US workers in US dollars (Yellow highlights).

Example.  An unskilled chef in Denmark earn an minimum of  114.47 Kroner per hour. When exchanged at the current exchange rate that comes to $19.23. Sounds like a lot, but remember we don't buy exchange rates we buy "stuff".

When we control for the price level difference of 49% that Danish workers wage has the same purchasing power as an unskilled chef in the US earning $12.91.

I am not judging this.  Just providing some perspective on the wage differential.

That is all...
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