A few days ago Barry posted a chart titled Who benefits from a higher minimum wage?. Obviously everyone except the labor doing the minimum wage benefits from this. For example, American farmers employing minimum wage workers to pick strawberries and other work profit handsomely from keeping the minimum wage at very low rates.This is on top of the billions that are handed out to farmers in subsidies. Another example would be corporations and ultimately the owners of corporations also benefit from minimum wage. Higher wages would lead to lower profits and that is against the purpose of a corporation’s existence.

I came across an interesting chart that shows the net minimum wages of workers in OECD countries:

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Source: OECD and RT

Some notable points:

• Australia has the highest minimum wages among OECD countries.
• With a Federal minimum wage of $7.25 per hour the U.S. ranks 11th in the list.
• Mexico has the lowest after tax minimum wage at just $1 per hour.
• In the U.S. a worker needs to work 50 hours per week to escape poverty while in Australia the same worker needs to only 6 hours per week to escape poverty.

The U.S. and Chinese economies are two of the largest economies in the world. Both the countries depend on each for trade and investments. Like the Siamese twins it can be argued that the economies of these countries are inter-linked with one another. In this article, let us compare China and the U.S. based on a few select economic indicators.

1. GDP Composition by Sector:

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The U.S. economy is a consumer-driven economy whereas the Chinese economy is still a manufacturing-driven. Hence the services sector accounts for about 78% of the U.S. economy compared to under 50% for China. The Agricultural industry is a small portion of the American economy.

2. Government Finances and Size of Economy:

The U.S. GDP based on 2014 estimates is $17.4 Trillions compared to China’s $10.3 Trillion. Both the countries government expenditures are higher than revenues.

3. Public Debt as a % of GDP:

The U.S. is a debtor nation meaning the government borrows money from investors to keep the country running. According to the CIA’s World Factbook data, the public debt as a percentage of GDP stood at 71.2%. This is very high compared to China’s as shown in the above chart.

4. External Debt:

As mentioned earlier the U.S. government borrows heavily from investors in the U.S. and abroad. According to the CIA’s data, the external debt mountain exceeded $15.0 Trillions. External debt is a key figure since it represents funds owed to foreign investors and not to the domestic population. If foreign creditors such as China and Japan demand repayment of their debt at once the U.S. can get into trouble.

Based on the Treasury Department’s data the current Total Public Debt Outstanding is 18,152,456,926,656.13 (ie. over $18.0 Trillions). Out of that, the Debt Held by the Public is 13,050,345,826,235.33 with the rest in intra-governmental holdings.

Japan and China are the top two holders of U.S. debt. At the end of February, 2015 Japan and China held $12.24 Trillion and $12.23 Trillion of U.S. Treasury Securities. As a result of being a debtor nation, the U.S. pays billions in interest payments to these two and other creditors.

5. Reserves of Foreign Exchange and Gold:

The U.S. ranked 19th in the world in terms of foreign exchange reserves and gold held. while China ranks the 1st. At the end 2014, China held about $4.0 Trillion in foreign exchange reserves and gold.

Source: CIA’s The World Factbook

Earlier:

• China vs. USA – A Comparison of Government Finances and the Economy (TFS, 2010)
• USA vs. UK: Government Finances and Size of Economy (TFS, 2010)