Two methods to ensure fair minimum wages in EU

Two methods to ensure fair minimum wages in EU
Credit: Unsplash/Raoul Croes

The European Commission’s consultation on how to ensure fair minimum wages for all workers in the EU ended in beginning of September. A Commission proposal is expected already in October but might face opposition from Sweden and other countries that apply a collective bargaining system.

Minimum wages can be ensured by either collective bargaining between employers and trade unions (“the social partners") or legislation in the form of statutory minimum wages. In an op-ed yesterday (14 September) in Swedish daily Dagens Nyheter, Commission President Ursula von der Leyen tried to assuage the Swedish concerns about legislation on minimum wages.

“EU will not force Sweden to introduce minimum wages,” she wrote. This was not enough assuring for Swedish MEP Heléne Fritzon, S&D group vice-president, who replied the very same day to her op-ed. Statutory minimum wages is not the issue. Any legislation on wages would contradict the Swedish labour market system which is based on collective bargaining between the social partners.

“There should be a legal guarantee that the minimum wage should be at least 70 – 80 % of the median wage (the poverty threshold),” Nicolas Schmit, Commissioner for Jobs and Social Rights, said at a workshop in February in the European Parliament.

“Statutory minimum wages are the second-best option, strong collective bargaining is the best option,” he stressed then. “If you have a well-functioning collective bargaining system, reaching a certain coverage of the working population, then there is no need for minimum wages.”

Minimum wages are considered adequate if they are fair vis-à-vis the wage distribution in the country and if they provide a decent standard of living but this is far from the case in many member states.

In fact, only a minority of EU member states determine the wages via collective bargaining. There are major gaps in the coverage of minimum wages in some countries. In other countries, the minimum wages are not regularly adjusted and updated. Legislation on minimum wages could be needed for countries lacking a functioning collective bargaining system.

In its consultation, the Commission stated that it did not aim to set a uniform European minimum wage, nor to harmonise minimum wage setting systems. Any possible measure would be applied differently depending on the minimum wage setting systems and traditions of the Member State, in full respect of national competencies and social partners' contractual freedom.

Therefore, the EU initiative would aim to ensure that both “well-functioning collective bargaining in wage-setting is in place and that “national frameworks allow for statutory minimum wages to be set and regularly updated according to clear and stable criteria”.

The Commission published today (15 September) its 2020 Employment report which includes research data on the positive effect of minimum wages on social mobility.

Asked at today’s press conference about the two options in the Commission’s forthcoming proposal, a spokesperson replied that it will not recommend the introduction of statutory minimum wages in countries where they are autonomously negotiated by the social partners.

What it will recommend for the other countries was less obvious but the Commission clarified afterwards that it wants to ensure that all systems provide adequate minimum wage levels, have sufficient coverage, include thorough consultation of social partners, and have appropriate update mechanisms in place. That said, the Commission excludes a uniform European minimum wage.

Update: Some of the fog surrounding the Commission proposal was finally dispelled by European Commission President von der Leyen in her State of the Union Address at the European Parliament Plenary on Wednesday (16 September).

“The truth is that for too many people, work no longer pays,” she said in her speech. This is why the Commission will put forward a legal proposal to support Member States to set up a framework for minimum wages. Everyone must have access to minimum wages either through collective agreements or through statutory minimum wages.”


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