Tuesday

4th Oct 2022

EU Commission unveils 'adequate minimum wage' plan

  • 'Promising the same minimum wage for all Europeans would not be realistic, would be impossible and irresponsible,' said the EU commissioner for jobs and social rights, Nicolas Schmit (Photo: EC - Audiovisual Service)

The European Commission proposed on Wednesday (28 October) minimum standards to ensure an "adequate minimum wages" across the EU.

While commission president Ursula von der Leyen has previously referred to this initiative as one of her top priorities, ensuring workers have access to an adequate minimum wage has only gained in prominence due to the economic maelstrom of the coronavirus pandemic.

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"Improving working and living conditions will not only protect our workers, but also employers that pay decent wages, and create the basis for a fair, inclusive and resilient recovery," von der Leyen said in a statement.

According to the International Labour Organisation, adequate minimum wages contribute to sustaining domestic demand, strengthen incentives to work, reduce wage inequalities and in-work poverty.

In the EU, in-work poverty increased from 8.3 percent in 2007 to 9.4 percent in 2018 as a result of the previous economic crisis.

Meanwhile, the new initiative also aims at reducing the gender pay-gap - given that nearly 60 percent of minimum wage earners are women.

In the EU, minimum wage protection in Denmark, Italy, Cyprus, Austria, Finland and Sweden is provided exclusively by collective agreements, and the remaining 21 countries have statutory minimum wages set by governments.

However, the proposal does not oblige member states to harmonise their systems, nor does it set a common minimum wage level.

Instead, the provision promotes collective bargaining on wages as a "gold standard" for all member states since those countries with high collective bargaining coverage tend to have a lower share of low-wage workers, lower wage-inequality and higher minimum wages.

"There will be never, at least not in the foreseeable future, the same level of minimum wages in all the member states of the Union," said the EU commissioner for jobs and social rights, Nicolas Schmit.

"Promising the same minimum wage for all Europeans would not be realistic, would be impossible and irresponsible," he added.

Bargaining vs statutory systems

The group of member states that already have collective bargaining systems should ensure that 70 percent of their workers are covered by such a system, the proposal says.

Those who do not reach this level of coverage would have to prepare an action plan and to inform the commission about how they plan to reach that minimum target.

Meanwhile, countries with statutory minimum wages are expected to put in place conditions for minimum wages to be set at adequate levels, including clear and stable criteria for setting, monitoring and regularly updating the level.

These criteria should take into account the cost of living and the contribution of taxes and social benefits, the general level of gross wages and their distribution, the growth rate of gross wages, as well as labour productivity.

These member states are also supposed to increase the engagement with social partners, such as employers organisations or trade unions, when setting and updating minimum wages.

Additionally, these member states will also have to justify the use of different rates of statutory minimum wage ensuring that variations for specific groups of workers are "non-discriminatory, proportionate and justified".

All member states will have to inform the commission on developments annually.

The proposal now has to be negotiated with EU governments in the European Council and lawmakers in the European Parliament. Once adopted, member states will have two years to transpose it into national law.

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