Wednesday

8th Jul 2020

Opinion

EU minimum wage - a view from Poland

  • It is hardly possible to compare the living conditions in Germany, the Netherlands or France with those in Bulgaria, Romania or central Europe. Therefore, it is difficult to imagine a single minimum wage applicable across the community (Photo: Images_of_Money)

The consultation of social partners on the submission by the European Commission of a proposal for an EU minimum wage lasted until the end of February.

Should the proposal be adopted, six EU member states would be obliged to introduce a minimum wage, whereas the other 21 countries would need to modify their regulatory frameworks. This is the revolution that the current European Commission is cooking.

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The introduction of a European minimum wage is one of the first initiatives proposed by Ursula von der Leyen for the new commission's term of office.

Interestingly, during the elections to the European Parliament the then president of the European People's Party (EPP) - the party von der Leyen derives from - was sceptical about the solution.

In the different political context this proposal resembles the mobility package for posted workers within the European Union, which was aimed at limiting the access to the labour market of workers from cheaper and less developed Eastern Europe.

The mobility package is to enter into force in 2021 and provides a minimum pay for drivers travelling across Europe. So, why the rush to introduce a EU-wide minimum wage for all sectors? We did not have a chance to see the outcomes of the last proposal.

Therese Svanström, the president of the Swedish Confederation of Professional Employees, who emphasised in her position published in EUobserver.com, Why EU Minimum Wage is Actually Bad Idea for Workers that the EU can only act in those areas where member states have authorised it to do so under the EU treaties.

There are no such prerogatives with regard to the labour market.

The EU today is an extremely differentiated economic project.

It is hardly possible to compare the living conditions in Germany, the Netherlands or France with those in Bulgaria, Romania or the central Europe. Therefore, it is difficult to imagine a single minimum wage applicable across the community.

Especially that the Scandinavian countries (Denmark, Finland, Sweden) as well as Austria, Italy and Cyprus have no minimum wage at all.

Hence the European Commission's idea to link the national minimum wage with the national median or average wage.

It is supposed to be set at 60 percent of either of the two – there are no clear details on this point so far.

Which 'average'?

Unfortunately, the success of the whole project hinges on those indicators. For example, the ratio of Poland's median to the national average is four-fifths. Thus, the calculation of a minimum wage based on such differentiated indicators would also involve significant financial consequences.

A certain compromise or a different path for the EU might be to follow the US or Australia.

The US has a federal minimum wage of $7.25 [€6.56] per hour, set as the absolute minimum. Nevertheless, most states independently determine their own minimum hourly wage rates; in the majority (i.e. 29 states) those are higher than the minimum wage, they even double the amount.

Such a model better reflects regional disparities with the absolute minimum wage maintained, as pushed for by the EC leaders.

Another solution is the Australian model; although the minimum wage in Australia ranks among the highest worldwide, it is not the main determinant of earnings.

Wage rates usually depend on industry-specific collective bargaining agreements. The solution is quite effective; there are sectors where the minimum wage is practically non-existent, but the majority of lower-ranking workers may earn just above the amount. In such cases, changes in the minimum wage have little or no influence on a significant group of workers.

Today it is difficult to find economic rationale behind stepping up the work on a European minimum wage. Its introduction would have no effect on equal opportunity efforts, migration flows or combating the shadow economy.

However, it may mean restraints on competitiveness in several countries.

Down, not up?

Moreover, certain trade union organisations already fear that the introduction of the solutions proposed by the commission would ultimately mean that the workers would see their wages fall in some markets. So we can see both the cases of wages going up in some markets and dropping down in others. This might be the external effect of the top-down minimum wage.

However, if we follow the federalist route of development, the EU-wide minimum wage is another step in progress. But it is better to use other countries solutions so we do not do harm to our economies.

Most of the people would probably agree to introduce an absolute EU-wide minimum wage, while giving individual member states the freedom to increase their respective minimum wage rates above that amount.

This should not be a bureaucrats' decision but it needs to be determined in dialogue with industry organisations and trade unions negotiating appropriate sector-specific pay conditions.

Author bio

Andrzej Kubisiak is a labour market analyst at the Polish Economic Institute.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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