EU seeking to increase member states' minimum wages

  • 2020-10-28
  • LETA/BNS/TBT Staff

TALLINN - The European Commission on Wednesday proposed an EU directive to ensure that the workers in the EU are protected by adequate minimum wages allowing for a decent living wherever they work.

When set at adequate levels, minimum wages do not only have a positive social impact but also bring wider economic benefits as they reduce wage inequality, help sustain domestic demand and strengthen incentives to work. Adequate minimum wages can also help reduce the gender pay gap, since more women than men earn a minimum wage. The proposal also helps protect employers that pay decent wages to workers by ensuring fair competition, the Commission said.

The current crisis has particularly hit sectors with a higher share of low-wage workers such as cleaning, retail, health and long-term care and residential care. Ensuring a decent living for workers and reducing in-work poverty is not only important during the crisis but also essential for a sustainable and inclusive economic recovery.  

Minimum wages exist in all EU Member States. Altogether 21 countries have statutory minimum wages and in six member states -- Denmark, Italy, Cyprus, Austria, Finland and Sweden --, minimum wage protection is provided exclusively by collective agreements. Yet, in the majority of member states, workers are affected by insufficient adequacy and/or gaps in the coverage of minimum wage protection.

In light of this, the proposed directive creates a framework to improve the adequacy of minimum wages and for access of workers to minimum wage protection in the EU. The Commission's proposal fully respects the subsidiary principle: it sets a framework for minimum standards, respecting and reflecting member states' competences and social partners' autonomy and contractual freedom in the field of wages. It does not oblige member states to introduce statutory minimum wages, nor does it set a common minimum wage level.

Countries with high collective bargaining coverage tend to have a lower share of low-wage workers, lower wage inequality and higher minimum wages. Therefore, the Commission proposal aims at promoting collective bargaining on wages in all member states.

Countries with statutory minimum wages should put in place the conditions for minimum wages to be set at adequate levels. These conditions include clear and stable criteria for minimum wage setting, indicative reference values to guide the assessment of adequacy and regular and timely updates of minimum wages. These member states are also asked to ensure the proportionate and justified use of minimum wage variations and deductions and the effective involvement of social partners in statutory minimum wage setting and updating.

Finally, the proposal provides for improved enforcement and monitoring of the minimum wage protection established in each country. Compliance and effective enforcement is essential for workers to benefit from actual access to minimum wage protection, and for businesses to be protected against unfair competition. The proposed directive introduces annual reporting by member states on its minimum wage protection data to the Commission.