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EU Commission works towards a EU-wide minimum wage

The idea of adaption of a European minimum wage is not new. European Commission President-designate Jean-Claude Juncker said in July 2014 that he would work towards the introduction of a minimum social wage in each member state of the EU.

Two years later, the discussion on the issue is high on the EU agenda and lot of political resistance in some countries.

The idea of a European minimum wage has sat on the back-burner for a long time. Germany’s to enforce a minimum wage in January 2015 was the first in a series of positive signs for the European project. EurActiv France reports

The problems posed by the posting of workers, and the competition it provokes between the EU’s social security systems, have thrown the spotlight on the need for social convergence between EU member states.

And the talks on the Posting of Workers Directive, due to begin in Brussels in the near future, provide a good stage for this issue to be aired.

On September 14th 2016, members of the European Parliament adopted a report on the highly controversial subject of social dumping, bringing the EU one step closer to revising the Posting of Workers Directive, despite vigorous opposition in the East.

Social dumping

As a precursor to these discussions, the European Parliament’s rapporteur on social dumping, French Socialist Guillaume Balas (S&D), recommended the progressive enforcement of a European minimum wage.

This, Balas said, should be fixed at 60% of each country’s median national wage.

Paris pushes EU-wide minimum wage in crusade against social dumping.

“Workers should get the same pay for the same work in the same place. It is a question of social justice,” Jean-Claude Juncker said in his State of the Union Speech last Wednesday (14 September).

Thorny consensus

Yet the question is barely progressing in Brussels. A number of European politicians have tried to link the subjects of posted workers and the European minimum wage, but have consistently run into opposition.

Six European countries (Italy Cyprus, Austria, Denmark, Finland and Sweden) have no legal minimum wage. But the differences between existing national minimum wages within the EU can be almost tenfold. Bulgaria’s minimum wage for the month of January 2016 was €215, while in Luxembourg it was €1,923.

“If we express this in terms of purchasing power, the gap is smaller, but the difference is still a factor of four in some countries,” the rapporteur told MPs in the French parliament’s Social Affairs Committee.

Proponents of an EU-wide minimum wage will also have to find a solid legal basis on which to anchor it, as the EU has only limited competences in the matter. Article 153 of the Lisbon Treaty foresees that “the Union shall support and complement the activities of the member states” on working conditions.

Headwinds from the East

Among the partners that will need convincing are many of the EU’s Eastern European member states, which are already up in arms over the proposed revision of the Posting of Workers Directive.

For these countries, whose wages are among the lowest on the continent, the enforcement of a European minimum wage could put an end to a precious competitive advantage.

Without a legal minimum wage in the EU, “the member states get into a race to the bottom to attract business and capital”, Cordery’s report said.

Tricky criteria

And the creation of a European minimum wage may have to face another sizeable obstacle: the question of which convergence criteria should apply to ensure a minimum wage does not unbalance EU countries’ pay policies.

According to Cordery’s report, EU countries set their minimum wage at between 40 and 60% of the national median wage.

A European law enforcing a minimum wage at 60% of the median would not necessarily change a great deal in certain countries. The French and Portuguese minimum wages are already at the recommended level of 60%, while in Luxembourg, workers earn at least 57% of the national average.prefer a European minimum wage with a threshold below 60%, and and certian countries in thand . (EurThe French treasury suggested a floor of 45-50%, which would increase progressively to 55%. of the median national wage. This scenario would cut the minimum wage in France by 8.3%.

But it would have a positive effect on wages in countries like Estonia, the Czech Republic, Spain and Romania, where the minimum wage is currently around 40% of the median. (full story Euractive.com)

Greece

In Greece, wages underwent massive cuts due to austerity measures that practically abolished labor rights and “social justice”, while in the name of “competitiveness” and the economic crisis, Greek employees go home with less and less money compared to the cost of living.

In 2012, lenders enforced the cut of  minimum wage from €700 to €580. According to Social Security Fund for Employees (IKA) data in 2014, the median wage was €1,048 gross – that is the minimum wage was 55% of the median. Furthermore, they also “froze” the wage increase “allowances”: wage increase of 10% after the first 3 years of experience and 5% and 5% after the 6th and the 9th year.

These two major changes in minimum wages led to massive cuts also in median wages. In Greece, the cut of minimum wage occurred first and was in no percentage connection to the median wage. It was simply “deliberate.”

As IMF’s Christine Lagarde used to praise “minimum wage in Greece had to come down to levels of Croatia,” a member of the EU but not a member of the eurozone.

Lagarde was claiming that lowering the minimum wage was aiming to make Greece a competitive country. Six years later, it turns out it was not the ‘high minimum wage’ that was making Greece noncompetitive but permanently changing taxation system, the over taxation of business and enterprises, the hikes in social security contributions. But the IMF has admitted that its Program to Greece was wrong, didn’t it?

With the adoption of a minimum wage across the EU, Brussels claims to work towards eliminating “social injustice.”

However, this contains also the risk, that the Greek model might be applied across Europe.

It is not a secret that the measures that have crashed the Greek society are just an experiment to check public reaction in a lab full of rats.

Of course, we would all agree that the minimum wage is at the level of Luxembourgh, 1,900 euro per month – even gross…

PS Nowadays, the median wage in Greece is hard to be estimated as almost 50% of the full-time employees to work without social security for 400-500 euros per month.

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3 comments

  1. everyone could adopt the minimum wage of bulgaria…

  2. That is a nice idea and such but will lead to higher unemployment, especially youth unemployment. Companies will simply not hire more people or will fire some of the ones they have.