Newsitem
2020-12-02
Proposal for a Directive on adequate minimum wages in the EU
By: Erika Kovács (Vienna University of Economics and Business)
On 28th October, 2020, the European Commission proposed a Directive on adequate minimum wages in the European Union.[1] The Proposal has a promising title, but the Directive will bring, in my opinion, little actual development regarding national minimum wages. However, it has potential to have a positive impact on collective bargaining.
The proposal does not intend to harmonise minimum wage levels across the EU as the regulation of pay is under the exclusive competence of the Member States according to Art 153 (5) TFEU (see recital 16 of the Preamble). Rather, the Member States shall be free to determine the method for setting minimum wages. Member States with statutory minimum wages shall define the criteria in line with the default elements to promote adequate minimum wages. Social partners shall be involved in statutory minimum wage setting and updating.
The major achievement and challenge of this directive could be to promote collective bargaining. The Proposal (recital 11 of the preamble) stresses that setting minimum wages by collective agreements is more beneficial than providing them by statutory law. While minimum wages in collective agreements are even in low-paid occupations adequate in most cases, statutory minimum wages did not provide sufficient income for a single minimum-wage earner to reach the at-risk-of-poverty threshold in nine Member States. Therefore, Art 4 of the proposed Directive aims to increase the collective bargaining coverage and invites all Member States to promote the building and strengthening of the capacity of the social partners to engage in collective bargaining on wage setting and encourage negotiations on wages among social partners. Member States where collective bargaining coverage is less than 70% of the workers, shall in addition provide for a framework of enabling conditions for collective bargaining and shall establish an action plan to promote collective bargaining.
In fact, statutory minimum wages already exist in 21 Member States, ranging from € 312 to € 2.142 per month in July 2020.[2] In the 6 remaining countries (Austria, Cyprus, Denmark, Finland, Italy, Sweden), collective agreements regulate the minimum wages and they have in general a high coverage rate. Altogether, the adoption of the Directive would probably not substantially develop the minimum wages in the Member States, but could promote collective bargaining, even if the rules leave the Member States great leeway.
[1] European Commission, Brussels, 28.10.2020 COM(2020) 682 final. https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020PC0682&from=EN.
[2] Eurostat: Minimum wage statistics, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Minimum_wage_statistics.