Written by Verena Kern
Several EU Member States have recently implemented adaptions to their wage policies. The most debated change was the introduction of a national minimum wage of 8.50 € per hour in Germany from 1 January 2015.
Minimum wages are common globally with different systems in place. About 100 countries worldwide, including 22 EU countries have statutory national minimum wages. In the EU, national minimum wages are highest in Luxembourg (11.10 € per hour) and lowest in Bulgaria (1,04 € per hour). Contrary to those are countries where minimum wages are set in sector-specific collective agreements. This is usually the case in countries with a high density of trade unions such as Austria, Italy or Sweden.
Minimum wages are meant to support household incomes and protect those with low wages from drifting into poverty. Moreover, they are seen as a means to reduce income inequality. Striking a balance between the needs of a worker and economic factors is their main aim according to the ILO. At the same time, they can be described as a moral value defining the lowest threshold under which employment is not acceptable.
The right of a worker to gain an equitable wage is laid down in the European Social Charter, ratified by all EU Member States. The EU itself has no legal competences on pay. Minimum wages are exclusively defined at national level. However, the discussion on a common European threshold (for example 60% of the national median wage) has gained momentum in recent years. European Commission president Juncker spoke in favour of a European minimum wage in 2013 and again in 2014. The European Parliament has also called for a common European minimum wage in several resolutions.
This keysource is a collection of research on national minimum wage systems and a common European minimum wage policy.
Analysis: Minimum wage systems in EU countries
The minimum wage revisited in the enlarged EU. Daniel Vaughan-Whitehead, ILO, 2010, 544 p. This book provides chapters on the characteristics of minimum wage policies in different EU Member States (Bulgaria, Croatia, the Baltic States, France, Germany, Greece, Hungary, Ireland, the Netherlands, Poland, Sweden and the United Kingdom) and therefore provides good insight at national level. Book available in the EPRS Library.
Who earns minimum wages in Europe? Francois Rycx, ETUI, 2012, 64 p. This study assesses the level of minimum wages in nine countries from Western, Central and Eastern Europe and categorises the different systems in place. Moreover, it characterises minimum wage earners and their households and often finds them to be young, female and with a low level of educational attainment. Temporary work contracts and part-time jobs are also common among minimum wage earners. The study is available in the EPRS Library.
WSI Mindestlohnbericht 2014 – stagnierende Mindestlöhne. (in German), Thorsten Schulten, Hans-Böckler-Stiftung, 2014, 8p. This 2014 minimum wage groups minimum wage levels into three categories: minimum wages of 7 or more Euro (7 EU countries), between 3 and 7 Euro (4 EU countries) and less than 3 Euro (11 EU countries). In addition it measures relative minimum wages according to the Kaitz Index and finds them to be rather low in most countries.
Minimum wage regimes in Europe. And what Germany can learn from them. Thorsten Schulten, Friedrich-Ebert-Stiftung, February 2014, 18 p. This paper looks at minimum wage regimes in Europe from a German perspective. It concludes that all national minimum wages in Europe are below the low-wage threshold. See in particular the chapter on what Germany can learn from the experiences of its European Neighbours (p. 14).
Stakeholder views in favour of a common European minimum wage policy
A coordinated EU minimum wage policy? Enrique Fernández-Macías, Carlos Vacas-Soriano, Eurofound, October 2013, 64 p. This draft report evaluates the potential impact of a common minimum wage threshold in the EU. It consists of two parts: part one describes theoretical and policy considerations and classifies minimum wage systems in in EU Member States. Part two analyses the potential effects of a common minimum wage threshold of 60 per cent of national median wages.
Minimum Wages in Europe: Does the diversity of systems lead to a diversity of outcomes? Stephan Kampelmann, Andrea Garnero, Francois Rycx, ETUI, 2013, 113 p. This report summarises the debate on a common EU minimum wage system and describes the institutional diversity of minimum wage systems. Based on qualitative and quantitative data it assesses the labour market performance of minimum wage systems in Austria, Belgium, Denmark, Finland, Germany and Italy. It points out that the discussion should rather focus on ‘a choice between alternative systems rather than a choice of any particular rate for Europe as a whole’. The report is available in the EPRS Library.
Contours of a European Minimum Wage Policy. Thorsten Schulten, Friedrich-Ebert-Stiftung, October 2014, 18 p. This paper outlines the idea of a common European minimum wage norm equivalent to 60 per cent of national median wages. It argues in favour of a wage norm assuming that it could help coordinating wages and have a stabilising effect on deflation.
Mapping out the options for a European minimum wage standard. Trésor Economics, Ministry for Finance and Public Accounts and Ministry for the Economy, République Française, July 2014, No. 133, 8 p. This note briefly summarises the main arguments for a European minimum wage standard and sheds light on national standards. It is complemented by tables showing mininum-wage adjustment procedures and national minimum wages as percentage of median wages.
European minimum wage policy: A concept for wage-led growth and fair wages in Europe, Thorsten Schulten, Hans-Boeckler-Foundation, International Journal of Labour Research, 2012, Volume 4, Issue 1, 20 p. This article describes national minimum wage developments in light of the crisis such as interventions by the Troika, followed by an analysis of different national standards and minimum wage levels. The author argues in favour of a common European minimum wage policy assuming that it could support sustainable growth in Europe.
Maximising the minimum: a review of minimum wage approaches and trends in European Member States. Peer Review on “Minimum Wage”, London, 7-8 April 2014. DG Employment, Social Affairs and Inclusion, Thematic Paper, 20 p. Background paper for the peer-review exercise under the Mutual Learning Programme. Peer country reviews from previous years are also available for various EU countries.
Promoting social inclusion and combating poverty, including child poverty, in the EU. Adpoted on 9 October 2008 (2008/2034 (INI)).
Role of minimum income in combating poverty and promoting an inclusive society in Europe, Adopted on 20 October 2010 (2010/2039(INI)).
On the European Platform against poverty and social exclusion. Adopted on 15 November 2011 (2011/2052(INI)).
Eurostat collects data on Monthly minimum wages – bi-annual data. These minimum wage statistics refer to national minimum wages (not sector-specific collectively agreed minimum wages).
The German Hans-Böckler-Foundation hosts a minimum wage database which provides information on national minimum wages on 30 countries worldwide including all EU Member States. Their latest overview contains data from January 2014. According to the table, minimum wages per hour in Euro range from 11.10 EUR in Luxembourg to 1.04 EUR in Bulgaria. (The database is in German but graphs and tables are easy to understand by non-German speakers.)
OECD Earnings presents gross earnings, minimum wages relative to median wages, nominal minimum wages, real minimum wages and real hourly minimum wages for all OECD countries.