EU Launches Minimum Wage Initiative

The European Pillar of Social Rights (The Social Pillar) delivers new and improves existing social rights for EU citizens and serves as the EU’s compass to achieve better working and living conditions in Europe. The set of twenty principles is aimed at maintaining and even growing well-functioning labor markets. In this context, a new framework for determining minimum wages may ensure equal opportunities and access to the labor market, fair working conditions and even social protection and inclusion.

While freedom of movement is one of the most celebrated, practical and visible rights stemming from EU integration, it is also a contested field embodying certain challenges. Labor mobility within the European labor markets has created a rather distracting competition among EU countries, triggering a major trend of leaving one’s country for better working conditions in another. Such movement has been causing, in some countries, huge labor shortage.

The number of people in employment in the EU is at a record high, but many working people are still struggling to make ends meet. The minimum wage initiative may also be a way to keep workers out of poverty risk. In the EU, people who receive less than 60% of median household income are considered to be at risk of poverty. This 60% limit could also be used as the bottom limit for the minimum wage, according to the EU Commission.

Although the minimum wage initiative is merely the first step on a long and winding road before any final legislation could drive change, it has already created a big stir in some European countries, especially in those with a high extent of collective bargaining. Negative aspects have been highlighted, such as shifts in bargaining behavior and industrial relations systems, the high degree of detail that the possible legislation might involve and EU’s lack of competence at national level.

Moreover, high-wage Nordic countries, such as Denmark or Sweden, fear that such measure would undermine their own traditional legal labor models, where social partners negotiate wages without any involvement of the state. An EU legislation that would set a minimum wage is in-conceivable without the intervention of the state that might have to guarantee a certain percentage and could end up by even lowering their high wages.

Considering the pros and cons of such measure, the EU Commission opened a six-week consultation period with businesses and trade unions. The results are to be formulated into a concrete proposal in the summer, and, eventually, be incorporated into an action plan in 2021.