Although the quality of life has improved in Europe over the past decades, wage inequality has increased. The Covid-19 crisis has worsened this situation, and poverty is now a significant concern for the European Commission. Granting minimal wages might be a solution for social inclusion, but is this even possible at the European level? The Member of the European Parliament Monica Semedo answers this question by explaining a new project for a Directive on adequate minimum wages.
Growing socio-economic vulnerability in Europe
Despite a general rise in wages, the socio-economic conditions of low-wage workers have worsened. According to Eurostat, “the proportion of employed persons at risk of poverty went from 8.3 % in 2010 to 9.3 % in 2018,” diminishing their purchasing power. Purchasing power is a key economic indicator that compares national economies because it comprehends the different living costs. The cost of living determines the amount of money needed to cover basic expenses. It is helpful to compare the price of everyday life in different cities, regions or countries. The European context reveals a cleavage between western and eastern European citizens, the former having a lower purchasing power than the latter. Moreover, the Covid-19 crisis had a negative impact on wages, the most vulnerable workers being the youngsters and the least skilled.
To tackle this socio-economic issue at the European level, adopting minimum wages in each European country could be helpful. However, the economic benefits of implementing such a measure are still unclear. Since it would most certainly contribute to an increase in labour costs, some economists argue that it might also lead to job losses and thus would end up being counterproductive in tackling economic vulnerability. Nevertheless, other experts explain that a legal minimum wage could increase workers’ purchasing power and create jobs. Hence, this measure would protect low-wage workers and enhance social inclusion by ensuring fair wages and fighting against in-work poverty. Following this reasoning, twenty-one European states have already fixed legal minimum wages. The remaining six (Austria, Cyprus, Denmark, Finland, Italy and Sweden) currently establish salaries through collective bargaining between social partners.
But could a shared European solution be found to address this issue beyond national strategies?
A feasible European response?
When announcing her political guidelines in July 2019, Commission’s President Von Der Leyen stated that “the dignity of work is sacred”. She mentioned a legal tool granting each European worker a fair wage and ensuring a decent standard of living. The European Commission should offer concrete solutions to embed this saying legally, but this is not an easy task.
Indeed, the Union has very few competencies in the social field, which remain mainly under the member states’ sovereign competence. The EU adopted soft law measures in anti-poverty policies by helping coordinate national practices and compare and promote the best ones among the member states. According to a 2021 study requested by the European Parliament’s Committee on Employment and Social Affairs: “the front of actors that might favour the establishment of the adoption of a binding supranational minimum income framework at the EU level is not strong enough.” Hence, the Commission’s mandate regarding social inclusion is hard to achieve.
However, a Commission initiative is currently being analyzed by the European Parliament and might become a European Directive in the near future.
The Directive project: a step further
The French delegation of the political group Renew initiated the negotiations in the European Parliament about the Directive on adequate minimum wages in the EU. The project aims at establishing common criteria for each European government when setting wage levels, thus fixing a minimum level of social protection for workers. Its final objective is to reduce social dumping and fight against poverty and delocalisation. However, the Directive does not aim to set a unique European minimum wage since the EU does not have the legal capacity to do so. Also, an even minimum wage in Europe would not correspond to the different national purchasing power and could even be counterproductive to tackling socio-economic vulnerability. According to a 2020 European Parliamentary Research Service briefing, “expressed in euros, monthly minimum wages vary widely across the EU, ranging from 312 Euros in Bulgaria to 2’142 Euros in Luxembourg”.
Luisa Gambaro (LG): The project does not aim to fix the same minimum wages for all Europeans because the national living costs are very different. Thus, what can the European institutions do to tackle poverty in Europe with this new legislative project?
MEP Semedo: Indeed, we can not set the same minimum wages for every member state because the costs of living between, for instance, Luxembourg and Bulgaria are too different. Moreover, it is not in the remit of competence of the EU. But what we can do to tackle in-work poverty is to set a framework of criteria through the directive to guarantee decent living conditions. A country like Sweden has a statutory minimum wage, but everything is based on collective bargaining and is quite well-covered so that almost every worker is protected. But other countries do not have those options, and we have to guarantee that workers can live off their salaries. In the directive, we have both systems, with criteria to assess the adequacy of a statutory minimum wage and enhance collective bargaining coverage by attaining a particular objective of percentages so that people are socially better covered and protected.