European minimum wage
©AdobeStock bluedesign
In October 2020, the European Commission presented a proposal for a directive on European minimum wages. The debates on a European regulation on minimum wages are not new. The BDA and European employers reject an EU directive on this as a violation of the subsidiarity principle. In the European legislative process, it is now important that the diversity of industrial relations and wage-setting systems be taken into account and that the entry of people with placement barriers into the labour market be made possible and not hindered. The principle of subsidiarity must also be respected.
Respect the diversity of national industrial relations systems
The diversity of industrial relations and wage-setting systems in the various Member States must be preserved. These are in line with national traditions and the different systems of industrial relations. Systems within the EU are historical and highly diverse. For example, 22 Member States have a general statutory wage floor in force, while the rest have sectoral rules, mostly set by collective agreements. The introduction of a European regulation on wage floors would interfere considerably with these structures and would have an impact on the entire wage and collective bargaining system. The Nordic countries in particular show how successful the concept of wage setting by the collective bargaining partners is. In these countries, collective bargaining autonomy exists, while at the same time above-average wages are paid. There, both employers and trade unions, together with the government, are opposing the Commission's European minimum wage plans.
Do not make access to the labour market more difficult
Establishing minimum wages that are set across Europe independently of productivity would make access to the labour market more difficult for the long-term unemployed, the low-skilled, people with placement barriers and those wishing to enter the labour market. The introduction of a uniform minimum wage level would therefore not bring about any improvements in economic conditions and the associated performance of social and labour market policies in the Member States. On the contrary, such a mechanism would interfere with the competitive relations between EU states and impair the necessary adaptability of national wage regimes. Wage convergence should not be forced by a European minimum wage, but should rather be in line with national productivity.
With the Minimum Wage Commission, Germany has an established body that decides on the level of the minimum wage. This has proved its worth. The introduction of new European criteria for determining the level of minimum wages is therefore problematic.
Respecting responsibilities and collective bargaining autonomy
Moreover, the European Treaties exclude the competence of the EU for "pay" pursuant to Art. 153 (5) TFEU. The ECJ has ruled (Case C-268/06, Judgment of 15 April 2008) that the "determination of the amount of the various elements of a worker's remuneration escapes the competence of the Community legislature and is indisputably a matter for the competent authorities in the individual Member States." It is deduced from this that an obligation under European law for the Member States to introduce a minimum wage amounting to 60% of the respective median wage would prescribe the concrete wage level for a part of the employees in the EU Member States and thus directly affect their wage level and is therefore not covered by the social policy competence of the EU due to Article 153 (5) TFEU.
An important element in this context is the preservation of collective bargaining autonomy. The EU should exercise restraint in those matters that can be better resolved at national level. This applies to many areas of regulation, but especially to European social policy, which must respect the different traditions of the Member States in labour market policy, social security, but also with regard to the role of the social partners. The autonomy of the national social partners is not only explicitly stated in the national constitutions, but also in Art. 28 of the GR Charter, as a fundamental right. According to this, "workers and employers, or their respective organisations ... have the right, in accordance with Union law and national laws and practices, to negotiate and conclude collective agreements at the appropriate levels."
Reconsider setting minimum wages on the basis of the median wage
The yardstick used in the explanatory memorandum to the Directive for the appropriateness of a minimum wage at 60 percent of the median wage of the respective country is not appropriate. The assessment of the minimum wage level on the basis of the median wage has only limited significance: the European top minimum wage in Luxembourg, at 12.38 euros, is just under 54 per cent of the median wage, while Portugal, with a minimum hourly wage of 3.83 euros, exceeds the 60 per cent line to the median wage (source: WSI, 2020). Implementing such a unified appropriate minimum wage in the current economic environment could also exacerbate the tight situation for many companies and thus in national labour markets. In many countries where minimum wages are currently below 50 percent of the median wage, unemployment was already above average before the Covid 19 pandemic.
