Skip to main content

The European Commission proposed on Wednesday standards for setting adequate minimum wages across the 27-nation bloc to reduce wage inequality and in-work poverty, increase incentives to work and help sustain domestic demand as the economy shrinks.

The proposal, worked on long before the onset of the COVID-19 pandemic, gains new significance by the fact that the coronavirus is hitting hardest many of the sectors that pay minimum wages like retail and tourism, bars and restaurants as well as health workers, caregivers or cleaners.

The Commission proposal, which will have to be negotiated with EU governments and the European Parliament in a lengthy process, lays out only common rules for a minimum wage, but not a minimum wage level itself.

“The proposed Directive creates a framework to improve the adequacy of minimum wages and for access of workers to minimum wage protection in the EU,” the Commission said in a statement.

“... It sets a framework for minimum standards. It does not oblige Member States to introduce statutory minimum wages, nor does it set a common minimum wage level,” it said.

Of the EU’s 27 countries, 6 have wages set in collective bargaining between employers and trade unions and 21 have statutory minimum wages set by governments.

“Countries with high collective bargaining coverage tend to have a lower share of low-wage workers, lower wage inequality and higher minimum wages. Therefore, the Commission proposal aims at promoting collective bargaining on wages in all Member States,” the Commission said.

It said countries with statutory minimum wages should set clear and stable criteria for minimum wage setting, indicative reference values to guide the assessment of adequacy and regular and timely updates of minimum wages.

In countries with a statutory minimum wage the Commission proposal calls for social partners – employers organisations and trade unions – to be involved in setting the minimum wage level and updating it.

Those that have collective bargaining systems – Sweden, Denmark, Finland, Austria, Italy and Cyprus – should make sure that 70 per cent of their workers are covered by such bargaining deals, the proposal said.

The EU executive arm also proposed to monitor and improve the enforcement of minimum wage protection established in each country.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.