Minimum wage in Europe: crediting social-democrats’ initiatives

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Expected deal among EU institutions on a minimum wage directive represents a key milestone in a decade-long social-democrat’s fight for fair wages. The directive is aimed at better wages for Europe’s lowest paid workers and will help millions of low paid workers EU-wide at a time when citizens contend with climbing living costs and energy prices. 

The directive’s initial idea was first made public by the party groping (the PES) in the European Parliament in its manifesto for the 2009 European elections; it has been over a decade since a new directive version finally reached a provisional deal.
It has to be finally endorsed by the EPSCO and then by the European Parliament plenary.

Some historic reminiscences…
No doubt, that it was the European socialists that have been all the time at the center of a EU-wide “fair pay” discussions; thus, for example the PES manifest already in 2009 “proposed a European pact on wages, guaranteeing equal pay for equal work and setting out the need for decent minimum wages in all EU states, agreed either by law or through collective bargaining and applying both to citizens and migrant workers”. It is true, that social rights include the right to a fair level playing field for workers…
The Directive’s draft was put forward by a socialist European Commissioner, Nicolas Schmit, in 2020 and guided by PES through the European Parliament in 2021. At the last European Parliament elections in 2019, PES candidate Frans Timmermans pushed minimum wages issue further in the Commission’s political agenda.

Big step forward
This agreement has been a big step forward for fair pay, as the directive will “make work pay”: the directive defines clear criteria in setting statutory minimum wages, while taking into account the cost of living and purchasing power in a EU member state.
Besides, it strengthens workers to collectively bargain on wages too, and supports the vital trade unions’ role in such agreements. Thus, when the collective bargaining coverage rate is below 80% in a certain member state, a national action plan is required to progressively increase this coverage. This way, more workers will get the protection of a collective agreement, which is best way to combat the so-called in-work poverty.
Besides, and this is seemingly most important, that new directive makes it clear that minimum wages will contribute to decent working and living conditions, to reducing wage inequality and upward social convergence.
Presently, the highest minimum wage in the EU states/per hour (in euros) is ranging from about 12,7 in Luxembourg and about 10,3 -10,2 in France and Ireland, to the “lowest” 9,8-9,5 in Belgium and Germany; this is more than ten times higher than in some eastern EU member states.
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Several EU states are making serious steps in “combining” the trade unions and employers’ associations to the so-called “concerted action” against surging inflation and aggravating living conditions; among other issues, there are suggestions “to act together to avert a wage-price spiral”, as proclaimed the German leaders.
Thus, if the unions would forgo calling for high wage rises in upcoming collective-bargaining exercises and would go for small hikes plus one-off bonus payments instead, the German government could make the latter tax-free. Businesses liked the idea: country’s finance minister and leader of the Free Democratic Party Ch. Lindner did not like the idea so much; in his opinion the measure was “hardly financeable” and he questioned whether such blatant subsidies for companies, including those that make huge profits, were needed in the first place.
Other critics observed that only about half of German workers are subject to collective-bargaining results; therefore the measure, while unspecific on the one hand, would not be so broad as to help everybody. Lindner, while not averse to the main idea of concerted actions, called for “targeted instruments” instead.
Main issue, however, is that of the public budget and available resources to support the “social agenda”: in any event a new relief package will not be accepted before 2023, which is likely to annoy government’s coalition partners which have already called for “quick measures”. If accepted, it would be the third package in German history, although the first two were not fully effective either.
The new budgets won’t be available this year; as for the next one, the draft budget for 2023 was only through the first discussed by the coalition government. The draft foresees a return to the debt cap enshrined in the German basic law, i.e. something that not all of coalition partners take as seriously as the liberal block.
Thus the debates will continue in the coming months and is expected to heat up the social agenda in the EU states.



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