Securing adequate minimum wages for workers in the EU has been a long-standing theme in the EU-wide social agenda. This September was a pivotal moment: the draft directive was endorsed by the European Parliament to confirm an agreement between the Parliament and the Council in June while providing hope for a successful adoption of a Directive. However, the idea’s practical outcome is full of political and economic obstacles in the member states: the teachers’ wage in EU is an example.
At the end of 2020, the European Commission took an important step towards securing adequate minimum wages for workers in the Union; the draft directive was already approved aimed at reversing the growing polarisation of incomes among the states and eliminating in-work inequality. These cardinal steps are to convince the middle class and lower socio-economic groups that the EU is able to reduce inequality, protect the lass-fortunate people and, at the same time, to secure the whole course of the Union’s social market economy concept.
Besides, the present proposal will contribute to elimination of social exclusion through promoting income support at a level of a dignified life, combined with effective access to essential services and measures to support labour market integration.
The general Commission’s idea is to “convince the middle class and lower socio-economic groups” that the EU institutions can deliver on the pressing issues of reducing inequality and protect the interest of all Union’s citizens.
However, securing an income sufficient for a decent standard of living will require substantial increases in minimum wages in many EU member states; which is a medium-term objective that would deliver clear social benefits.
At the same time, transformation of the modern socio-economic systems in the EU states towards implementation of the global challenges has turned national governance to revitalise basic social elements, including progressive taxation of income and wealth, as well as changes in corporate strategies, including social-security systems.
The European Parliament decision has shown the EU’s institutional ability to enforce in the states some resolute actions towards future-oriented “new thinking” in establishing new forms of socio-economic systems; hence, new political economies’ patterns are to be oriented towards more equitable and sustainable development.
See more in: https://www.integrin.dk/2021/07/06/minimum-wage-issue-resolving-inequality-in-europe/
At the end of September 2022, the Commission proposed a Council Recommendation to ensure that minimum income scheme in the member states are adequate, inclusive and reach all people in need, and help incentivise those who can get back to the labour market; interesting to mention a very slow pace of actions: previous recommendation was almost three decades’ old (?!).
Present Council recommendation aims to: a) protect the most vulnerable by reducing the risk of poverty and social exclusion; b) contribute to reaching the EU-2030 employment and poverty reduction targets; c) provide incentives and support to reintegrate those who can “work back” to the labour market; d) preserve the sustainability of public finances.
According to the Commission factsheet and in-house calculations,: more than 95 million people in the EU were at risk of poverty or social exclusion in 202; about 20 percent of jobless people at risk of poverty are not eligible to receive any income support; and about 30-50 percent of the eligible population in the EU are not eligible to any minimum income schemes.
Securing the adequacy of income support is a challenge in nearly all EU member states, including “wage developments”. The adequacy can be measured by comparing the overall income of beneficiaries with the national poverty threshold (as an indication of the poverty alleviation effect) and with the income of a low-wage earner (as an indication of the financial incentives associated to labour market participation). While it varies across households, both indicators provide similar results, pointing out that low wages are close to poverty threshold and benefits stand at even lower level. In 2019, the income of a beneficiary of income support (a single person) was below 80% of the poverty threshold in 22 EU member states, while the income of a low-wage earner reached or stood above the poverty threshold in all EU states. For households with children, the adequacy of income support is generally significantly higher (on average by around 10 to 20 percentage points).
Acknowledging the EU assistance to the states’ social system modernisation, the Commission called on the member states also to modernise their minimum income schemes as part of the ongoing pledge to reduce poverty and social exclusion in Europe. The Council recommendation envisages that the massive EU funding will be available to support the member states efforts in “improving” their national wage systems.
Inclusive labor markets
Strengthening inclusive labor markets accessible for all is important in order to mitigate long-term dependence on income support. Activation requirements and active labour market policies can encourage higher job-search efforts and acceptance of job offers, when including supporting services such as counseling, coaching and job-search assistance and measures to ensure work-life balance. In line with the Council Recommendation “Bridge-to-Jobs: Reinforcing the Youth Guarantee”, particular attention is devoted to young adults at the risk of poverty or social exclusion by getting them back into education, training or needed skills within the shortest time possible, but income support should be linked to particularly strong activation measures.
More in: Council Recommendation of 30 October 2020 on A Bridge to Jobs – Reinforcing the Youth Guarantee and replacing the Council Recommendation of 22 April 2013 on establishing a Youth Guarantee (OJ C 372, 4.11.2020).
The minimum wages directive is regarded as the success of European socialists: they celebrated in mid-September a great victory in combating for a decent minimum wages across Europe; it was coped with the reinforcement of collective bargaining, another key demand of the Party of European Socialists (PES) during the 2019 European elections campaign. As a result, the issue of minimum wages was included in the Commission’s agenda.
Socialists in the EU: victorious moves
The draft of the EU Directive for adequate minimum wages was proposed by socialist European Commissioner for Jobs and Social Rights N. Schmit and championed in the European Parliament by S&D MEP and Chair of the PES Social European Network A. Jongerius; it was finally endorsed by MEPs at a Parliament’s plenary. PES President S. Stanishev underlined that socialists “have fought for many years; and the EU rules to secure decent minimum wages across Europe are long-overdue”. It is particularly true presently, serving as a boost for all underpaid workers when they face difficult time presently.
The Directive will also enhance the role of trade unions in the wage setting process: in many EU states there is a strong tradition of collective bargaining, and it is vital both to protect and to promote further development of this system; besides, stronger collective bargaining means, amongst other, better pay for workers.
Under the new rules national minimum wages will be set at a level allowing workers to lead a decent life, taking into account the cost of living and wider pay levels. To set this level, EU countries may establish a basket of goods and services at real prices, or set it at 60% of the gross median wage and 50% of the gross average wage. In countries where fewer than 80% of workers are covered by collective bargaining, the states will have to establish an action plan to increase this figure.
“Wage movement”: short history
The European Parliament, in its Resolution (October 2017) called on the EU states to introduce adequate minimum income, highlighting the role of minimum income protection as a tool for combating poverty. In November 2017, the European Parliament, the Council and the Commission proclaimed the European Pillar of Social Rights, setting out 20 principles to support well-functioning and fair labour markets and welfare systems. Principle 14 states that “everyone lacking sufficient resources has the right to adequate minimum income benefits ensuring a life in dignity at all stages of life, and effective access to enabling goods and services; for those who can work, minimum income benefits should be combined with incentives to (re)integrate into the labour market”.
Source: Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions ‘The European Pillar of Social Rights Action Plan’ (COM/2021/102 final)
In its conclusions in October 2020, the Council invited the Commission to initiate an update of the Union’s framework to effectively support and complement the states’ policies on national minimum income protection. During the Conference on the Future of Europe (May 2022), citizens called for a common Union framework on minimum income.
PES President S. Stanishev said after the historic Parliament’s decision that “the deal” comes after more than 10 years in the making: PES began this fight in 2009 followed by a provisional deal by EPSCO’s June endorsement and present MEPs agreement at September’s European Parliament plenary. He also noted that “the agreement was a big step forward for fair pay”: the Directive will make work pay and define clear criteria when setting statutory minimum wages, taking into account the cost of living and purchasing power; it strengthens workers to collectively bargain on wages too, and supports the vital role of trade unions in this.
When the collective bargaining coverage rate is below 80% in a state, a national action plan is required to progressively increase this coverage: in this way, more workers will get the protection of a collective agreement. The Directive makes it clear that minimum wages must contribute to decent working and living conditions, reducing wage inequality and upward social convergence.
Reference and citations from the Commission’s Employment, Social Affairs and Inclusion website at: https://ec.europa.eu/social/home.jsp?langId=en, and the newsletter at: https://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=10417&pk_source=newsletter&pk_medium=email&pk_campaign=eu_social_newsletter
The “European pact on wages”, guaranteeing equal pay for equal work and setting out the need for decent minimum wages in all EU states, shall be legally enforced and agreed through collective bargaining to be applied both to EU citizens and migrant workers.
Wage difference in EU: teachers in schools
The official annual gross salaries in public schools in lower secondary education (ISCED 2) ranged from around €4,233 in Albania to €69,076 in Luxembourg (data for 2020/2021, according to the European Commission/EACEA/Eurydice). In the three Baltic States the situation is quite pessimistic: about €15.780 in Estonia and Lithuania, and about € 9.480 in Latvia; in Poland and Romania it is even less –about € 7.731/per year.
The latest Eurydice report also provides figures for the 2009/2010 period. At the time, the annual gross starting salaries of teachers varied from €2,743 in Romania to €63,895 in Luxembourg.
The average across 26 EU countries was €19,563 in 2009/2010. However, it was below €5,000 in six EU countries: i.e. Slovakia – €4,824, Poland – €4,462, Lithuania – €4,275, Latvia – €4,166, Bulgaria – €2,761 and Romania – €2,743. In other EU countries it generally ranged from €18,000 to €30,000 while starting salaries in Germany and Denmark were over €35,000.
The change in annual gross starting salaries of teachers between 2009/2010 and 2020/2021 was the highest in Lithuania, where wages rose by 269 per cent during last 11 years. Recent EU member states Romania and Bulgaria also saw dramatic increases in teacher salaries over the last decade, of 193 and 180 per cent respectively.
The EU countries spending the highest share of GDP on education were Sweden (7 per cent), Belgium and Estonia (6.6 per cent), followed by Denmark (6.4 per cent) in the EU; outside the EU, Iceland spent 7.7 per cent of its GDP on education. The lowest levels of expenditure on education as a share of GDP were seen in Ireland (3.1 per cent), Romania (3.7 per cent), and Bulgaria (4 per cent); in the Baltic States it is about 5,2-5,9 per cent.
As soon as the social agenda is a shared EU-states competence, the main burden of implementing the Union’s is on the member states’ governance and social institutions: hence the draft is full of recommendations, invitations and advises…
The Draft Directive and the Council “recommend” the member states to develop robust social safety nets through an integrated approach which combines income support, incentives and support to (re)integrate in the labour market and access to services. Hence the EU recommends the states ensure the adequacy of income support by defining a transparent methodology for setting and reviewing the level of income support, proposing reference values to guide the assessment of adequacy and recommending annual adjustments of income support. Specifically, the draft “invites” the states to “progressively achieve the adequacy of income support by 31 December 2030 at the latest”.
Besides, it recommends the states to provide for a possibility to request the income support to be provided to individual members of the household, without necessarily increasing the overall level of benefits received by the household.
The draft and the Council recommendations advise the member states to ensure a comprehensive coverage of persons lacking sufficient resources by minimum income, through inter alia non-discriminatory eligibility criteria and proportionate means testing.
Thus, the Council recommendation provides only the so-called EU-wide guidance, while leaving the implementation to the member states; the approach was generally regarded as the best-suited presently. Most EU states and national governance systems reiterated the importance of an “empowering active inclusion approach”, comprising income support, inclusive labour markets, social inclusion and access to quality services.
However, for the approach to be effective, adequate governance system should support cooperation of different actors on vertical and horizontal levels including service providers and civil society organisations; these actors are to become part of the governance systems.
As to “adequacy”, most states agreed that the level of income support should be set at or above national poverty threshold to ensure a life in dignity. Some states pointed to the need of robust monitoring systems to support an effective implementation and securing the adequacy of income support in all EU states, including on account of wage developments.
The adequacy can be measured by comparing the overall income of beneficiaries with the national poverty threshold (as an indication of the poverty alleviation effect) and with the income of a low-wage earner (as an indication of the financial incentives associated to labour market participation). While it varies across states, both indicators provide similar results, pointing out that low wages are close to poverty threshold and benefits stand at even lower level.
The example of wage differences for teachers in the EU-27 shows that the real picture in creating a EU-wide minimum wage system is full of complicated obstacles” both of political and economic essence.
General reference to: European Commission proposal for a Council Recommendation “On adequate minimum income ensuring active inclusion”, SWD (2022) 313 final. Brussels, 28.9.2022. COM (2022) 490 final.