Europe | Minimum wage: from symptoms to causes

Summary

On June 7, 2022, the European Parliament and EU Member States reached an agreement on the Directive on adequate minimum wages. Despite the arrival of this Directive, differences in minimum wages between EU Member States will continue to exist for as long as there is no convergence in productivity and employment rates.

Key points

• Key points:
• The Directive establishes a framework for the adequacy of statutory minimum wages, promoting collective bargaining on wage setting, and enhancing the effective access of workers to minimum wage protection.
• While most EU countries have a statutory minimum wage, Denmark, Italy, Austria, Finland and Sweden do not have a single national yardstick, rather sectoral minimum wages set through collective bargaining between employers and labour unions; or by the government, as is the case in Cyprus.
• Under the Directive, those states with a statutory minimum wage must have a framework for setting and updating it based on clear criteria such as purchasing power, cost of living, the level, distribution and growth rate of wages, or productivity. To this end, it recommends using 60% of the median gross wage or 50% of the average gross wage as benchmarks.
• While the Directive is certainly a step forward in improving living and working conditions in the EU, while respecting the national competences of each Member State, it does not guarantee that the results will be the same or even similar between states.

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