A Europe-wide minimum wage, adapted to each country, would support the EU’s economic revival and tackle “low cost” labour from Eastern European countries, according to a new report for the French Economic Ministry. EURACTIV France reports.
With Germany implementing a minimum wage for the first time, the debate in Europe is no longer taboo, Paris believes.
France has long spearheaded the campaign for the introduction of a European minimum wage. In a report called “Methods for the introduction of European norms for a minimum wage,” the Treasury’s General Directorate, which works under the Economic Ministry, put forward several proposals on how this could be achieved.
“The introduction of a European norm for a minimum wage could come in the form of a minimum salary level, taken as a percentage of the median salary of each country,” the report said, while taking into account the specifics of the labour market in each country.
The report claimed that the minimum salary could reach 45 to 50% of the median income, or higher than the Eurozone’s lowest income ratios. It could even reach 55% of the median income, as will soon be the case in Germany. Germany will gradually implement an hourly minimum wage of €8.50 from 1 January 2015.
Out of the 28 EU member states, only seven do not have a legal minimum wage; Cyprus, Austria, Denmark, Finland, Italy, Sweden and Germany. In Germany, an agreement has been reached between Chancellor Angela Merkel’s CDU party and the Socialist Party (SPD).
And where they do exist, minimum wages vary considerably, the report noted. These differences are linked to disparities in quality of life and productivity between the countries of the EU. In western countries, the minimum monthly salaries in 2014 are approximately €1,200 gross. In the southern countries it varies between €600 and €800, whereas in Eastern Europe the figure is closer to €400.
At the moment it is not possible for European legislation to intervene in matters of salary. Paragraph 5 of article 153 of the Treaty on the Functioning of the European Union (TFEU) prohibits the EU from adopting legislation on pay.
The authors of the report believe that this could be overturned if eurozone states can commit politically. It could reinforce the social aspect of the economic and monetary union. It is important for France that regular discussions on national and European minimum wages are held with European social partners to take into account all the issues faced by each country and the EU as a whole.
Reducing social dumping
By adopting a minimum wage, low income workers would benefit from “a certain standard of living,” the report argued, which would also have a knock-on effect on consumption.
Another advantage would be to reduce social dumping and excessive competition on salaries across Europe that badly affect certain sectors of the economy, such as construction or road transport. In June, the French parliament proposed legislation against unfair social competition, the aim of which was to rapidly reinforce the European directive on the posting of workers.
From an economic point of view, an EU-wide minimum wage could bolster domestic demand in countries that produce more than they consume – code for Germany – as well as supporting the rebalancing of eurozone economies. As exchange rate adjustments are no longer possible within the eurozone, changes must be made using prices and salaries, the report argued. “This will allow us to strengthen domestic demand” while reducing inequality, said the authors of the report.
According to the reports, a minimum wage would also prompt “more intense job-searching by the unemployed and would lead to greater job opportunities”. Nevertheless, this is only possible if the minimum wage were not too high.
While Germany's grand coalition finally produced a draft agreement over introducing minimum wage, other EU member states have been calling for an EU-wide wage floor.
French socialists, for example, believe Europe should be more uniform on labour policy and see the German measure as a step in the right direction.
Employment and jobs has been a central issue throughout the European election campaign. According to Eurostat, the unemployment rate in the EU was 10.7% of the population in December 2013 with 26.2 million unemployed. This figure is in line with those of 2012.
Within the eurozone, unemployment rate rose from 11.7% to 12.0% in one year. Youth unemployment is a major concern of the European Union. In 2013, it reached 23.5% for those under 25. In the eurozone, youth unemployment is 24% for those under 25.
- 1 January 2015 : German minimum wage comes into force
French Ministry of Finance
- Report: Piste pour l’instauration d’une norme de salaire minimum européenne (Methods for the introduction of European norms for a minimum wage)