Brussels to push for EU-wide minimum wage

This is madness. It's like taking one long step back in time. This is not what Europe needs to be competitive in a global economy. Moreover, the Commission is wasting its time as the proposal won't fly. Preparing a proposal that goes to the bin is a waste of tax payers' money.

Sorry, this is a step forward in the right direction, that is if Europe wants to be a place for market economy with free and fair competition.

Low wages in some countries hide very backward technological production systems as competitiveness is only based upon low wages.

In a world where production of goods and services will be more and more automated, compettiveness through low wages is bound to drive such economies to lack of competitiveness. This is what countries like China, India, and other low wage coutries are starting to discover: machines cost even less than low wage employees.
Some businesses which had ofshored their production in India China or South West Asia have recalled home their production units, since automated production gives a better competitive advantage than low wages.

In addition competing on low wages also reduces potential final demand for goods and services.China has understood that and is trying to foster an internal demand through wage increases at home, while also going the way of automated production.

Finally Let's not consider that reducing wages and social policies is progress.
Recent social policies restrictions and wages reduction trends are indeed taking a long step back in time, when employees were working 60 hours a week for miserable wages and no social protection. Which is the situation in most countries competing in the global economy only through low wages and no social protection, including children employment.

When European employees will earn salaries like Indian or Chinese employees, European economy will be competitive, at least for a while, but European employees will have the buying power of Indian and Chinese employees.
Paul

Remember also that the EU Commission which ha a pretty neoliberal view of the economy, published in 2003; a document entitled :
COSTS OF NON-SOCIAL POLICY: TOWARDS AN ECONOMIC
FRAMEWORK OF QUALITY SOCIAL POLICIES – AND THE
COSTS OF NOT HAVING THEM.

http://temaasyl2.episerverhotell.net/Documents/ETG/Cost%20Of%20Non%20Social%20Policy.pdf

Market economy needs the lubricants that social policies provide. Of course these have a cost, but the cost of not having them is higher than the cost of having them.
It is like the famous quote:
"If you think education is expensive, try ignorance"

quote by Derek Bok, American lawyer and former president of Harvard University.

A minimum wage reduces employment. We should find other ways of boosting incomes other than raising labor costs.

Sorry for the typing errors in my comment. It has been a long day...

Paul,

The European debt crisis is not due to the distribution of income. It is due to the propensity of European politicians to buy votes by offering social benefits.

A lot of Europeans earn low incomes because they lack skills and European labor markets are dysfunctional.

I aggree with Lucas, Europe wide minimum wages is the only way outs of this mes. Actually there may be a better way but is seemc impossible to achieve: OECD wide minimum wages.

As far as Europe a European "Soial policy scheme financed by a Europd wide taxt system feeding directly the European Social fund, rather than the current system where countries are asked to feed that social fund ans do it reluctatnly since iot would imply unpopular taxes which none of the governing bodies want to implement at home in order to be reelected, prefering that other EU countries do itA direct European tax system would prohibit EU member states to compete on social dumping and tax reductions.
As an example did you know that USA Corporation profit taxes were on average 25% of profits in Europe, while USA business profit taxes were levied at a 40% rate.
So there is a margin to tax profits in Europe without endengering our competitiveness with the USA. But this can only be done at European level, otherwise EU Member states will continue their social and fiscal dumping.
Europe badly needs investments in intelligent networks modernisation, one domain where the European Commission is pushing hard for the development of advanced transborder intelligent networks. Intelligent networks aren't only "data networks" transportation networks remain very backward. This has an effet on markets efficiency but also on the environmental situation. For exampleelectricity networks remain inefficient loosing about 30% energy on less than optimized transport lines.

Speaking of Energy networks allow me to recommend the lates Jeremy Rifkin's book "The third industrial revolution", where he advocates for a wide decentralisation of energy production asociated with advnaced networking systems to distribute energy where and when it is needed with a very high efficiency.
Here again such a strategy cannot be developed in a single country, especially since cross border energy exchange would be esential to the success of this model.

Paul,

Minimum wages make a country poorer, not richer. Explain why a business would not substitute away from labor if you raise the cost of labor. It well known that Americans employee more workers than an equivalent restaurant because American labor is cheaper.

It makes more sense to subsidize workers than to impose more costs on workers and make Europe less and less competitive.

Hi J. thorpe, Even if French German and Italian companies set up shops in former Eastern countries, if Easter countries custommers bya french , German , Italian products because they now can afford to buy them with vaslty increared wages. This will mean income coming back to France Germany and Italy.

As I said in my first comment:
This is great!!! Somewhat late, but great.

If European fathers had statred by setting competition rules such as all menber states should compete on equal ground: minimum salary as well as equal social rules; Europe wouldn't be in the mess it is now.

Unfortunately some advisors thought that opening up markets would be enough to create a European community and that other aspects would just follow. As we have seen this has created market distortions; leading corporations in low wage and poor social protection to sit on their false competitive advantage.

I think that the Commission reaction is great but too late, because it should have been implemented much earlier, when economy globalisation wasn't yet as strong a factor as it is now.
Just like the higher wages strategy in the USA could work at the time of Henry through Henry Forde salaries increases strategies, as well as General Motors similar high wages strategy, when the economy could still be managed at a geographical level smaller than the World.
Such a strategy would have worked in Europe too, if the stupid European Commission people had not forbiden any talks about tax income and social regulations Discussions. I know I was there an,d any attempts fifteen years ago at addressing the subject was completely taboo. But now it may be too late., as economic globalisation has anchored its system.
What may save Europe is that China will need to increase its workers wages in order to create the internal demand that will foster its own economy, doing a Fordist strategy seventy years later.

European governacece has been stupid in not recoghnizing the value of a Fordist wage strategy when it was still time to have such a strategy.

Coming back to an earlier comment of mine, the real problem in the years to come will be to find enough jobs in Europe to buy the products that huge
productivity gains will have enables the industry to produce, with fewer employees.
Who is thinking about this much bigger problem at the European Commission or at the European Parliament or elsewhare?

Last point final demand in a market economy is the primary motor of economic activity. Intermediate demand only comes when businesses anticipate a strong final demand.
In the firstst economic lesons we learn that propensity to spend it inversely proportional to the wage levels, so if wages increases by 10% in the lowest wage brackets, almost 100% of the wage increase will be spent in the economy. While in higher wagekets perhaps only one % of wage increases, will go back to market demand. The milloins of people buying their dayly food and household living products. Although high income family celle spend more that low income family cells the statistics show that they are far less numerous (Pareto Income distribution law) So even if they spend twice as much as low income hous holds, they are ten times or one hundred timesless in the populaytion. Hence generating much less demand on the products and services markets.

Lately income increases have been attributed to the high wage brackets (I have the official data sources) but these people didn't spend theirincome increases on the markets, as explained above.

So Wages increases in low wage countries will generate demand in their countries and all over Europe. Since the rest of Europe is not in a producyion constrained economy, this demand will not generate inflations. It will just increase demand and generate jobs in the richest countries.

As an additional note futire jobs won't be found in induestry nor ins distribution nor even in administration, since digital technology will replace most of these jobs by machines. So the only domain where ther will still be jobs will be services to people, for which robots capable to do the jobs are yet to be invented. And this type of job is not easily transfered to low wages countries, even less easily if such low wages countries have to raise wages to the minimus level, hopefully this minimum level being set at the level of current highest wages levels.
I would be against setting minimal wage levels using the lowest wage levels in Europe.
Doing so would kill the demand. As I said at A European Conference about ten years ago, where similar arguments were discused; "When all Europeans will have low wages as in Romania, European workers will spend as little as Romanian workers.
In such a case what will German, French Italian corporations do with the "cheap" products coming out of their factories.

Again remember that this is what happened in the USA before the 2008 finan crisis.

If European governance isn't intelligent enough to understant this, especially after having had the 2007-2008 USA warning, the next world économic crisis will start in Europe.

It is in European interest to provide higher wages, especially since labour productivity is higher in Europe than it is elsewhere in the world, even higher than it is in Japan and far higher than it is in China.

With higher wages Eurpean employees will be able to buy European products, but also american products and even Chinese products: This will increase income in these countries which in turn will buy Euroepan products, especially if we keep investiong in R&D rather than palying the "Low cost game" which is just like shooting oneself in the foot.

In additions satisfied workers have haighet productivity, while low wages employees "just do the job".

As I mentionned in another answer, my father was a small business owner. He practiced at fair wage strategy, his competitoes blemed him for paying his employees at higher rates than the rest of the corporation. To which My father repplied "Indeed but I'm making money, where you are struggling to survive. Indeed My fathers business had higher productivity rates than its competitors, because his emplyees loyalty and commitment was much higher that in other local busineses.
The factor that "killed his business was the unfair competition coming from the Common Market, since Italian competitors at that time (in the early sixties) had no mimimal wages and no social protection, meking the price competitive whilts not quality or organisational competitive. Because Italian wages were not contrlled and social protection was not there, in the local area, more than 500 direct jobs were lost not taking into account indirect jobs such as equipment maintenance or accountants doing the business chores for theose enterprises.

The whole problem with wages and social protection is tha Europe was built upside down: opening markets befors rules were set up to make competotion fair.

It would be like opening a boxing competition withous any rules and even worse; say for example that in a country it would be allowed to add weight in the boxing gloves while in the other countries adding weigh in the gloves is forbiden. Would the winner of the competition really be stronger?

All the EU commission is asking for, admitedly a bit late, is that european corporations be put in a fair competition situation with corporations settled in other european countries, including currently "low wages countries".

Do you think it is fair that German, French or Italian corporation have to compete with corporations which pay their workers 30% less than they do?
And would it be fair that well paid workers in France Germany or Italy, would have to come back to lower standards of life to adapt to low wages as provided in former Eastern Block countries, or worse as in South East Asia.
With China and South East Asia the problem is compounde with the catastrophic exchange rate between Euro and thoses countries undervalued currencies, and with Dollar too. This makes their products even more competitive on the European markets, and lowwers their buying power for European goods and services.

Icreased wages in those countries will foster demand in Europe the USA and the Whole OECD countries.
Let's hope tha we will soon see hords of Chinese, tourists in Europe as we witnessed ten to twenty years agon with Japanees tourists in Europe.

• Hi J. Thorpe, Even if French German and Italian companies set up shops in former Eastern countries, if Eastern countries customers buy French , German , Italian products because they now can afford to buy them with vastly increased wages. This will mean income coming back to France Germany and Italy.
As I said in my first comment:
This is great!!! Somewhat late, but great.
If European fathers had started by setting competition rules such as all member states should compete on equal ground that is : minimum salary as well as equal social protection rules; Europe wouldn't be in the mess it is now.
Unfortunately some advisors thought that opening up markets would be enough to create a European community, and that other social and human aspects would just follow. As we have seen this has created market distortions; leading corporations in low wage and poor social protection countries to sit on their false competitive advantage regardless of low productivity.
I think that the current Commission reaction is great but too late, because it should have been implemented much earlier, when economy globalization wasn't yet as strong an economic factor as it is now.
Just like the higher wages strategy in the USA could work at the time of Henry Ford through salaries increases strategies, as well as General Motors similar high wages strategy, when the economy could still be managed at a controllable geographical level, that is, smaller than the whole World.
Such a strategy would have worked in Europe too, if the stupid European Commission people had not forbidden any talks about taxes, minimum income, and social regulations harmonization discussions. I know, I was there particpating at numerous meetings, and any attempts to start a discussion on these subjects fifteen years ago, was completely taboo. But now it may be too late, as economic globalization has anchored its system around the whole world.
What may save Europe is that China will need to increase its workers’ wages in order to create the internal demand that will foster its own economy, implementing a Fordist strategy in China seventy years later than Henry Ford did in the USA.
European governance, has been stupid in not recognizing the value of a Fordist wage strategy when it was still time to have such a strategy in Europe.
Coming back to an earlier comment of mine, the real problem in the years to come, will be to find enough jobs in Europe to buy the products that huge productivity gains will have enabled the industry to produce, with fewer employees.
Who is thinking about this much bigger upcoming problem at the European Commission or at the European Parliament or elsewhere?
Last point: final demand in a market economy is the primary motor of economic activity. Intermediate demand only comes when businesses anticipate a strong final demand.
In the firsts economic lessons we learn that propensity to spend one’s income, is in reverse proportion to the wage levels, so if wages increase by 10% in the lowest wage brackets, almost 100% of the wage increase will be spent back in the economy. While in higher wage brackets, perhaps only 1% of wage increases, will go back to market demand.
The millions of people buying their daily food and household living products are the ones feeding the final demand. Although high income family spend more than low income families , the statistics show that they are far less numerous than low income families. (Pareto Income distribution law) So even if they spend twice as much as low income households, they are ten times or one hundred times less in the population. Hence generating much less demand on the final demand for products and services markets.
Lately larger income increases have been attributed to the high wage brackets than to lower income brackets (I have the official data sources) but these high income brackets people didn't spend their income increases on the products and services markets, as explained above. Most of them started playing on the financial markets, which don’t generate much real economy activity, hence limited job creations.
So Wages increases in low wage countries will generate demand in their own countries as well as all over Europe.
Since the rest of Europe is not in a production constrained economy, this demand will not generate inflation. It will just increase demand and generate jobs in the richest European countries.
As an additional note: future jobs won't be found in industry nor in distribution nor even in government or privates administration offices; that , since digital technology will replace most of these jobs by highly automated machines. So the only domain where there will still be jobs will be services to people, for which robots capable to do the jobs are yet to be invented. And this type of job is not easily transferred to low wages countries, even less easily if such low wages countries have to raise wages to the minimum European wage levels, hopefully this minimum level will be set at the level of current highest wages levels.
I would be against setting European minimum wage levels, using the lowest wage levels in Europe as a standard.
Doing so would kill the demand in Europe. As I said at A European Conference about ten years ago, where similar arguments were discussed; "When all Europeans will have low wages as in Romania, European workers will spend as little as Romanian workers."
In such a case what will German, French Italian corporations do with the "cheap" products coming out of their factories : who will buy them?
Again remember that this is what happened in the USA before the 2008 financial crisis. The same happened before the 1929 crisis. It seems that our governing bodies never learn lessons from history.
If European governance isn't intelligent enough to understand this, especially after having had the 2007-2008 USA warning, the next World economic crisis will start in Europe. And since European economy is, so far, still the largest economy in the world, such a crisis would be even more catastrophic than the 2008 crisis which started in the USA.
It is in European interest to provide higher wages in "low wages European countries" I mean countries like former Eastern Countries that stil practice wage levels as could be found almost a century ago in France Germany and Italy. This wouldn't hurt the Western European countries, especially since labour productivity is higher in Europe, especially France Germany and Italy than it is elsewhere in the world, even higher than it is in the UK, the USA and Japan and far higher than it is in China. China, unlike Japan earlier on in the seventies, strives in the world economy not because it is more competitive and inovative at doing business , but because its workers are starving.
With higher wages, European employees will be able to buy more European products, but also American products and even Chinese products: This will increase income in these countries which in turn will buy more European products, especially if we keep investing in R&D rather than playing the "Low cost_low wages game" which is just like shooting oneself in the foot. Trying to pay European workers at Chinese rates, and without social protection will lead to severe social unrest all over Europe, which would destroy the European economy far more dramatically that a rather small wage increase applied throughout Europe.
In additions satisfied and well payed workers have higher productivity, while low wages employees "just do the job".
As I mentioned in another answer, my father was a small business owner. In his business, he practiced a fair wage strategy, his competitors blamed him for paying his employees at higher rates than the rest of the local companies. To which My father replied "Indeed I pay them more, but I'm making money, where you all are struggling to survive. Indeed My father’s business had higher productivity rates than its competitors, because his employees loyalty and commitment was much higher than that in other local businesses.
The factor that "killed his business, was the unfair competition coming from the early Common Market opening (in the early sixties), since the Italian competitors across the border, at that time had no minimal wages and no social protection to respect, making them price competitive whilst not competitive in quality or in organization. They were competing on price, just because Italian wages were not controlled and social protection was not there, in the local area, more than 500 direct jobs were lost not taking into account indirect jobs such as equipment maintenance or accountants doing the business chores for those enterprises.
Now that Italian wages have increased, Italians come shopping in France near Nice, where we were going to Italy to buy cheap products. Now we still go to Utaly but for the quality of life, even if prises have come up in Italy.
The whole problem with wages and social protection is that Europe was built upside down: opening markets before fair competition rules were set up.
It would be like opening a boxing competition without any rules, and even worse; say for example that in a country it would be allowed to add weight in the boxing gloves while in the other countries adding weigh in the gloves is forbidden. Would the winner of the competition really be stronger?
All the EU commission is asking for, admittedly a bit late, is that European corporations be put in a fair competition situation, with corporations settled in other European countries, including currently "low wages countries".
Do you think it is fair that German, French or Italian corporation have to compete with corporations which pay their workers 30% less than they do in France Germany or Italy? And with no or little social protections.
And would it be fair that well paid workers in France Germany or Italy, would have to come back to lower standards of life in order to adapt to low wages as provided in former Eastern Bloc countries, or worse as in South East Asia.
With China and South East Asia the problem is compounded with the catastrophic exchange rate between Euro and those countries undervalued currencies, and with Dollar too. This makes their products even more competitive on the European markets, but lowers their buying power too for European goods and services.
Increased wages in those countries will foster demand in Europe, the USA and the Whole OECD countries.
Let's hope that we will soon see hordes of Chinese tourists spending their money in Europe as we witnessed ten to twenty years ago Japanese tourists visiting France Germany and Italy, and buying goods in Europe.
By :
pauldenice

This is funny! Germany? hahaha...

So it will be polish minimum wage

This is total Idiocy . Is the EU commission totally unaware of a debt crisis in Europe , countries bankrupt . Where do they think this money is coming from ? Perhaps Germany is . going to subsidise the whole of the EU minimum wage . Wages and minimum wages MUST be decided at LOCAL NATIONAL level , according to the local ability to pay it .It is commission proposals and decisions such as this that have destroyed the democratic heart of the EU

This is absolutely crazy. EU is heralding its own doom. Minimal wage means banning millions of unskilled workers from getting a job.

Luke , with all due respects , no offence meant .
I believe that all Europeans who still hope that EU integration will lead to a better life , Need a Slap in the Face , to wake them up to reality . I really think that people in less advanced economies as those mentioned by me will be better off in an un integrated EU , better still NO EU . I really think that people in the Eastern block with minimum wage around €300 gross should work it out for themselves .
In 1975 I voted for Britain to leave the EEC ; I was strongly opposed to Britain signing Maastricht .
I was living in Italy before and at the time of introduction of the Euro , I said before it would raise the cost of living , indeed 30% the first year . Nearly all the People I know there hate the Euro and would happily return to the Lira and the financial flexibility it gave them . I have friends in Prague who were very uncertain about joining the EU . I was very worried for them too .
You make the wrongful assumption that everything is equal in all those countries as in France or Germany .
It is not . When I was last in Prague I could buy the best seats at the opera for equal of £10 , the cost of living was very low relative to the low wages . We are No better off today with higher salaries , because the cost of living has even exceeded that seeming benefit , there are higher taxes and VAT .
I reitterate The EU and its commission is the ENEMY of all Europeans . The EU is not about bettering peoples lives , it is part of the Global movement , it's about political power that benefits the few at the expense of the masses .
The EU started out as an alliance between 6 adjoining countries all of whom had been overun by Germany and defeated in WWII , to ensure that their wouldn't be a third war , economics being a major factor .
Countries so vastly varying in culture , customs and language as those across Europe have little hope of becoming a single nation because the people won't allow it . The Economies vary in their strengths ; a single federal state would be a transfer economy , where Germany and northern countries pooled their resourses with poorer countries , like Greece , Italy , Spain , Portuagal , Ireland , the former eastern block countries , so they'd all be poor together . Anything is possible , but it wouldn't surprise me if the EU isn't history in 20 years time . You think I'm a pessimist , but in fact I'm a realist .

Creating a minimum wage across the EU , surely raising all wages to the highest level . If you reduced salaries to a lower level , the people in more prosperous countries would have insufficient to meet the cost of living . When salaries are raised to the higher EU level , the EU will find that production will be outsoursed to countries with no such wage constrictions , perhaps in south east Asia or China .
EU countries would find themselves with huge numbers of unemployed .

Hi Luke , Thanks for your reply . I think the Czech republic is a good example . I was in Prague Dec/Jan 2001/2 , with friends from Italy , none of us too well off . We ate the popular food in restaurants , not amazing and some better than others , the draught beer was good though . I went to the opera , about £10 for the best seats . I asked my Czech friend if he ever went to the opera , no , he said , he couldn't afford . He was a professional engineer , designer of power stations . As I see it you get what you pay for . If you paid Belgian prices in the Czech republic the quality and service would probably be the same .
The Czech republic has had industry brought there because their wages are lower .
People in EU states have been encouraged to expect too much , more than their regular standard of living can afford . I live in Thailand now , where the cost of living is considerably less . We don't have social services or national health , in the country no taxes , annual motor insurance is my biggest one time expense , about £300 comprehensive . In Italy I had to pay over €1000 for 3rd party only , when I went to Italy to live I received L3000 to £1 . Seeing a doctor in Thailand isn't expensive , we have no heating bills .
If the EU isn't careful , it will price itself out of the market , perhaps already has .
Perhaps you should know that English is the language of medicine and doctors should be able to speak well enough to advise and prescribe . A problem in Prague I found was a sort of communistic attitude and refusal to acknowledge of communicate .

lilam ,
I like your forthright manner ! Am I pulling your legs ?
NO !
" all these centuries we all worked together to create the developed society we have today.and no,expecting retirement pension,healthcare and decent living conditions with sanitation *is not* too much. "
So you have all the social services , no matter that the country is bankrupt and cannot afford to pay for them .
Perhaps you haven't been to the opera . In European opera houses the best seats cost in the hundeds , Luke quotes the minimum wage in the Czech republic as being €300gross . £10 for best seats at the opera seems very cheap . An educated man such as my friend , might have been to Prague's excellent opera . My friend has simple tastes , playing bridge and drinking beer with friends , we had some good pub lunches together and downed a few pints .
I was told by an Italian surgeon who spoke very little English socially , that he knew English from medicine that Latin and English are the languages of medicine the world over . In Thailand all the doctors and dentists speak English . Europeans could indeed come to Thailand for operations , surgeons are generally very good and infinitely cheaper than Europe or the US , you would save waiting time and can pay by BUPA or PPP , cosmetic surgery is very inexpensive at small clinics .

I read some very worrying tendencies above: if there was a minimum wage People would not need to move across borders in Europe to "steal our jobs". Wasn't the whole European peace project about all Europeans mixing and becoming more understanding of each other. Through trade and later through movement of labour we would become more tolerant and not wage wars against each other. Therefore in the 21st century it seems backwards to me to strive towards a society where people stay where their whole life in the same place they were born.

All this aside from all the rational economic arguments for not having an EU wide minimum wage. The idea is completely flawed.