Minimum wage debate in EU centres on social dumping, ‘fair pay’

Germany’s adoption of a minimum wage in 2015 and the EU’s repeated talks over posted workers have paved the way for the adoption of a European minimum wage. But political resistance in some quarters is still strong. EURACTIV France reports.

The idea of a European minimum wage has sat on the back-burner for a long time. But Berlin’s decision to enforce a minimum wage in January 2015 was the first in a series of positive signs for the European project.

The problems posed by the posting of workers, and the competition it provokes between the EU’s social security systems, have thrown the spotlight on the need for social convergence between EU member states.

And the talks on the Posting of Workers Directive, due to begin in Brussels in the near future, provide a good stage for this issue to be aired.

Social dumping

As a precursor to these discussions, the European Parliament’s rapporteur on social dumping, French Socialist Guillaume Balas (S&D), recommended the progressive enforcement of a European minimum wage.

This, Balas said, should be fixed at 60% of each country’s median national wage.

Adopted by a large majority, many MEPs hope the proposal will eventually find its way into the revised Posting of Workers Directive. But the Commission’s original draft, presented in March this year, contained no reference to a minimum wage.

The idea of advancing the question of fair pay was also recently supported by the President of the European Commission.

“Workers should get the same pay for the same work in the same place. It is a question of social justice,” Jean-Claude Juncker said in his State of the Union Speech last Wednesday (14 September).

Thorny consensus

Yet the question is barely progressing in Brussels. A number of European politicians have tried to link the subjects of posted workers and the European minimum wage, but have consistently run into opposition.

“There is no consensus on this question within the EPP in the European Parliament today,” a frustrated MEP told EURACTIV.

“Despite the disagreements, the establishment of a minimum wage mechanism […] is a realistic medium-term ambition, and I would say a necessity,” said Philip Cordery, a French Socialist MP and author of a report on the European minimum wage.

Today, six European countries (Italy Cyprus, Austria, Denmark, Finland and Sweden) have no legal minimum wage. But the differences between existing national minimum wages within the EU can be almost tenfold. Bulgaria’s minimum wage for the month of January 2016 was €215, while in Luxembourg it was €1,923.

“If we express this in terms of purchasing power, the gap is smaller, but the difference is still a factor of four in some countries,” the rapporteur told MPs in the French parliament’s Social Affairs Committee.

He added that “there are some real difficulties, from a political point of view. In particular, we have to convince a number of our partners”.

Proponents of an EU-wide minimum wage will also have to find a solid legal basis on which to anchor it, as the EU has only limited competences in the matter. Article 153 of the Lisbon Treaty foresees that “the Union shall support and complement the activities of the member states” on working conditions.

Headwinds from the East

Among the partners that will need convincing are many of the EU’s Eastern European member states, which are already up in arms over the proposed revision of the Posting of Workers Directive.

For these countries, whose wages are among the lowest on the continent, the enforcement of a European minimum wage could put an end to a precious competitive advantage.

Without a legal minimum wage in the EU, “the member states get into a race to the bottom to attract business and capital”, Cordery’s report said.

Tricky criteria

And the creation of a European minimum wage may have to face another sizeable obstacle: the question of which convergence criteria should apply to ensure a minimum wage does not unbalance EU countries’ pay policies.

According to Cordery’s report, EU countries set their minimum wage at between 40 and 60% of the national median wage.

A European law enforcing a minimum wage at 60% of the median would not necessarily change a great deal in certain countries. The French and Portuguese minimum wages are already at the recommended level of 60%, while in Luxembourg, workers earn at least 57% of the national average.

“But if the EU fixes a threshold below 60% of the national average, it could create downward pressure on wages in these countries,” said Republican MP Isabelle Le Callennec.

Certain actors would prefer a European minimum wage with a threshold below 60%. The French treasury suggested a floor of 45-50%, which would increase progressively to 55%. of the median national wage. This scenario would cut the minimum wage in France by 8.3%.

But it would have a positive effect on wages in countries like Estonia, the Czech Republic, Spain and Romania, where the minimum wage is currently around 40% of the median.