Strasbourg, 1 May 2023 (TDI): European Parliament has approved new rules to ensure a decent stand of living for the citizens of the European Union. The rules call on all EU countries to establish a national minimum wage allowing workers to live comfortably and avoid falling into poverty.
The poverty in the EU has increased manifold in the past decade. The economic downturn, especially during the Covid-19 crisis, has highlighted the role of minimum wages in protecting low-wage workers.
The Members of the European Parliament adopted new rules in September 2022 to improve minimum wages. The rules were expected to achieve real wage growth and avoid competition on labor costs in the single market.
The rules of 2022 also envisioned reducing the gender pay gap, as nearly 60% of minimum wage earners in the EU are women.
What does the new EU legislation on minimum wages entail?
The European Union countries will ensure their national statutory minimum wage is adequate for a decent standard of living. To determine how much that represents, they may use instruments such as:
- A national basket of goods and services at real prices, which could include cultural, educational, and social activities
- Comparison of the minimum wage with reference values commonly used internationally, such as 60% of the gross median wage or 50% of the gross average wage
- The comparison of the net minimum wage with the poverty threshold
- The purchasing power of minimum wages
The national governments will also take measures to promote collective bargaining in the wage setting. They will also ensure Updating statutory minimum wages at least every two years or at most every four years for those countries that use an automatic indexation mechanism.
The governments will enforce labour inspections to ensure compliance and address inhumane working conditions. Furthermore, they will also ensure dispute resolution and a right to redress for the worker.
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Will all EU countries have the same minimum wage?
All the European Union countries will have their own level of minimum wage based on the country’s socio-economic conditions, purchasing power, productivity levels, and national developments.
The EU Countries in which salaries are set exclusively through collective agreements will not be obliged to introduce a statutory minimum wage.
Why is a law on a minimum wage needed at the EU level?
The minimum wage is the lowest remuneration that employees receive for their work. All EU countries have some sort of lowest remuneration, but in most of the countries, these wages do not cover all living costs.
In 2018, about 7 out of 10 minimum wage workers found it difficult to cover their living costs.
Minimum wages in the EU
The minimum wage will vary across the EU countries in 2022. It ranges from €332 in Bulgaria to €2,256 in Luxembourg. One of the major factors for the gap is the difference in the cost of living.
There are two forms of minimum wage in EU countries:
- Statutory minimum wages: regulated by statutes or formal laws. Most member states have such rules.
- Collectively agreed minimum wages: in six EU countries – Austria, Cyprus, Denmark, Finland, Italy, and Sweden – wages are determined through collective agreements between trade unions and employers, including, in certain cases, minimum wages.
