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EU legislation on an adequate minimum wage

One of the 20 principles of the European Pillar of Social Rights adopted in November 2017 on wages (Article 6), establishes the right of workers to a fair and equitable wage that provides a decent living wage. Accordingly, adequate minimum wages must be ensured, in a way that provides for the satisfaction of the needs of the worker and his / her family in the light of national economic and social conditions, whilst safeguarding access to employment and incentives to seek work. In-work poverty shall be prevented. All wages should be set transparently and predictably according to national practices and respect the autonomy of the social partners.

Across the European Union, there are marked differences in minimum wages. According to Eurostat's 2022 graph, Luxembourg has the highest minimum wage with EUR 2,250 in January 2022. The lowest is in Bulgaria, where the minimum benefit is just over one-seventh of that, i.e. EUR 332.

The Council presidency and the European Parliament reached a provisional political agreement on a draft directive on adequate minimum wages in the EU. The new legislation, once finally adopted, will promote the adequacy of statutory minimum wages and thus contribute to achieving fair working and living conditions for European workers.

The European Commission makes it clear that the European minimum wage does not mean harmonising the minimum wages of individual Member States. There is no intention to introduce a single European minimum wage, nor apply any method of setting the minimum wage exclusively over another model. The initiative aims to strengthen national systems, preserve and promote national traditions and the freedom of collective bargaining, so decisions on the amount of the minimum wage will remain a national competence. The idea is that the minimum wage in each country would be set at 60% of the median wage, or 50% of the average wage of the country, as these are believed to be the levels that provide a fair and adequate living for individuals and their families.

Member States with statutory minimum wages are required to put in place a procedural framework for setting and updating these minimum wages based on clear criteria. The Provisional Agreement provides for the statutory minimum wages to be updated at least every two years (or at most every four years for countries that apply an automatic indexation mechanism). The involvement of social partners in the procedures for setting and updating the statutory minimum wages is mandatory. In particular, the Provisional Agreement requires the Member States to draw up an action plan to promote collective bargaining if the coverage of collective agreements falls below the 80% threshold.

According to the initiators, the economic impact of the proposed measures is expected to be neutral or positive overall. The impact on employment could materialise as returns to public budgets in the form of income tax and social security contributions from beneficiaries who succeed in (re-)integrating into the labour market. In addition, the possible increase in public expenditures could partly be set off by the increases in consumption tax revenues (VAT). The Directive is expected to be adopted in September 2022. Member States will have two years to implement the rules, which means that the decision on the amount of the minimum wage in 2025 will probably have to be made in the light of the new provisions.