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3/1/17

EU: Growth Of Minimum Wages Accelerates Across Europe - by Karel Fric

The growth in average (nominal) pay of employees has accelerated in recent years in EU countries after a slump following the economic crisis (AMECO data). Similar developments show up in data on collectively agreed wages. However, higher wage growth figures do not automatically mean that all employees benefit equally. On 14 February 2017, the European Trade Union Confederation (ETUC) launched a campaign Europe needs a pay rise. It says workers’ wages have not kept pace with productivity for decades and have been falling compared to profit, shares and capital income. One way to counter extreme wage inequalities in the labour market is to set a statutory minimum wage level.

According to EurWORK’s article on Statutory Minimum Wages in 2017, growth in minimum wages inside the EU has accelerated this year compared to the previous year. This development is consistent with recent progressive developments in average nominal compensation per employee and in collectively agreed wages. Fifteen out of 22 EU countries with general statutory minimum wages implemented greater increases during 2016–2017 than 2015–2016. Newer member states generally experienced a more pronounced growth than the majority of other EU countries, with Romania, Hungary and the Czech Republic leading the charge and with increases reaching up to 38% in Romania. Within the EU-15 minimum wages grew most in Spain (up 8%).

Last year, MEPs first floated the idea of a minimum wage pegged at 60% of the median income in a resolution on social dumping. (See Eurofound’s 2013 report which examines hypothetical effects of such provision.) However, such proposals are controversial among businesses, politicians and even some trade unions.

January 2017 saw an intensified discussion about the minimum wage at the European level. In mid-January, MEPs called on the European Commission to require all member states to introduce national minimum wages. Six EU countries now (Austria, Cyprus, Denmark, Finland, Italy and Sweden) haven’t implemented a generally binding statutory minimum wage.

EU Social Affairs Commissioner Marianne Thyssen has insisted over recent years that she wouldn’t propose an EU-wide minimum wage. However, she has encouraged individual countries to introduce one. At the end of January, Jean-Claude Juncker, President of the European Commission, called for a minimum salary in each EU country.

While minimum wages protect employees from receiving extremely low wages, their ‘side effects’ are often disputed. Especially with regards to unemployment, many claim that setting minimum wages too high can lead to rises in unemployment. To avoid this, minimum wage growth needs to be accompanied by sufficient growth in labour productivity. As such minimum wages need to be used in a virtuous circle with pro-active fiscal policies and incentives to – for example – increase educational attainment levels and develop high added-value economical activities.

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