Against the advice of employers, who wanted recommendations, the European Commission on Wednesday 28 October presented a directive to set “sufficient” minimum wages, which is more binding in form, but whose content remains sufficiently flexible, even broad, to avoid encroaching on national competences and traditions.
“The treaty does not give us the possibility to set wages in Member states. This is expressly not allowed”, the Commissioner for Employment and Social Rights, Nicolas Schmit, highlighted at a press conference.
Therefore: “We are not promising the same minimum wage for all Europeans. We are not putting into place one unique minimum wage for all Europe. This would not be realistic, this would be totally impossible, irresponsible! ”, he said. “What we want is better convergence, reducing gaps, improving wages, creating positive dynamic around minimum wages and around wages in general, I would say!”
The Directive has not changed, or only incidentally, from a recent version seen by EUROPE (see EUROPE 12589/1). It is still trying to achieve two objectives, namely to improve the minimum wage and to improve the coverage of collective agreements. It is structured around the two main social models which coexist in the EU, the Member States where minimum wages are set by collective agreements (as is the case in 6 Member States, notably Scandinavia) or by statutory minimum wages set by legislation (as is the case in 21 Member States).
Thus, Member States with a national legal framework setting a minimum wage are required to determine clear and stable criteria for setting the wage level. There is no binding mention in the body of the Directive. However, the Commission includes in a recital the existence of indicators commonly used at international level, such as 60% of the median gross wage and 50% of the average gross wage, which can help guide the assessment of the adequacy of minimum wages in relation to gross wage levels.
Revitalising the role of the social partners
It also calls on these Member States to strengthen on-the-spot checks and inspections through guidance for law enforcement authorities and by ensuring that information on legal minimum wages is publicly available. Furthermore, the Commission calls on the Member States to ensure that wages are regularly updated, in effective partnership with the social partners.
This is because the European Commission wants to strengthen the coverage and role of the social partners, especially in all Member States where collective bargaining coverage is below 70%. It expects Member States to draw up action plans to promote social dialogue. According to the impact assessment, only about ten Member States have such coverage and it has fallen drastically, especially in the Eastern Member States (see impact assessment, p. 155).
Public procurement and the ‘European Semester’ as levers
Interestingly, the institution introduces an article dedicated to public contracts which provides that, in the execution of public contracts or concession contracts, economic operators must respect the wages set by collective agreements for the sector and geographical area concerned and the legal minimum wages where they exist.
As confirmed by Vice-President Valdis Dombrovskis and Commissioner Schmit to EUROPE, the ‘European Semester’ and the ‘social scoreboard’ will have a key role to play in monitoring progress on both wages catch-up and social partner coverage. They pointed out that the country-specific recommendations already contained social points, but they acknowledged that these tools could be reformed.
10 to 20 million workers affected, what about consumers?
According to the European Commission's impact study, this directive could improve the pay conditions of 10 to 20 million workers and reduce pay inequalities between women and men by at least 5%. “I believe that many Member States may need to adjust their practices. Change completely, no. Adjust, yes. And involve the social partners more”, Commissioner Schmit hoped.
In an earlier draft of its Communication, the Commission mentioned that three quarters of the cost of raising minimum wages could be borne by consumers and one quarter by business. This reference has disappeared, because it was too “hypothetical”, the Commissioner explained, in response to EUROPE.
A mixed reception from the European Parliament side
The reception among MEPs was mixed, ranging from disappointment on the left and among the Greens/EFA to relative satisfaction on the right, although some fears persisted regarding respect for the principle of subsidiarity. Leïla Chaibi (GUE/NGL, France) said the European Commission had ensured the “minimum service”. She welcomed the strengthening of inspections, for example, but criticised the absence of objectives and means. The same was true of Kira Peter-Hansen (Greens/EFA, Denmark), who said the proposal “will not do the job”.
Welcoming the measures, Anne Sander (EPP, France), for her part, objected that “many questions remain”, in particular on compliance with the principle of subsidiarity and respect for national competences.
Employers disappointed, unions satisfied (or almost satisfied)
Unsurprisingly, employers expressed their dissatisfaction (see EUROPE 12555/28). Starting with BusinessEurope, which points out that the European Commission's initiative goes against the position of the Member States, the business community and Nordic trade unions and goes against the spirit of the European Treaties. BusinessEurope therefore asks the co-legislators to opt for recommendations.
The trade unions welcomed the Commission's decision to opt for a directive, but demanded amongst other things that a threshold be set in the body of the directive for the minimum wage (60% of the median wage and 50% of the average wage). (Original version in French by Pascal Hansens)