Protection through statutory minimum wages or collective agreements.

JS – 11/2020

At the end of October, the European Commission published the long awaited proposal for an EU Directive on Minimum Wages (we reported on the previous steps here). The directive aims to ensure that workers are paid at a level which enables them to have a decent standard of living at their job location.

The COVID-19 pandemic has specifically highlighted the importance of low-wage sectors in society, such as cleaning services, retail, agriculture, care and health. The Commission has also taken forward the debate on the value of work in this context. In-work poverty should not be allowed. This also follows from principle 6 of the European Pillar of Social Rights.

Ursula von der Leyen, President of the European Commission, commented on this when the proposal was published: "Today's proposal for adequate minimum wages is an important signal that also in crisis times, the dignity of work must be sacred. We have seen that for too many people, work no longer pays. Workers should have access to adequate minimum wages and a decent standard of living."

Social and economic objectives

Adequate minimum wages should also contribute to reducing the gender pay gap: a large proportion of the workforce in the low-wage sectors mentioned above are women, so they could benefit from this. In sectors traditionally dominated by male workers, such as the automotive industry, protective mechanisms have often been put in place through collective agreements.

The European Commission also sees the proposal as relevant for a sustainable and inclusive economic recovery: domestic demand should be supported and incentives to work increased. Fair competition should protect those employers who pay adequate wages.

No Europe-wide minimum wage level

The proposal aims to ensure that an adequate minimum wage level is set, either in the form of a statutory minimum wage or through collective agreements. Therefore, there should be no obligation to set a statutory minimum wage. Instead, all Member States should encourage collective pay bargaining to set wages.

The directive also does not intend to specify the level of minimum wages. The minimum wages should be "adequate". This adequacy is based on criteria such as purchasing power, taking into account taxes and social benefits, general gross wage levels and wage distribution, and the growth rate of gross wages.

The proposal also aims to introduce better enforcement and monitoring of the respective minimum wage protection: the Member States are to report annually to the European Commission on the situation in their country.

The European Commission's proposal is based on Article 153(1)(b) of the Treaty on the Functioning of the European Union (TFEU) on working conditions. However, the competence of the EU in this respect is controversial.

The proposal must now be approved by the European Parliament and Council. Once adopted, Member States are obliged to transpose the directive into national law within two years.