Eurofound study reports no "crowding out" of collective bargaining.

Against the backdrop of the EU Minimum Wages Directive adopted in October 2022, Eurofound has conducted a recent study examining the impact of national minimum wages on collective bargaining and wage structures. The results show that setting minimum wages does not weaken collective bargaining – on the contrary, minimum wages have a positive impact on the overall wage structure and thus strengthen the social security contribution base.

Background to the Minimum Wages Directive

The Directive on adequate minimum wages in the European Union aims to ensure fair statutory minimum wages, promote collective bargaining and improve workers' effective access to this protection. The deadline for transposition into national law expired in November 2024.

Since its adoption, the Directive has influenced developments in the setting of national statutory minimum wages. In many Member States, national statutory minimum wages have risen significantly in relation to actual wages. In addition, the guideline value of at least 80 per cent adequate collective bargaining coverage set out in the Directive has shaped discussions on the reform of collective bargaining in some countries.

Empirical basis of the study

In order to examine how the Minimum Wages Directive has affected national collective bargaining, the quantitative analysis in the study draws, among other things, on the Eurofound database on minimum wages and European Union statistics on income and living conditions.

For six Member States where collective bargaining coverage and minimum wage setting vary greatly (including Germany), the care and food industries were examined in detail using qualitative case studies. These studies allow conclusions to be drawn about the impact of the Minimum Wages Directive because they reflect real national reform processes and the reactions of the social partners. They provide examples of how statutory minimum wages and collective bargaining could interact in the future.

No ‘crowding out’ of collective agreements

Under Article 4 of the Minimum Wages Directive, national governments are required to actively promote collective bargaining. This is based on concerns that statutory minimum wages could restrict the social partners' room for negotiation.

However, the results of the Eurofound study show that this fear is largely unfounded. On the contrary, higher national minimum wages do not hinder collective bargaining – they strengthen it and thus help to raise the minimum wages agreed in collective agreements in low-wage sectors. In addition, an increase in national minimum wages makes it more likely that collective agreements will be extended. In some sectors, however, there is a shift from negotiations on basic wages to bonuses and allowances, which are often negotiated at company level.

As expected, countries with weak collective bargaining institutions and low collective coverage are an exception. In these countries, the minimum wage determines the low-wage sector. The report therefore emphasises that these countries need to make greater efforts to support social partners and collective bargaining. As required by the Directive, this includes creating an appropriate legal framework for collective bargaining and strengthening the social partners.

Strengthening the contribution base for social security

The analyses show that higher minimum wages have an impact on the overall wage structure in the medium term. For social security, this means that an increase in the minimum wage not only leads to higher social security contributions from low-wage workers, but also strengthens the contribution base as a whole.