Business All the answers about the European minimum wage that...

All the answers about the European minimum wage that Brussels wants

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Win 2,000 euros in Luxembourg is not the same as earning 260 euros in Bulgaria. Or maybe yes. Because these figures have something in common: they represent the minimum salary in their respective country.

Just when the Government has taken the step this week to raise the minimum salary to 950 euros per month, the Commission wants to open the melon to introduce in 2024 a common minimum wage in the member states that would stand at 60% of the average salary –That is, the one in the middle of the distribution range– of each country. A measure that raises many questions.




Why does the European Union want a common minimum wage?

The first reason is obviously to guarantee European workers a decent level of income. “The main objective is to guarantee to those who travel in search of employment in Europe that they will have minimum conditions to be able to live in the country,” says Pablo Simón, Professor of Social Sciences at the Carlos III University of Madrid, with that labor mobility is encouraged within the Union.

But in addition, with this measure Brussels fulfills an important propaganda gesture. “The EU has often been accused of imposing cuts and adjustments, while now with this more social initiative it also aims to curb the rise of the more Eurosceptic populist movements,” says Raymond Torres, director of conjuncture and analysis of Funcas, who He worked at the International Labor Organization (ILO).

Ursula von der Leyen, President of the European Commission
(Gian Ehrenzeller / AP)


Does Brussels have powers to legislate on this matter?

Not explicitly, but clings to the call social pillar of the EU. In any case, the proposal must be implemented by the states, which will have the last word. The minimum wage does not in itself solve the differences in the cost of living between cities in the same country, but other tax-redistributive policies may come into play to reduce differences between territories.




Do the states agree?

There is no consensus. The Nordics reject the minimum wage because they don’t need it: the Collective negotiation It covers everything and has given good results. Moreover, the Brussels initiative is seen as an interference. Therese Svansström, of the TCO union, believes that with this criterion the next time there is a financial crisis, you can take advantage of the tool to lower wages.


What is the current situation in Europe?

It is very heterogeneous. Of the 27 member countries, six have no fixed minimum wage (among them, Italy, Denmark, Sweden) and entrust it to collective bargaining, others make distinctions according to the profession (Cyprus). In terms of levels, only six states reach 60% or more of the median income (France or Portugal, for example).

Spain, after this last rise, reaches a level of just over 50% Even if minimum wages are measured in purchasing power parity there are still huge differences in Europe between the lowest and highest salaries (up to three times more) . On the other hand, there is a common upward trend, since its amount has increased significantly in several European countries in the last decade.



So that the data between different countries can be compared, the equivalent sum of the minimum annual salary in 14 payments is taken and divided by twelve monthly payments.


What impact can this measure have on employment?

There is not conclusive data. At the aggregate level, it should be considered that only 10% of European workers earn less than the minimum wage, so if there is any impact, it will be relative. Not only because the increase takes place in a small percentage of workers, but because the weight of wages in the economy is in decline. In some countries with low union membership, in which collective bargaining is not common, it will have more concrete effects.


What impact does it have on companies?

There are countries, such as those in the Balkans, that base their model productive in low salaries. For Raymond Torres, “the risk is that some very cheap labor cost countries will see their investment potential destroyed and be less competitive.” Also, the bulk of the European business fabric is made up of SMEs, and they can see an increase in their labor costs and reduce their margins.



However, according to Pablo Simón, “at the same time they can raise prices and recharge the cost in the consumer. The increase in the minimum wage will also increase demand, as there is more disposable income. ”

For Esade professor Carlos Obeso, “you have to think that paying a very low salary does not ultimately lead to development, while a rise in remuneration is a pressure to improve productivity. When you keep companies with very low salaries you keep companies unproductive. ” In his opinion, the wage increase forces firms to get more performance from the worker.

A worker cleans windows in the Plaza Callao, Madrid

A worker cleans windows in the Plaza Callao, Madrid
(Dani Duch)


Is setting the threshold at 60% of the average salary a valid criterion?

For Simón it is a reasonable criterion to evaluate the cost of living, much more than the basket of products, which is somewhat arbitrary and does not offer the possibility to really compare the variables. According to Torres, “the European minimum wage is a necessity at a time of digitalization of the economy, since the rights of some groups are not respected in the labor market.”




Do you have a chance to prosper?

“The important thing is that this measure is agreed upon and its implementation takes place in a manner gradual”, Says Torres. “I anticipate that it will be very long and that there will be many exceptions,” predicts Pablo Simón. In Europe, things have always been done that way.


Singular cases

The Italian labyrinth

Of the big economies of the euro zone, Italy It is the only one has no minimum wage. This is due to historical reasons: a high affiliation to trade unions and a powerful collective bargaining, which provides for the minimum remuneration by sectors.

The Government of the majority of the 5 Star Movement has proposed a minimum remuneration of 9 euros gross per hour, but the project is bogged down in the Senate and does not seem to see the light soon. Today there are almost 900 national collective agreements, but 22% of workers receive a salary lower than that figure. In the south, that percentage rises to 33%.

A street of Rome, in a resource image

A street of Rome, in a resource image
(PacoRomero / Gettty)





Singular cases

In the United States count the cities

Franklin Delano Roosevelt established the minimum wage in 1938. It is currently at $ 7.25 per hour (6.50 euros). Even so, the calculation is more complicated because each state reserves the right to set its own minimum wage, which may be higher than set by the federal government (such as Massachusetts or Washington), and cities also apply their own rate, to suit the cost of living.

As a result, in New York you can charge $ 15 an hour, and in Seattle, up to 16. This year, several states have applied an increase. As a curiosity, in California the minimum wage varies if the firm is an SME or a larger company.

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