The Progressive Post

Squaring the circle with an EU action on minimum wages is more urgent than ever

If a consensus could be found on bailing out indebted countries and extend the intervention scope the ECB, why not on tackling poverty through minimum wages?


In January 2020, the European Commission launched a formal consultation of social partners in view of proposing an EU “framework” ensuring “fair minimum wages” across the EU. The proposal instantly triggered vivid protest, notably from Scandinavian unions. While no one can underestimate the difficulties involved the conception of a legitimate and effective EU framework on this issue, societies are in serious need of action at EU scale to tackle poverty, the devaluation of work and atone economies.

As the measures adopted to contain the coronavirus will bring about a deep recession across Europe, it will be crucial to not repeat the mistakes of the past. In response to the 2008 financial crisis (and the ensuing debt crisis), the decrease in wages, the pressure for further decentralising of collective bargaining and the debasing of social rights across the board have been the main game in town. This has made our societies more vulnerable in the face of the new sanitary and socio-economic crisis. The adoption of an EU instrument for guaranteeing minimum wages would send the right signal, namely that the European Union shall not be a main driver of social regression this time.Health and long-term care sectors are particularly affected by the low wage problematic. Beyond one-off bonuses foreseen by some governments, an increase in minimum wages to reach decent levels would be welcome to recognise, on the long term, the heavy responsibility these workers are bearing in – among others things – the fight against the coronavirus. 

Principled and defensive positions

The grounds for an EU action are tangible. There is a widely shared – and well documented – diagnosis that an important share of wages is too low in Europe.This brings about problems in terms of inequalities (since wages and income have grown for the better off), poverty, including rampant in-work poverty, and detrimental persisting imbalances among EU countries.

“If a consensus could be found on bailing out indebted countries and extend the intervention scope the ECB, why not on tackling poverty through minimum wages?”

From the outset, the European Commission made clear that the initiative would by no means try to impose the introduction of statutory minimum wages where they do not exist, because minimum wages stem from collective bargaining. Yet, the Nordic unions’ responses, which have been vocal in expressing resistance, very much focused on this fear. 

Immediately, the Danish, Finnish, and Swedish unions have felt under attack of a threatening EU bureaucracy wanting to destroy their (highly performing) systems of collective bargaining. It is striking, though, that the argument against EU action is first and foremost one of principle. In an op-ed published on EU Observerright before the formal launch of the consultation, Therese Svanströmthe president of the Swedish Confederation of Professional Employees (TCO) wrote: “Most importantly (…) is the fact that the EU lacks legal competence in the area of wages”.Thus, rather than convincing arguments about why precisely EU action would be bad, the piece primarily reflects a fear of losing control and a defensive stance claiming that “well-functioning systems for collective agreements simply cannot be ordered from Brussels”.

While competence-creep certainly raises legitimacy issues, one can only admit that EU integration is a dynamic process. From jurisprudence to the initiatives from the Delors Commission, permissive interpretation of EU law provisions is part of the EU’s DNA especially (if not only) in the social realm. When the financial crisis hit, the course of action which prevailed relied on an intrinsically political logic. It is a shared diagnosis that EU action is needed to tackle a particular issue which provides the grounds to act, not the exact wording of the treaties. If a consensus could be found on bailing out indebted countries and extend the intervention scope the ECB, why not on tackling poverty through minimum wages?

While more open to EU action, the response of the European Trade Union Confederation (ETUC) to the Commission’s consultation document focuses mainly on how to strengthen collective bargaining. Such a defensive position is well understandable, given that the EU’s actions over the past decade have more contributed to weaken than strengthen national collective bargaining. Insofar, the EU seems to be going one step forward, two steps backwards, fuelling legitimate bitterness and distrust. However, it is not realistic to hope that this initiative can (or should) tackle the structural problems which have been underlying the weakness of collective bargaining in many European countries for a long time This ought to be addressed in a separate initiative. 

Defining minimum requirements, not setting wages

Rather than seeking new competence to intervene in wage setting, the EU needs to focus on the objectives in terms of coverage (decreasing the percentage of workers who are not entitled to the minimum wage) and level (most probably expressed in percentage of the median wage). This could take the form of a framework directive asking Member States to choose their own path to achieve those objectives: either through a statutory minimum wage, through collective bargaining, or a combination of both. While discussions tend to focus on the level-dimension, coverage is also key in preventing poverty. As rightly pointed by the ETUC, multiple exceptions and exemptions contribute to maintain numerous categories of workers in poverty – ranging from young people to platform workers, home workers or seafarers.

A strict non-regression clause should be introduced in the Commission’s proposal to ensure that the EU minimum standard does not drive national norms downwards.

Furthermore, Svanström hypothesises that “what goes up, might come down”, implying that the EU could use the framework to lower wages in times of crises. Yet, the history of EU social policy rather teaches us that EU regulations are always minimum standards. This has two implications. First, EU standards cannot be used to lower national standards. Second, what is already a minimum cannot be lowered. In turn, wages have been substantially lowered at the national level as a result of the recession, whether the unions supported it or not. In fact, research shows that where the EU does not have minimum requirements and protective regulations in the social realm, other dimensions of EU integration (linked to pro-market policies) will more easily affects social conditions.

Twenty-two EU countries currently have a minimum wage under 60% of the (gross) median wage (the benchmark recommended by the ILO). An EU framework could matter a great deal for those countries, crating political pressure and institutional incentives to improve wage conditions and even, in the medium run, create upward convergence. 

That the framework will most likely be irrelevant for the remaining six countries which have higher levels of minimum wages is not a good reason to reject it. A strict non-regression clause should be introduced in the Commission’s proposal to ensure that the EU minimum standard does not drive national norms downwards. This non-regression clause could have an additional time dimension, ensuring that, even in times of recession, the threshold could not be violated.

Furthermore, the ETUC’s position is in some respects ambiguous. In its contribution, it forcefully claims that any EU action “needs to fully respect and safeguard systems of collective bargaining which work well” and that “any specific criteria and wage setting mechanisms must only apply to statutory minimum wages and to the role of public authorities in fixing and enforcing them, not to wages set through collective agreements”. Yet, what the ETUC document does not say, is what happens when collective bargaining does not work so well.

Among those six countries where minimum wages are decided by collective agreements, only three (Denmark, Italy and Sweden) reach the benchmark of 60% of the gross median wage, while the three others (Austria, Cyprus and Finland) remain below. In such cases, then, why would a mandatory EU benchmark not be seen as a tool for unions to strengthen the union’s negotiating position and set minimum wages which are an adequate tool to prevent poverty? In turn, as far as states with statutory minimum wages are concerned, the ETUC is right to point out that an EU framework should ensure that unions’ participation in the negotiations are not merely symbolic.

The hard law vs. soft law dilemma

If we can agree that the currently highly concerning situation regarding wages is worth engaging with a positive intervention, this does not solve the “how” problem. With which kind of policy instrument can the Commission come up that could be able to accommodate the diversity of wage setting systems across Europe and keep its promise of not harming subsidiarity? 

While hard law is always the best way to ensure compliance, it is not sure that the Commission will be able to overcome the legal and political hurdles. It has been oftentimes underlined that Article 153 on social policy explicitly excludes pay from the EU’s regulatory competences.If not impossible, the search for alternative legal basis in a gesture of legal creativity seems tricky and will be hotly debated.

The consultation of the coming months will be crucial for the Commission to find the right balance between legitimacy and effectiveness

If the Commission fails to gather sufficient support for a legislative breakthrough, it will have to rely on soft law. In that regard, the reference to the European Pillar of Social Rights leaves to door open two both paths, but tends to put more emphasis on the second best, non-binding option. In that case, a Council recommendation could be the chosen instrument. Anchoring it into the European Semester would have the advantage of setting up a surveillance mechanism through which slow convergence could be promoted. But, as we know from all socially rooted recommendations of the European Semester, compliance and implementation tend to be low.

Thus, the consultation of the coming months will be crucial for the Commission to find the right balance between legitimacy and effectiveness. As Europe is facing yet another recession and its possible ensuing steps towards social regression, it is important to draw the lessons from the past and remember that social actors at the national level (including unions) are particularly vulnerable and, what is more, they are so in a way which is unequally distributed among Member States. Hence, it is key that EU is able to establish social safeguards which do not only rely on political actors’ goodwill. 

Against that background, it is important for all progressive actors to remember that one cannot continuously call for a more a social Europe and end up vetoing tangible initiatives as soon as they are on the table.

Photo credit – Shutterstock

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