Same Minimum Wage For All EU Countries Is Impossible

By Georgi Gotev and Jorge Valero

(EurActiv) — Commissioner Nicolas Schmit said on Wednesday (28 October) that if Bulgaria, the country with the lowest wages in the EU, were to introduce the same wages as his native Luxembourg, the very next day there would be “no Bulgarian economy”.

Schmit, in charge of jobs and social rights, was speaking to the press while presenting the European Commission’s proposal of an EU Directive aimed at ensuring that the workers in the EU are protected by adequate minimum wages that allow for a decent living wherever they work.

The minimum wage in Bulgaria is €312, and it is €2,071 in Luxembourg.

In his introductory remarks, Schmit said it was becoming difficult to defend the internal market if the wages gap is too big.

“Upward convergence” is a key word in the Commission proposal although the text contains no silver bullet, as it only speaks of the need to “promote social dialogue and collective bargaining on wage setting”.

EURACTIV asked Schmit how one could expect such a convergence to take place in a lifetime, and he replied that what matters is on which basis one builds a country’s economy.

“If you build it just on low wages, then the gaps will be reduced very slowly. But this is not the plan of the Commission”, he said, pointing to the launch of the EU recovery plan and the recommendation that member states should use it to invest in green and digital technologies, as well as in education and human capital.

This, he argued, should go hand in hand with increasing wages, because otherwise people would not have the incentive to get new skills and accept to earn very low wages.

Commission Vice President Valdis Dombrovskis, who chaired the press conference brought up the aspect of productivity.

On average, he said, productivity in the eastern European members was 60-70% of that of their western counterparts. At the same time, the gap in wages is bigger, he said, mentioning the figures of 30-40%.

The European Trade Union Confederation was very active in addressing this issue, he said. In that sense, Dombrovskis said there was scope for a greater wages convergence between East and West.

A journalist from Hungary asked if European minimum wages meant the same uniform minimum wage across the EU, to which Schmit energetically replied:

“This is not the case. It would destroy the economy if Bulgaria would adopt the Luxemburgish wage. Tomorrow there would be no Bulgarian economy.”

He repeated: 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, it would be irresponsible. What we want is better convergence, reducing gaps, improving wages, creating a positive dynamic around minimum wages, and around wages in general”.

Nordic concerns

Nordic countries, where collective bargaining plays a central role, were wary of the Commission’s proposal.

Schmit stressed that they do not intend to weaken the collective bargaining system but said that “it is very important to have objective criteria” when it comes to wage setting to achieve fair wages.

The Commission highlighted that inequalities are on the rise and in-work poverty increased from 8.3% in 2007 to 9.4% in 2018 in the EU, and things could get worse as a result of the COVID-19 pandemic.

The Commission proposal includes six policy measures for all 27 member states and four additional ones for those 21 governments with a statutory minimum wage, given that the salaries are lower in this group.

The goal is to ensure transparency in wage setting, the involvement of the social partners and an evolution of salaries aligned with productivity.

The directive asks member states to use indicators to measure the adequacy of minimum wages. The Commission points out that 60% of the gross median wage and 50% of the gross average wage can help guide the assessment of minimum wage adequacy in relation to the gross level of wages. But the EU executive is not imposing these indicators as targets.

In addition, the Commission wants to ensure that collective bargaining covers at least 70% of workers to ensure proper minimum wages.

Commission officials admitted that the legal base for the proposal is “complex”, given that there are limitations for EU action in this field as EU treaties exclude the possibility of setting a minimum wage and protect the autonomy of social partners.

Still, the Commission opted for a directive, with common compulsory principles for all member states, given “the strong political commitment” of president Ursula von der Leyen with fair wages, Schmit explained.