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The directive for “adequate minimum wages” recently unveiled by the European Commission was widely welcomed by regional authorities – who stressed the need to reflect on the local dimension of the proposed legal framework.
While only very few EU regions have legislative powers to set base rates of pay, they can influence minimum wages in their capacity as employers, negotiating sub-national collective agreements, and award public contracts.
There are also examples of cities that have voluntary agreements on minimum wages and employment conditions for specific sector, as in Italian region of Bologna, where there is a voluntary agreement for the so-called digital platform workers.
That is why local and regional authorities are “in a key position to enforce, promote and monitor the proposed directive,” the vice-president of the Committee of the Regions, Vasco Cordeiro, said on Thursday (18 March) during a European Parliament plenary session.
“With adequate minimum wages in the EU, we are taking another step in the direction of eradicating in-work poverty and reducing poverty in general,” he added.
Monthly minimum wages vary widely across the EU, ranging from €312 in Bulgaria to €2,142 in Luxembourg.
In Denmark, Italy, Cyprus, Austria, Finland and Sweden, minimum wage protection is provided exclusively by collective agreements, while the remaining 21 countries have statutory minimum wages set by governments.
The commission proposal does not oblige member states to harmonise their systems, nor does it set a common minimum wage level.
However, some local authorities fear that the EU proposal would undermine the Scandinavian model.
“Most member states have laws on minimum wages, but we keep seeing more and more in-work poverty in the EU,” said Karsten Uno Petersen, member of South Denmark regional council
“We need to make sure that countries with strong collective bargaining agreements are not adversely affected by any directive,” she added, arguing that it is “worrying” that the commission interferes with the Danish system.
However, according to the vice-president of the parliament for Germany’s Saarland region, Isolde Ries, “the directive is the only way to crack down on discrimination and reduce poverty”.
Capitals vs countryside?
A study on the regional dimension of minimum wages, published this week, warns that the extensive impact assessment guiding the commission’s proposed directive pays little attention to the territorial and local aspects.
The report reveals that wage levels vary significantly at a regional level – with notable differences among sectors.
For example, there are regions with high wage-levels, typically the capital city and metropolitan regions, where the minimum wage may not secure adequate living standards in low-pay sectors due to high living costs.
In Spain, the analysis of the Basque Region and Catalonia suggest that a minimum wage of €1,200 per month is needed – against the current minimum wage set at €950.
That is also the case in Prague and Warsaw, where the statutory minimum wage represents only a quarter of the region’s average wage.
Meanwhile, local authorities warned that the regional imbalances in minimum wages have also an impact on migration flows, creating demographical problems in some regions, such as rural areas.
Hungarian Patrick Schwarcz-Kiefer, from the Baranya county assembly, said that in his region the minimum wage is so low that “it is not surprising that a lot of people leaves for other regions in the EU, for example, in neighbouring Austria”.
The committee of the regions report calls on the commission to undertake an in-depth assessment of the territorial aspects of minimum wage and to clarity the wording of the proposed directive to include justified regional variations and add-ons to minimum wages laws.
In the EU, in-work poverty increased from 8.3 percent in 2007 to 9.4 percent in 2018 as a result of the previous economic crisis. The pandemic is expected to exacerbate these figures.
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