[Opinion] EU minimum wage directive risks legal quagmire

This proposal is under the scrutiny by the European Economic and Social Committee, which will deliver a controversial opinion this week.

To be clear, as employers we agree that more convergence on wages, including minimum wages, would help improve social and economic cohesion, eliminate the gender pay gap and improve living and working conditions, while ensuring a level playing field in the Single Market.

But it’s the way we go about achieving this goal that is questionable. We definitely don’t need a directive. Many member states are in favour of a non-binding instrument, such as a council recommendation.

Even the legal base is not clear-cut.

The EU can adopt legal instruments on working conditions on the basis of Articles 151 and 153 Treaty of the Functioning of the EU.

The treaty provides that the provisions of Article 153 shall not apply to “pay”. In fact, there is EU case law and existing directives that have treated the issue of pay as a key working condition.

In the intense debate that has been taking place around this proposed directive it is clear that there are diverging opinions as to whether this is correct approach or not.

This same divergence of opinions exists within the EESC.

Some committee members support the view that it should be within the competence of the EU to set minimum wages which allow a decent standard of living wherever they work.

On the other hand, the employers’ group within the EESC is of the view that setting minimum wages is a matter for the national level, done in accordance with the specific features of respective national systems.

That is also the view of some Nordic trade unions, which are against legal interference in autonomous collective bargaining on wages amongst social partners.

Collective bargaining

It is our firm view that the commission’s proposal goes against the word and spirit of the EU treaty, which protects national competences on pay and collective bargaining.

As the commission itself has stated in its memorandum explaining the proposed measures, member states with high collective bargaining coverage achieve better results than others in terms of higher wages and have fewer low-paid workers.

Such results can be explained by the fact that the state is involved in neither setting the criteria for collective bargaining agreements nor their enforcement, and that the social partners have full responsibility and autonomy for both.

It is clear that an EU directive on minimum wage would undermine collective bargaining systems, particularly in those countries where minimum wage floors are set through collective agreements.

European statutory minimum wage policy could potentially also have a negative effect on employment, particularly in the case of young people and low-skilled workers, and could aggravate non-compliance, which in turn could also push a number of low-wage workers towards informality.

Undeclared work leads to unfair competition and deteriorates the social and tax systems and disrespects workers’ rights – including the rights to decent working conditions and a minimum wage.

This is why employers in the European Economic and Social Committee are convinced that we need to let each member state decide, under its national conditions, in accordance with its industrial relations system, the appropriate coverage objective and the measures to be taken in the event the pay level falls below the nationally defined objective.

The commission should therefore reconsider and take a more balanced and cautious approach, seeking a genuine EU convergence through a non-binding instrument, in full respect of social partners’ autonomy and the different industrial relations models as is being requested by the employers’ group.

These are difficult times and we need to strive for well-thought and necessary legislation which delivers sustainable results. The Covid-19 pandemic has hit Europe hard and we are yet to see the light at the end of the tunnel, because business investment remains low and unemployment remains high.

The crisis has weakened the financial situation of many SMEs, many of which are facing possible closure.

The situation is a very serious one and therefore every new piece of legislation needs to be properly assessed before being introduced.

The one key question that needs to be asked is – will this proposed new legislation aid the required economic recovery or could it have an actual negative effect?

Our assessment is clear: The issue of minimum wages has to remain firmly within the competence of the individual member states.