A Coordinated EU Minimum Wage Policy?

Fernández-Macías, Enrique; Vacas-Soriano, Carlos

A Coordinated EU Minimum Wage Policy?

Abstract

[Excerpt] Minimum wages exist in all EU member states, even if, as we shall see in this report, they are set up and established in very different ways. Minimum wages, in fact, can be considered as a cornerstone of the “European Social Model”. Yet, the on-going process of European integration has so far had very little to do with them. Wages are explicitly excluded from the competences of European institutions in the existing treaties, contrary to other areas of work and employment such as working time or health and safety. But in the context of increasing European integration, it seems at least plausible that sooner or later there would be some attempt of coordinating this important aspect of social policy across countries. As we will see in this report, the idea has been discussed at the European level several times since the EU was born, and it seems to be gaining momentum the context of the current economic crisis. Of course, the discussion is by no means settled, as many important European and national actors consider that this area should remain within the remit of national governments and according to national traditions and practices. It is certainly possible that wages, and minimum wages, would remain squarely at the level of national competence in the foreseeable future. Still, it seems like a worthwhile exercise (useful to the debate) to explore what kind of implications would be associated with such a coordination of European minimum wage policy. This is what we will try to do in this report. Without taking ourselves a position, we will try to provide arguments and facts that we hope can be useful in this debate. The report is organized in two big sections. In the first one, we will discuss the theoretical and policy considerations around a coordinated EU minimum wage policy. We will review the social sciences literature on the effects of minimum wages, present a broad picture of the current debates around the coordination of EU minimum wage policy and discuss the institutional difficulties that such a coordination would in our view have to face. In other words, that section will try to provide a balanced summary of the theoretical and policy arguments around this debate. The second big section will try to complement the arguments with some facts, by carrying out a “simple accounting exercise” to evaluate how many and what types of workers would be most affected by a hypothetical coordination of minimum wage policy in the different countries, using a baseline scenario of a single national wage floor of 60% of the median national wages and drawing from the two most recent EU-wide data sources on wages and income. Eurofound was established in 1975 with the mandate of contributing with knowledge to the planning and design of better living and working conditions in Europe. We hope that this report can at least contribute to the debate.

Date Issued

2013-10-01

Keywords

Europe; minimum wage; economic policy

Types

article