Minimum Wages, Poverty and Social Exclusion
European Directive on Minimum Wages
The Directive on Adequate Minimum Wages is part of the EU’s commitment to improving the living and working conditions of people in the EU, according to the European Pillar of Social Rights. The EU Directive aims to improve the living and working conditions of all workers in the EU and to promote economic and social progress, improving workers’ effective access to the protection guaranteed by the minimum wage.
The Directive establishes new EU rules on:
- procedures to set and update the adequacy of statutory minimum wages
- the promotion of collective bargaining on wage setting
- the effective access to minimum wage protection for those workers who are entitled to a minimum wage under national law
a) Adequacy of statutory minimum wages
Member states with statutory minimum wages are requested to put in place a framework to set and update these minimum wages according to a set of clear criteria. Updates to the statutory minimum wage will take place at least every two years (or no later than every four years for countries which use an automatic indexation mechanism). The directive does not prescribe a specific minimum wage level that member states have to reach, and setting the minimum wage will still be up to individual Member States. For the purpose of assessing the adequacy of minimum wages, the Directive proposes that Member States use the reference values of 60% of the gross median wage or 50% of the gross average wage.
b) Promotion of collective bargaining on wage setting
One of the goals of the directive is to increase the number of workers who are covered by collective bargaining on wage setting. To reach that objective, countries should promote the capacity of social partners to engage in collective bargaining. Member States with a collective bargaining coverage below 80% should establish an action plan to promote collective bargaining. The action plan should set out a clear timeline and specific measures to progressively increase the rate of collective bargaining coverage.
c) Effective access to minimum wage protection
The text stipulates that member states will take measures to enhances workers’ effective access to statutory minimum wage protection. Measures to this end include:
- controls by labour inspectorates
- easily accessible information on minimum wage protection
- developing the capability of enforcement authorities to take action against non-compliant employers
Data collection and reporting
Member states should monitor the coverage and adequacy of minimum wages. In addition, they will be asked to report every two years to the Commission on the:
- rate of collective bargaining coverage
- level of the statutory minimum wage
- share of workers covered by the statutory minimum wage
Article 2 states that the new Directive will apply to all workers within the EU with an employment contract.
- EMPL Committee vote in favour of Draft Report on the Commission proposal on a Directive for adequate minimum wages (11 November 2021)
- Commission’s proposal for EU rules on adequate minimum wages welcomed by MEPs. Law should ensure employers do not deduct the costs for carrying out work, like accommodation or equipment, from minimum wages.
- ETUC recommendations for changes to Directive: Document considers both statutory minimum wages in tandem with strengthened collective bargaining processes
- ETUC Myths Debunked: document outlines the myths and realities of the Directive
- Eurofound Report on Minimum Wages in 2021: Summarises how minimum wage rates for 2021 were set during 2020 – the year marked by the COVID-19 pandemic. Reviews the difficulties for national decision-makers and how they reacted to the challenges of the economic and social fall-out of the pandemic when making decisions regarding the minimum wage. Maps the extent to which minimum wages were referred to in COVID-19-related support measures. Discusses advances made on the EU initiative on adequate minimum wages and maps the reactions of the EU-level social partners and national decision-makers. The report is accompanied by two complementary working papers: one providing an analysis of developments for low-paid employees and minimum wage workers over the past decade; the other summarising the most recent research on minimum wages in EU countries, Norway and the UK
- Key legislative documents on minimum wages
- European Council agreement on Commission proposal for Minimum Wages regulations (December 2021)
- European Council and European Parliament reach provisional agreement on draft directive on adequate minimum wages. Since early January 2022, eight rounds of negotiations between the Council and the European Parliament took place. (June 2022)
- On 14 September 2022, the European Parliament adopted a legislative resolution on the proposal for a directive of the European Parliament and of the Council on adequate minimum wages in the European Union.
- On 4 October 2022, the European Council gives its final green light and adopts the Directive on Adequate Minimum Wages. Member States have two years to transpose the Directive into national law.
Equal labour conditions for digital platform workers:
- Legislative framework on minimum working conditions should apply to all workers, including atypical or non-standard workers in the digital economy, who often work in precarious conditions. They should be covered by labour laws and social security provisions and should be able to engage in collective bargaining.
- On 12 June 2023, ministers for employment and social affairs agreed on the Council’s general approach for a proposed directive to improve working conditions for platform workers. The Council will start negotiations with the European Parliament on a new law that will help millions of gig workers gain access to employment rights. The proposal introduces two key improvements: it helps determine the correct employment status of people working for digital platforms and establishes the first EU rules on the use of artificial intelligence in the workplace.
Women more at risk of poverty and social exclusion:
- MEPs urge EU countries to implement Work Life Balance Directive to address the issue of women earning 15% less than men on average. Action is also urged to be taken to tackle gender pay gap and guarantee access to affordable and quality childcare.
- Increase in workers earning minimum wage across EU over the last decade – women make up majority of those earning minimum wage and more likely to live in deprived households (October 2021).
- European Gender Equality strategy legislative documents
- In work poverty – EMPL report (January 2021)