10.6092/issn.1561-8048/13368
In autumn 2020, the European Commission published a proposal for a "Directive on adequate minimum wages in the European Union". For the first time in the history of the EU, draft legislation is on the table which explicitly aims not only to significantly increase the level and scope of minimum wages in Europe, but also to strengthen collective bargaining systems. The proposal thus represents a fundamental paradigm shift in European labour policy. Not so long ago, the Commission essentially viewed adequate minimum wages and strong collective bargaining systems as institutional barriers for the functioning of free markets and thereby as having a negative impact on the development of growth and employment. Indeed, in the wake of the last major economic crisis in 2008/2009, the EU exerted considerable influence in many countries towards freezing or even decreasing minimum wages and weakening collective bargaining systems. Now the European Commission’s approach is the exact opposite: by upgrading minimum wages and extending collective bargaining, the main aim is to strengthen the bargaining position of workers. The adoption of the Directive would mark a significant step towards a more “Social Europe”. However, the debate on the Directive is shaped by various political and legal fault lines so that its adoption is still anything but certain.
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A paradigm shift towards Social Europe?  The proposed Directive on adequate minimum wages in the European Union
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A paradigm shift towards Social Europe? The proposed Directive                     Italian Labour Law e-Journal
on adequate minimum wages in the European Union                                           Issue 1, Vol. 14 (2021)
Thorsten Schulten                                                                               ISSN 1561-8048
thorsten-schulten@boeckler.de                                    https://doi.org/10.6092/issn.1561-8048/13368
Torsten Müller
tmueller@etui.org




              A paradigm shift towards Social Europe?
            The proposed Directive on adequate minimum
                   wages in the European Union
                               Thorsten Schulten, Torsten Müller


 1. Introduction. 2. The structural asymmetry of European integration. 3. Minimum wages
 and collective bargaining as a core element of neoliberal crisis management. 4. The return of
 Social Europe. 5. The proposal for a Directive on adequate minimum wages in the EU. 6.
 Criteria for adequate minimum wage levels and its possible impact. 7. Strengthening
 collective bargaining. 8. Four fault lines in the conflict about the proposed Directive. 9.
 Outlook.



                                                     Abstract

     In autumn 2020, the European Commission published a proposal for a "Directive on adequate
     minimum wages in the European Union". For the first time in the history of the EU, draft
     legislation is on the table which explicitly aims not only to significantly increase the level and
     scope of minimum wages in Europe, but also to strengthen collective bargaining systems. The
     proposal thus represents a fundamental paradigm shift in European labour policy. Not so long
     ago, the Commission essentially viewed adequate minimum wages and strong collective
     bargaining systems as institutional barriers for the functioning of free markets and thereby as
     having a negative impact on the development of growth and employment. Indeed, in the wake
     of the last major economic crisis in 2008/2009, the EU exerted considerable influence in many
     countries towards freezing or even decreasing minimum wages and weakening collective
     bargaining systems. Now the European Commission’s approach is the exact opposite: by
     upgrading minimum wages and extending collective bargaining, the main aim is to strengthen
     the bargaining position of workers. The adoption of the Directive would mark a significant step
     towards a more “Social Europe”. However, the debate on the Directive is shaped by various
     political and legal fault lines so that its adoption is still anything but certain.

     Keywords: Minimum Wage; Collective Bargaining; Adequate and Fair Wage Levels; Social
     Europe.




 
  Thorsten Schulten, Head of the Collective Agreement Archive of the Institute of Economic and Social
 Research (WSI) of the Hans Böckler Foundation in Düsseldorf, Germany and Honorary Professor at the
 University of Tübingen; Torsten Müller, Senior Researcher at the European Trade Union Institute (ETUI) in
 Brussels, Belgium. This essay has been submitted to a double-blind peer review process.
Thorsten Schulten                                                                     Italian Labour Law e-Journal
Torsten Müller                                                                               Issue 1, Vol. 14 (2021)
                                                                                                    Section: Theme


1. Introduction.

    At the EU Social Summit in Porto in May 2021, the presidents of the European
Commission, the European Parliament and the Portuguese EU Presidency, together with the
presidents of the major European employers’ and business associations, trade unions and
other social organisations, signed a strong “social commitment” to the implementation of
the European Pillar of Social Rights, which among other things demands “decent working
conditions and fair pay for all.”1 The Porto Social Commitment demonstrates that Social
Europe is back on the EU agenda. After a long period of a largely neoliberal dominance in
EU policy, which even became radicalised in the wake of the Euro crisis at the beginning of
the last decade, the EU has now entered a period in which at least the political discourses are
dominated by a strong commitment to a socially regulated capitalism.
    The change of discourse is particularly evident when it comes to minimum wages and
collective bargaining. Not so long ago, the dominant view among EU policy makers was that
strong institutions of collective wage regulation hinder the functioning of free markets, limit
employers’ flexibility and therefore have a largely negative effect on growth and employment.
But today, statutory minimum wages and collective bargaining are recognised as institutional
preconditions for a more sustainable and inclusive economic development.
    A clear expression of this new view is the proposed Directive on adequate minimum
wages in the EU which was published in autumn 2020.2 For the first time in the history of
the EU, draft legislation is on the table which explicitly aims to not only significantly increase
the level and scope of minimum wages in Europe, but also to strengthen collective bargaining
systems. In the following we argue that against the background of the dominant mode of
European integration, the proposed Directive marks a fundamental paradigm shift in
European labour policy. Whether the Directive will actually be adopted, is anything but
certain, because it faces considerable resistance rooted in various fault lines. However, there
is also certainly a chance that the project will be successful and, in the end, may mark an
important step towards a more social Europe.


2. The structural asymmetry of European integration.

   It is one of the basic insights of critical European Studies that the development of the
European Union follows a "structural asymmetry" between “negative” and “positive”
integration.3 A predominant mode of "negative" integration focuses on the creation of a
common European market in which national economic and social systems are exposed to
Europe-wide regime competition. If national regulations hinder the basic economic
freedoms in the European Single Market they have to be adapted -- if not completely


1 Porto Social Summit, Porto Social Commitment, 7 May 2021,
https://www.2021portugal.eu/media/icfksbgy/porto-social-commitment.pdf
2 European Commission, Proposal for a Directive of the European Parliament and of the Council on adequate minimum

wages in the European Union, Brussels, 28 October 2020, COM(2020) 682 final, https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:52020PC0682&from=EN
3 Scharpf F. W., The asymmetry of European integration, or why the EU cannot be a ‘social market economy’, in Socio-

Economic Review, 8 (2), 2010, 211–250.

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dismantled. This applies also to regulations in the field of labour and social policy which -
sanctioned by corresponding rulings of the European Court of Justice – are increasingly
often declared not to be in conformity with EU law. In this sense, European integration has
become a "great liberalisation machine".4
    In contrast, the implementation of a “positive” mode of integration, which aims to anchor
the integrated market through new Europe-wide regulations, is much more difficult
considering the often extremely heterogeneous interests among the 27 EU Member States.
This heterogeneity results both from the still very different levels of social and economic
development and from the fundamental orientations and institutional structure of the various
national economic and social models. The complex political decision-making structures
within the EU make finding a compromise even more difficult by opening up numerous
possibilities to block political initiatives and - especially when unanimous decisions are
required - granting the Member States extensive veto powers.
    The structural asymmetry between negative and positive integration is nowhere more
evident than in the debate about “Social Europe”. The implementation of a comprehensive
labour and social order at EU level has thus far failed not only because of the resistance of
European business and employers' associations and conservative-neoliberal governments,
but also because of the difficulty of arriving at meaningful common regulations in view of
the great differences between national social systems. Even minimum standards are seen in
some EU countries as a threat to their own higher social standards, which explains, for
example, the pronounced scepticism of the Scandinavian countries towards any form of
binding European labour and social policy.
    Even the European trade unions, which are traditionally among the greatest advocates of
a social Europe, resist any intervention in national collective bargaining autonomy, despite
all the declarations in favour of a Europe-wide coordination of wage policy. This gives rise
to the paradox that the EU still has hardly any competences in the area of wage and collective
bargaining policy, although economic integration has put national wage policies under
enormous competitive pressure and thus significantly weakened the negotiating power of
trade unions.5
    Against this background, some observers conclude that the idea of Social Europe as a
European regulatory framework for a Europe-wide integrated market is nothing more than
a myth that should be abandoned once and for all.6 Instead of focusing on deepening social
integration, the main focus should be on defending national labour and social systems against
the imperatives of a liberal market Europe, thereby consciously accepting the risk of political
disintegration (such as the possible dissolution of the European Monetary Union).
    However, considering the current state of advanced economic integration and the
resulting interdependencies, a strategy that primarily relies on the defence of national labour
and social systems seems hardly less illusory than the idea of a harmonised European welfare
state. It is therefore not a question of more or less Europe, but one of strengthening labour
and social policy regulations at all political levels against a neoliberalism that primarily relies

4 Streeck W., Buying Time. The Delayed Crisis of Democratic Capitalism, Verso Books, New York, 2014.
5 For a discussion see: Menegatti E., Challenging the EU Downward Pressure on National Wage Policy, in International
Journal of Comparative Labour Law and Industrial Relations, 33 (2), 2017, 195-219
6 Höpner M., Social Europe is a myth, in Social Europe Column, 5 November 2018, https://socialeurope.eu/social-

europe-is-a-myth

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Thorsten Schulten                                                                         Italian Labour Law e-Journal
Torsten Müller                                                                                   Issue 1, Vol. 14 (2021)
                                                                                                        Section: Theme


on regulation through markets and competition. The defence of national labour and social
systems through strengthening social rights on the one hand, and a reorientation of economic
and social policy at the European level on the other are not opposites. They are both
necessary parts of a contemporary "formula for a Social Europe.”7


3. Minimum wages and collective bargaining as a core element of neoliberal crisis
management.

    Since the 1990s which were comparatively ambitious in terms of labour and social policy,
social initiatives at the EU level have clearly receded into the background in the following
two decades.8 Nonetheless, labour policy issues in particular, such as the regulation of
employment relationships, or wage and collective bargaining policy, have clearly gained in
importance in the wake of the 2008/2009 euro crisis. With the new European economic
governance that has emerged at EU level in response to the crisis and that has produced a
number of new forms of economic policy coordination, European labour policy has also
emerged as a "new strategic policy field" in its own right.9
    The new strategic importance of labour policy results primarily from the dominance of a
neoliberal crisis narrative, which centres on a lack of price competitiveness, the causes of
which are seen primarily in excessively high labour costs and overregulated labour markets.
Since within the European Monetary Union an improvement in price competitiveness can
no longer be achieved by devaluing national currencies, according to the prevailing crisis
narrative a strategy of "internal devaluation" was the only viable option. What is specifically
meant by this can be read, for example, in the European Commission's now famous report
on "Labour Market Developments in Europe 2012" and its list of so-called "employment-
friendly reforms". This list comprises numerous labour and social policy measures, including
the dismantling of labour protection rights, the flexibilisation and precarisation of
employment relationships, the decentralisation of collective bargaining and the reduction of
collective bargaining coverage, as well as literally the "overall reduction in the wage setting
power of trade unions."10 Even though the European Commission has subsequently denied
that it intended to make specific recommendations for action with this list, it reads as a kind
of blueprint for all the labour and social policy measures that were implemented in many
European countries in response to the 2008/2009 crisis.
    Wages and collective bargaining has emerged as one core area of the new European labour
policy in which the European Commission has used the mechanisms of the new economic
governance to influence national developments to a previously unknown extent.11 This was

7 Seikel D., The Formula for a Social Europe: Complementary social policy plus a socially compatible monetary union and
internal market. WSI Policy Brief No. 57, 2021, Düsseldorf.
8 Graziano P., Hartlapp M., The end of social Europe? Understanding EU social policy change, in Journal of European

Public Policy, 26 (10), 2019, 1484-1501.
9 Syrovatka F., Europäische Arbeitspolitik als strategisches Feld, Dissertation at the Eberhard Karls University of

Tübingen, 2021, unpublished manuscript.
10 European Commission, Labour Market Developments in Europe 2012, European Economy, 2012, 5, p.103f.,

https://ec.europa.eu/economy_finance/publications/european_economy/2012/pdf/ee-2012-5_en.pdf
11 Schulten T., Müller T., European economic governance and its intervention in national wage development and collective

bargaining, in S. Lehndorff (ed.), Divisive integration: The triumph of failed ideas in Europe – revisited, ETUI, Brussels

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most evident in countries such as Greece or Portugal, which received loans within the
framework of the European Stability Mechanism and in return had to fulfil far-reaching
political conditions, which were monitored by the Troika of the European Commission, the
European Central Bank and the International Monetary Fund. In essence, the conditions all
aimed at cutting or freezing (minimum) wages and weakening collective bargaining systems
in favour of corporate decision-making prerogatives. It is true that the European
Commission did not succeed in establishing interventionist possibilities in the European
Semester similar to those of the Troika. However, in some countries, such as France, the soft
pressure of the non-binding Semester recommendations was enough to influence major
reforms of the collective bargaining system.12


4. The return of Social Europe.

    The results of the crisis management based on the new European labour policies have
been dysfunctional for the EU in every respect. Socially, they have contributed to more in-
work poverty and precariousness and to a further increase in social inequality in the EU as a
whole. Economically, they have further weakened domestic growth potential in many
countries and significantly increased economic dependence on the export sector. Finally,
politically, they have promoted a more Euro-sceptic attitude among European citizens and
undermined the acceptance and legitimacy of the political systems more generally both at
national and EU level, which eventually contributed to the electoral successes of right-wing
populist parties.
    Against this backdrop, a clear change in discourse can be observed in the EU since the
mid-2010s. The new narrative strongly emphasises the importance of functioning labour and
social systems for economic development and political stability. Exemplary for this is the
demand of former EU Commission President Jean-Claude Juncker that Europe should not
only achieve an economic and financial but also a "social triple-A" rating. However, apart
from the reform of the European Posting of Workers Directive, the upgrading of the social
dimension remained essentially symbolic: the high point was the adoption of the "European
Pillar of Social Rights" in 2017, which, contrary to the title, does not contain any enforceable
"rights", but rather non-binding political principles.13
    In contrast, the EU Commission under President Ursula von der Leyen, which has been
in office since 2019, has set out to go beyond symbolic declarations by pursuing a series of
legislative initiatives in the field of labour and social policy. This includes the Action Plan for
the implementation of the European Pillar of Social Rights, adopted in March 2021, which
contains several initiatives and concrete legislative projects.14 However, the Commission’s
most far-reaching and important labour policy initiative so far is the proposal for a European



2015, 331-363; Van Gyes G., Schulten T. (eds.), Wage bargaining under the new European Economic Governance –
Alternative strategies for inclusive growth, ETUI, Brussels 2015.
12 Syrovatka F., Labour market policy under the new European economic governance: France in the focus of the new European

labour market policy, in Capital & Class, 2020. Online First. DOI: https://doi.org/10.1177/0309816820943177
13 Barnard C., Are social ‘Rights’ rights?, in European Labour Law Journal, 2020, 11 (2), 351-361
14 European Commission, The European Pillar of Social Rights Action Plan, Luxembourg 2021.



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legal framework on adequate minimum wages, which it has been pursuing with high priority
since the beginning of its term of office.


5. The proposal for a Directive on adequate minimum wages in the EU.

   The debate on a European minimum wage policy dates back to the early 1990s, after the
EU had adopted the (non-binding) Community Charter of the Fundamental Social Rights of
Workers, according to which “workers shall be assured of an equitable wage, i.e, a wage
sufficient to enable them to have a decent standard of living.”15 In order to implement the
Community Charter, the European Commission published an “Opinion on an equitable
wage” in 1993 asking the EU Member States to “take appropriate measures to ensure that
the right to an equitable wage is protected, in particular by … further legislation (or) …
mechanisms for the establishment of negotiated minima and the strengthening of collective
bargaining arrangements.”16 In practice, however, this initiative had hardly any impact on
minimum wages or collective bargaining at national level.
   Since the1990s, the debate about common European standards for adequate minimum
wages has come up from time to time, but without leading to any concrete results.17 There
were some discussions before the adoption of the EU Charter of Fundamental Rights in
2000, which finally does not include an explicit reference to an adequate wage but only refers
more generally to “fair and just working conditions” (Article 31). However, there is now a
common understanding that “working conditions” also include “wages”, so that the Charter
is understood to also cover the right to fair wages.18 Finally, the “right to fair wages” has
again been explicitly recognised in principle 6 of the European Pillar of Social Rights, which
states that “adequate minimum wages shall be ensured, in a way that provide for the
satisfaction of the needs of the worker and his / her family in the light of national economic
and social conditions.”19
   The proposal for a Directive on adequate minimum wages which was presented in autumn
2020 is explicitly understood as the implementation of principle 6 of the European Pillar of
Social Rights.20 For the first time, the European Commission has presented a concrete legal
proposal for a Europe-wide coordination of national minimum wage policies which aims to
significantly increase the level and scope of minimum wages and collective bargaining in
Europe. The narrative used for the justification of the draft Directive reads like a complete


15 EU Council, Community Charter of the Fundamental Social Rights of Workers, Strasbourg, 8 December 1989,
www.eesc.europa.eu/resources/docs/community-charter--en.pdf, For an historical overview on the debate see
also: Schulten T., Towards a European Minimum Wage Policy? Fair Wages and Social Europe, in European Journal of
Industrial Relations, 2008, 14 (4), 421-439.
16 European Commission, Commission opinion on an equitable wage, COM (93) 388 final. Official Journal of the

European Communities No. C 248, 11 September 1993, 7-9.
17 For an historical overview on these debates see: Schulten T., Towards a European Minimum Wage Policy? Fair

Wages and Social Europe, in European Journal of Industrial Relations, 14 (4), 2008, 421-439.
18 Zimmer R., Living wages in international and European law, Transfer: European Review of Labour and Research,

25(3), 2019, 285-299.
19 European Commission, The European Pillar of Social Rights in 20 principles, 2017,

https://ec.europa.eu/info/strategy/priorities-2019-2024/economy-works-people/jobs-growth-and-
investment/european-pillar-social-rights/european-pillar-social-rights-20-principles_en
20 European Commission, nt. (1)



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Thorsten Schulten                                                                           Italian Labour Law e-Journal
Torsten Müller                                                                                     Issue 1, Vol. 14 (2021)
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counterprogram to what has been argued in the previous crisis. Adequate minimum wages
and comprehensive collective bargaining are no longer seen as an obstacle to competitiveness
and economic growth but are recognised as an important institutional precondition for a
sustainable and inclusive economic development. According to the European Commission,
a minimum wage set at adequate levels “ensures a decent living for workers, helps sustain
domestic demand, strengthens incentives to work, and reduces in-work poverty and
inequality at the lower end of the wage distribution.” Furthermore, “minimum wage
protection also supports gender equality, since more women than men earn wages at or
around the minimum wage.”21
    This new perspective on adequate minimum wages and comprehensive collective
bargaining has become even more pronounced during the Covid-19 crisis when it became
clear that many of the so-called core or essential workers only receive a rather poor salary.22
All in all, the adoption of the proposed Directive would mark a fundamental paradigm shift
in European labour policy.23
    To implement its objectives, the draft Directive primarily follows two approaches: First,
it aims to oblige Member States with statutory minimum wages to define clear criteria for the
adequacy of minimum wage levels. Secondly, it seeks to promote the scope of collective
bargaining so that in all EU countries a majority of workers should be covered by collective
agreements.


6. Criteria for adequate minimum wage levels and its possible impact.

    The Commission's proposal is based on the fundamental assumption that “in the majority
of Member States with national statutory minimum wages, minimum wages are too low vis-
à-vis other wages or to provide a decent living.”24 Hereby the Commission reflects the two
basic approaches on how to determine adequate minimum wages.25 The first is the so-called
‘living wage approach’ which determines adequate minimum wages by calculating the costs
for a certain basket of goods and services which is necessary for a decent living and
participation in social life. However, there is no universally accepted calculation for a living



21 Ibid, 2.
22  For a first assessment see: Aumayr-Pintar C., Vacas‑Soriano C., Minimum wages in 2021: Annual review,
Eurofound, Publications Office of the European Union, Luxembourg 2021.
23 At a hearing in the European Parliament, the EU Social Affairs Commissioner responsible for the initiative,

Nicolas Schmit, also adopted the view of a paradigm shift. In response to a commentary on the draft Directive,
he said verbatim: “I just want to confirm and also to express my agreement with what has been said on the paradigm shift.
There is a paradigm shift obviously, because we are talking now about adequate pattern for minimum wages in Europe. We are
talking about strengthening collective bargaining in Europe. This is a change from what happened not so long ago”, cited from
European Parliament, Discussion in the Committee on Employment and Social Affairs (EMPL) on the
proposal for a directive in adequate minimum wages, 4th March 2021, 16:45-18:45,
https://multimedia.europarl.europa.eu/en/committee-on-employment-and-social-affairs_20210304-1645-
COMMITTEE-
EMPL_vd?fbclid=IwAR2O9tp8xOPqfBdyVnGRZxojEh1RTWORbgCQDRnFwVMMsBQWOVNIgV74-
uo
24 European Commission, nt. (1), 2.
25 For the following: Schulten T., Müller T., What's in a name? From minimum wages to living wages in Europe, in

Transfer: European Review of Labour and Research, 25(3), 2019, 267-284.

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wage, neither regarding the concrete composition of the baskets nor regarding the types of
household which need to be considered.
    A second, more pragmatic way to determine adequate wages levels follows a ‘distribution-
oriented approach” which considers the relative position of the minimum wage in the
national wage structure. The indicator used here is the so-called Kaitz index, which measures
the value of the minimum wage in relation to the median or the average wage. As the
Commission pointed out in recital No. 21 of the proposed Directive, there are “indicators
commonly used at international level, such as 60% of the gross median wage and 50% of the
gross average wage, (which) can help guide the assessment of minimum wage adequacy in
relation to the gross level of wages.”26 While the Kaitz index might work as a rough indicator
for adequacy in most EU Member States, it might not be sufficient in countries with rather
low median or average wage levels and therefore needs to be combined with a living wage
perspective.
    Considering the different national contexts, the Commission’s proposal does not provide
a single definition of an adequate minimum wage but instead directs the Member States “to
ensure that the setting and updating of statutory minimum wages are guided by criteria set
to promote adequacy with the aim to achieve decent working and living conditions, social
cohesion and upward convergence.” While the Member States are almost free to include
whatever criteria they find appropriate, the draft Directive calls them to take into account at
least the four following aspects:
    (a) “the purchasing power of statutory minimum wages, taking into account the cost of
living and the contribution of taxes and social benefits;
    (b) the general level of gross wages and their distribution;
    (c) the growth rate of gross wages;
    (d) labour productivity developments.”27
    There are, however, no precise definitions of these criteria, so they remain rather vague
and need still to be specified at national level. This holds true for the “purchasing power”
criterion which stands for the idea of a living wage. With its reference to “taxes and social
benefits”, however, it becomes unclear whether adequacy is calculated on a gross or a net
basis, so that the responsibility for an adequate minimum wage level is blurred between the
state and companies. Even more problematic is the criterion “labour productivity
developments”. First of all, it is absolutely unclear what kind of productivity (national, sector,
company or even individual) should be taken into consideration. Moreover, there is a clear
danger that reference to productivity would undermine the concept of adequacy, which is
necessarily defined by the needs for a decent living.
    While the orientation to the “growth rate of gross wages” is a reasonable criterion for the
regular adjustment of minimum wages, it is “the general level of gross wages and their
distribution” which is possibly the most important criterion. In a separate paragraph, the
proposed Directive explicitly demands that “Member States shall use indicative reference
values to guide their assessment of adequacy of statutory minimum wages in relation to the
general level of gross wages, such as those commonly used at international level.”28 As

26 European Commission, nt. (1), Recital No. 21.
27 Ibid, art. 3 (2).
28 Ibid, art. 3 (3).



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mentioned above, a more concrete definition of “reference values commonly used at
international level” is given in Recital 21, which defines a kind of decency threshold for
minimum wages at the level of 60% of the median and/or 50% of the average wage. This
does not oblige Member States to comply with these criteria, but it will create a strong
normative European frame of reference against which national minimum wage policies will
have to be measured in the future.


Figure 1: Minimum wages in the European Union 2019
As a percentage of national median and average wages of full-time employees
 As a % of median wage                                   As a % of average wage

       France                                      61          France                                            50
     Portugal                                      61       Slovenia                                            49
     Bulgaria                                     60     Luxembourg                                        44
    Slovenia                                      59             Malta                                     44
    Romania                                      57          Portugal                                      44
 Luxembourg                                    55            Bulgaria                                     43
       Poland                                 52              Croatia                                     43
    Lithuania                                51             Germany                                       43
      Croatia                               50                   Spain                                   42
     Hungary                                50              Lithuania                                   41
         Malta                              50              Romania                                     41
     Slovakia                               49               Belgium                                   40
         Spain                              49               Slovakia                                  40
                                                         Netherlands                                  39
    Germany                                48
                                                                Latvia                               38
      Greece                               48
                                                             Hungary                                 38
     Belgium                               47
                                                              Estonia                               37
        Latvia                             47
                                                             Czechia                                37
 Netherlands                               47
                                                              Greece                              35
      Estonia                           43
                                                               Ireland                            35
     Czechia                            43
                                                               Poland                            33
       Ireland                          42
                                                                         0   10     20     30      40      50         60
                 0      20         40          60       80

Source: Source: OECD Earnings Database, supplemented by Eurostat and European Commission
for Bulgaria and Croatia.



   In fact, current minimum wage levels are well below the decency thresholds in most EU
countries (Figure 1). Implementing the double threshold of 60% of the median wage and
50% of the average wage in all EU Member States with statutory minimum wages would lead
to an increase in minimum wages for more than 25 million workers – or 18.7% of all
employees in EU countries which have a statutory minimum wage (Table 1).29 Over half of

29The figures are calculated by Lübker M., Schulten T., WSI Minimum Wage Report 2021: Is Europe en route to
adequate minimum wages? WSI-Report No. 63e, 2021, Düsseldorf, https://www.boeckler.de/de/faust-
detail.htm?sync_id=9200 on the basis of: European Commission, Impact Assessment accompanying the

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Thorsten Schulten                                                             Italian Labour Law e-Journal
Torsten Müller                                                                       Issue 1, Vol. 14 (2021)
                                                                                            Section: Theme


this number is accounted for by three populous Member States alone whose minimum wages
are currently well below the double decency threshold: Germany (6.8 million employees),
Spain (4.1 million) and Poland (4.0 million). The number of directly affected workers is
significantly lower in countries which are already close to the reference values, such as France
(2.2 million). Measured as a share of the total number of persons employed, the number of
workers who would benefit from a corresponding minimum wage increase ranges from less
than 10% in countries such as Belgium, Slovenia and France to more than 30% in countries
such as Greece and Romania (Table 1).

Table 1: Number of employees who would benefit from an increase in the statutory
minimum wage to 60% of the median wage and 50% of the average wage*

                             in 1,000                 as a percentage of all employees
 Germany                        6,835                                              18.2
 Spain                          4,120                                              24.9
 Poland                         3,998                                              30.9
 Romania                        2,354                                              35.9
 France                         2,202                                               9.3
 Greece                           907                                              34.4
 Hungary                          804                                              20.2
 Netherlands                      658                                               9.0
 Bulgaria                         649                                              23.1
 Portugal                         508                                              12.7
 Czechia                          492                                              11.4
 Ireland                          487                                              25.0
 Slovakia                         409                                              18.9
 Croatia                          250                                              17.1
 Latvia                           144                                              18.7
 Estonia                          116                                              20.6
 Lithuania                        116                                               9.9
 Belgium                          114                                               2.8
 Slovenia                          62                                               7.3
 Luxembourg                        58                                              21.9
 Malta                             24                                              11.6
 Total EU                     25,306                                               18.6
* the highest value in each case
Source: Own calculation based on European Commission data based on estimates using the
EUROMOD microsimulation model and based on the 2019 employment figures (Eurostat Labour
Force Survey).



  Finally, it is important to note that the European Commission's proposal has not been
made in a vacuum, but draws upon on numerous initiatives for higher minimum wages at



document Proposal for a Directive of the European Parliament and of the Council on adequate minimum
wages in the European Union, Commission Staff Working Document, SWD(2020) 245 final, Brussels, 28.10.2020,
https://ec.europa.eu/transparency/regdoc/rep/10102/2020/EN/SWD-2020-245-F1-EN-MAIN-PART-
1.PD F



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                                                                                                      Section: Theme


national level.30 These mainly trade union-driven initiatives have been launched in all parts
of Europe. In Western Europe, for example, the unions FNV in the Netherlands and
ABVV/FGTB in Belgium are campaigning for a minimum wage of €14. In Germany, where
the minimum wage was only introduced five years ago, the trade unions advocate a much
faster increase and demand that the minimum wage be raised to €12, which roughly
corresponds to 60% of the median wage. Minimum wage initiatives also exist in other
Western European countries such as France, Ireland, Malta, Portugal, Spain and the UK. In
most Central and Eastern European countries, trade unions anticipated the double threshold
in the proposed Directive by demanding an increase of the minimum wage to at least 50%
of the average wage (which in most CEE countries is the more favorable of the two
thresholds). In Croatia and Lithuania, unions explicitly refer to the double decency threshold
of 50% of the average and 60% of the median wage. In Slovakia, in October 2019 the
parliament adopted an amendment to the Minimum Wage Act, which stipulates that from 1
January 2021, in the event that trade unions and employers do not reach an agreement, the
minimum wage will be set by the government to at least 60% of the average gross monthly
wage of the two previous years.
    Furthermore, the example of Austria shows that minimum wage campaigns organised by
trade unions need not be limited to countries with statutory minimum wages. For a long
time, the Austrian trade unions have regularly determined a certain minimum wage target
(currently 1,700 Euros per month) and have taken this as a guideline in the negotiation of
collective agreements.31
    According to the proposed Directive, however, the criteria for adequate minimum wages
should only apply to countries with statutory minimum wages, because there should be no
interference in collective agreements. This means that the respective part of the Directive
will not apply to EU Member States such as the Nordic countries Denmark, Sweden and
Finland or Austria and Italy where minimum wages are exclusively determined by collective
agreements. In reaction to fears, particularly from Denmark and Sweden, the proposed
Directive also explicitly stipulates that Member States without a statutory minimum wage will
not be required to introduce statutory minimum wages.32
    In general, countries with minimum wage regimes exclusively based on collective
agreements tend to have particularly high levels of collective bargaining coverage.33 (Figure
2). Moreover, collectively agreed minimum wages are usually set at a higher level than
statutory minimum wages.34 Therefore, in Austria and the three Nordic countries Denmark,
Finland and Sweden the introduction of a general statutory minimum wage is rejected not
only by employers but also by trade unions. The fact that minimum wages are set by collective
agreements, however, does not necessarily mean that they are always set at an adequate level
in the sense of a living wage or the decency threshold. This is the reason why, for example,



30 Schulten T., Müller T., Between poverty wages and living wages: minimum wage regimes in the European Union, The Left
in the European Parliament (GUE/NGL), European Studies for Social and Labour Market Policy, No. 1/2020,
Brussels, https://oezlem-alev-demirel.de/wp-content/uploads/2020/06/mindestlohn-englisch-web.pdf
31 Ibid, 22.
32 European Commission, nt. (1), Art 1 (3).
33 See Figure 3 below.
34 Aumayr-Pintar C., Vacas‑Soriano C., nt. (22).



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Thorsten Schulten                                                                         Italian Labour Law e-Journal
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                                                                                                        Section: Theme


in Italy the introduction of a statutory minimum wage has been under discussion for several
years.35


7. Strengthening collective bargaining.

    Apart from establishing a joint framework for criteria of adequate (statutory) minimum
wages, the second main objective of the proposed Directive is the strengthening of
autonomous collective bargaining. It is a generally acknowledged fact that there is a strong
correlation between collective bargaining coverage, the degree of wage dispersion and the
size of the low wage sector.36 Countries with higher bargaining coverage tend to have a much
lower wage dispersion and a smaller low wage sector. All in all, a high bargaining coverage
seems to be an important institutional precondition for the promotion of adequate minimum
wages. Moreover, in countries with statutory minimum wages, there are often different
interactions with collectively agreed (minimum) wages.37 In Germany, for instance, the
introduction of the statutory minimum wage in 2015 has also strengthened collective
bargaining in many low-wage sectors.38 Conversely, an adequate wage level cannot be
achieved solely by means of statutory minimum wages, but also requires a comprehensive
collective bargaining system with a high level of bargaining coverage. In many countries there
is a considerable collective bargaining wage premium which means that workers whose wages
are set by a collective agreement earn considerably more than workers who are not covered
by collective agreement under otherwise comparable conditions.
    Against this background, another objective of the draft Directive is to strengthen national
collective bargaining systems by obliging all Member States whose collective bargaining
coverage is below 70% to enter into a national dialogue with employers' associations and
trade unions to promote sectoral and cross-sectoral collective bargaining and to develop a
concrete action plan to promote collective bargaining.39 The proposed Directive explicitly
emphasises the important role of public procurement in this respect by ensuring that
economic operators comply with the wages set by collective agreements.40
    Currently, collective bargaining coverage is below the 70% threshold in 17 out of 27 EU
countries (Figure 2). The European Commission's initiative thus draws attention to the role
of collective agreements as a guarantor of better working conditions and the ability of
political actors to increase collective bargaining coverage by setting more favourable and
supportive framework conditions. The need for action is particularly high in Ireland and
Greece, where the coverage is 34% and 26% respectively, as well as in Central and Eastern


35 Menegatti E., Wage-Setting in Italy: The central role played by case law, in Italian Labour Law e-Journal, 2019, 12(2),
53-65.
36 OECD, Negotiating Our Way Up. Collective Bargaining in a Changing World of Work, Paris 2019.
37 Dingeldey I., Grimshaw D., Schulten T. (eds.), Minimum Wage Regimes. Statutory Regulation, Collective Bargaining

and Adequate Level, Routledge, London, 2021.
38 Bispinck R. et al., Entwicklung des Tarifgeschehens vor und nach Einführung des gesetzlichen Mindestlohns, Study on

behalf the German Ministry of Labour (BMAS), BMAS Forschungsbericht Nr. 562, 2020, Berlin
https://www.bmas.de/DE/Service/Publikationen/Forschungsberichte/fb-562-entwicklung-tarifgeschehen-
vor-und-nach-einfuehrung-des-mindestlohns
39 European Commission, nt. (1), Art 4.
40 Ibid, art. 9.



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Torsten Müller                                                                   Issue 1, Vol. 14 (2021)
                                                                                        Section: Theme


Europe; in seven Central and Eastern European EU Member States, less than a quarter of
the workforce is covered by a collective agreement.


Figure 2: Collective bargaining coverage in EU countries, 2019*
Workers covered by collective agreements in % to all workers eligible to collective bargaining




   * 2019 or most recent value available.
 Source: OECD/AIAS ICTWSS Database                     (https://www.oecd.org/employment/ictwss-
database.htm).



8. Four fault lines in the conflict about the proposed Directive.

    The proposed Directive for adequate minimum wages in the EU currently is one, if not
the core political project that aims to strengthen the social dimension of European
integration by means of a fundamental reorientation of European labor policy. It is therefore
not surprising that it is highly contested and has met with particularly strong political
resistance, so that at the time of writing in June 2021 its adoption can by no means be taken
for granted. There are at least four fault lines in the conflict about the proposed Directive.
    The first fault line is the classic conflict between capital and labour. During the last
decades, the dominant mode of European integration driven by marketisation and
liberalisation has contributed to a significant shift in power relations in favour of capital. The
proposed Directive represents a political project which aims to somewhat rebalance power


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                                                                                                       Section: Theme


relations in favour of labour. It is therefore not at all surprising that the vast majority of
European trade unions --despite numerous criticisms in the detail -- overwhelmingly
supports the draft Directive,41 while most European employers' associations, which naturally
have little interest in substantially strengthening the employee side, reject the entire initiative
outright.42 In both camps, however, there are also different, or at least nuanced, views: The
trade unions from Denmark, Sweden and Norway, for instance, strongly reject the proposed
Directive43, while the peak employers’ association in France has expressed its cautious
support for a European framework regulation on minimum wages.44
    The divergent positions within European trade unions and employers’ associations’ point
to a second fault line between representatives of different national wage-setting regimes. The
harshest critique comes from Denmark and Sweden, where almost all social actors from the
government to employers, trade unions and all major political parties from the right to the
left reject the Directive as a threat to the "Nordic model" in which minimum wages are
exclusively set by collective agreements. In contrast, there are also countries, such as Finland
or Italy, in which there is no statutory minimum wage in place, but whose governments and
the trade unions endorse the Directive. The majority of EU Member States with statutory
minimum wages seem to see at least no systematic problem with the Directive related to their
own wage-setting regimes. Some of them, such as France, even strongly support the
Directive, since the proposed framework might be interpreted as a European prolongation
of their own national wage-setting regime which links a relatively high statutory minimum
wage with high collective bargaining coverage.
    A third fault line reflects the political and socio-economic orientations of the actors
involved. More leftist governments, for instance in Spain and Portugal, have shown strong
support for the Directive. In the case of Denmark and Sweden, however, the principal
political orientation is overlaid by the institutional logic of the particular wage-setting
regimes, so that even social-democratic-led governments have rejected the proposed
Directive. In contrast, more neo-liberal governments, such as in Austria and the Netherlands,
as well as the more right-wing populist governments in Poland or Hungary have so far
expressed their resistance to the Directive. There are also many governments which have not
yet taken a clear position (among them the German government), so that it remains an open
question whether the Directive will in the end find a sufficient majority within the EU
Council.
    These three fault lines also characterize the debates within the European Parliament. The
draft report of the European Parliament, which was jointly written by two representatives of
the largest political groups – the European People's Party (EPP) and the Progressive Alliance
of Socialists & Democrats (S&D), not only shows a strong endorsement for the


41 European Trade Union Confederation, Crucial wages directive needs improvement, press release of 28 October
2020, https://www.etuc.org/en/pressrelease/crucial-wages-directive-needs-improvement
42 Business Europe, Proposal for an EU directive on fair minimum wages - a Business Europe position paper, Brussels, 4

December 2020, https://www.businesseurope.eu/sites/buseur/files/media/position_papers/social/2020-12-
04_pp_minimum_wages.pdf
43 Risgaard L. et al., EU wage minimum undercuts Scandinavian model, in Eurobserver, 23 November 2020

https://euobserver.com/opinion/150145
44 De Comarmond L., Salaire minimum: les syndicats et le patronat français appuient la directive européenne, in Les Echos

29 April 2021.

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                                                                                                        Section: Theme


Commissions’ proposal, but encourages even more far-reaching and binding regulations.45
The European Parliament’s draft report, for instance, proposed to move the decency
threshold of 60% of the median wage and 50% of the average wage from the recitals to the
actual legal text of the Directive, which would give them a more binding character.46 The
final position of the European Parliament, however, is still very uncertain, as it is currently
addressing more than 800 amendments to the draft report proposed by Members of
Parliament from all political groups.47
    Finally, there is a fourth legal fault line. Critics of the Directive have argued that the
European Union has no regulatory powers at all in matters of wage policy. They justify their
view with reference to Article 153(5) of the Treaty on the Functioning of the EU (TFEU),
which explicitly excludes the determination of pay from the EU's regulatory competences in
the field of social policy. Accordingly, the proposed Directive is seen as contradicting this
article.48
    The European Commission, by contrast, views its proposal as fully covered by Article
153(1b), which gives it regulatory competences in the field of 'working conditions'. Since the
proposed Directive does not require Member States to set statutory minimum wage at a
specified level nor to introduce a specific system for setting minimum wages, the exclusion
of competences in Article 153(5) TFEU does not apply in this case. European regulations,
which only indirectly affect wage developments, are permitted under European law and are
also covered by the case law of the European Court of Justice. 49
    In the meantime, this view has also been confirmed by the Legal Service of the Council
of the EU.50 However, the legal basis for the Directive remains contested and its justification
moves on a fine line. For the proponents of the proposal this creates a fundamental dilemma:
in order to ensure the highest possible effectiveness and efficiency, the provisions of the
Directive should be as precise and binding as possible. Above all, the double decency
threshold of 60% of the median wage and 50%of the average wage should be a binding
criterion for adequate minimum wages. The more binding the requirements for adequate
minimum wages are formulated, however, the greater the legal burden of proof that the rules
are still covered by EU law.




45 European Parliament, Draft Report on the proposal for a directive of the European Parliament and of the Council on the
adequate minimum wages in the European Union, Committee on Employment and Social Affairs, PE689.873v02-00,
6 April 2021, https://www.europarl.europa.eu/doceo/document/EMPL-PR-689873_EN.html
46 Ibid., 30.
47 European Parliament, Amendments 80 – 918 on the draft report by Dennis Radtke and Agnes Jongerius on

the proposed directive on adequate minimum wages in the European Union, Committee on Employment and
Social Affairs, PE692.765v02-00, 18 May 2021
48 See for example: Franzen M., Der Vorschlag der EU-Kommission für eine Richtlinie über angemessene Mindestlöhne in

der Europäischen Union vom 28.10.2020 – kompetenzrechtliche und anwendungsbezogene Fragen, in Zeitschrift für Arbeitsrecht
(ZFA), 52 (2), 2021, 157-176; Thüsing G., Hütter-Brung G., Soziale Gerechtigkeit ultra vires – Kritische Anmerkungen
zum Entwurf einer Mindestlohnrichtlinie, in Neue Zeitschrift für Arbeitsrecht (NZA), 38 (2), 2021, 170-175.
49 Di Federico G., The Minimum Wages Directive Proposal and External Limits to Article 153 TFEU, in Italian Labour

Law E-Journal, 13 (2), 2020, 107-111; Eichenhofer E., Entwurf einer EU-Richtlinie über angemessene Mindestlöhne, in
Arbeit und Recht, 66 (4), 2021, 148-155.
50 Legal Service of the Council of the EU, Opinion on the Commission proposal for a Directive of the

European Parliament and of the Council on adequate minimum wages in the European Union - Legal basis,
Brussels, 9 March 2021 (OR. en) 6817/21.

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Thorsten Schulten                                                                   Italian Labour Law e-Journal
Torsten Müller                                                                             Issue 1, Vol. 14 (2021)
                                                                                                  Section: Theme


9. Outlook.

    Considering the dominant path of EU economic and social policy in the last decades, the
proposed Directive on adequate minimum wages represents a paradigm shift towards a more
social Europe. Its adoption would demonstrate that the structural asymmetry of European
integration is not a natural development path fixed for all time, but that it can be overcome
in certain situations by the hegemony of social forces aiming at a social re-embedding of
liberalised markets. The significant loss of legitimacy of the European integration project,
which is manifests itself in the strengthening of right-wing populist forces with a clearly
nationalist and anti-European attitude, has created a political momentum for a more social
orientation of EU policy. The Covid-19 pandemic has even reinforced this momentum by
fostering a kind of "emergency pragmatism" in the EU, which has facilitated many political
measures, especially in the area of economic policy, which were considered unthinkable only
a short time ago.51
    There is, of course, also no automatism that a more social Europe will materialise. There
are still strong social forces and significant faut lines which eventually might block social
progress. This might also be true for the proposed Directive on adequate minimum wages.
However, there is still a window of opportunity for it to finally be adopted in the first half
of 2022 under the French EU presidency.52 France is not only one of the strongest supporters
of the Directive, but will also have its next presidential elections during that time, whose
outcome will be greatly influenced by the European question.
    If the Directive would finally be adopted, there is also no automatism that everywhere in
the EU minimum wages would be increased to adequate levels. This holds even more true
for collective bargaining, since a significant increase of the bargaining coverage is not at all
easy to achieve. The EU Directive will only create a certain framework, while the final
decisions and implementation will remain at national level. However, an EU Directive would
significantly frame the national debates and support those social forces which fight for
adequate minimum wages and strong collective bargaining.




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https://doi.org/10.6092/issn.1561-8048/13368                                                                19
