The EU Directive on minimum wages has taken an important step this week: on 7 June 2022, the negotiations between EU Commission, EU Parliament and Council reached a breakthrough in form of a provisional agreement. The main objectives of the Directive, to achieve fair wages in Europe and to strengthen collective bargaining, are important projects to advance a social Europe. It is to be welcomed that with this important socio-political legal act, the EU clearly departs from the austerity course of earlier years.
Two Pillars of the Directive
In a joint press conference, Social Commissioner Nicolas Schmit and the two co-rapporteurs of the EU Parliament, Agnes Jongerius (S&D) and Dennis Radtke (EPP), presented the key points of the negotiation results. Based on the first pillar of the legal act, Member States with statutory minimum wage systems shall ensure – by fulfilling certain criteria, such as purchasing power and cost of living - that these minimum wages are adequate. Minimum wages shall be at least 60 % of the median and 50 % of the average income and become subject to a two-year evaluation. The important second pillar provides for countries with less than 80 % collective bargaining coverage having to submit an action plan, which includes planned steps to increase collective bargaining coverage. Austria does not need to take action; however, 19 of 27 EU Member States are currently not fulfilling this 80 % criterion and therefore have to submit an action plan.
Apart from that, Member States shall also ensure that (sub-)contractors of public contracts have to adhere to wage regulations and collective bargaining rights provisions. A contentious issue of the negotiations right to the end was the question whether exceptions for certain groups of employees should be permitted. It is to be welcomed that the employee-friendly position of the EU Parliament, which does not allow any exceptions from the minimum wage, has prevailed. Overall, about 25 million employees in the EU could benefit from the Directive. The latter can also make an important contribution to closing the Gender Pay Gap: 60 % of minimum wage recipients are women.
Aligning wage differences and tackling the cost-of-living crisis
As pointed out by the ÖGB, Austria, as a “collective bargaining world champion”, where almost 100 % of jobs are safeguarded by collective bargaining agreements, is hardly directly affected by the Directive. However, due to different wages in neighbouring countries and workforce mobility, it is - very much also from an Austrian point of view - an important European legal act. Statutory minimum wages within the EU differ greatly and reach from about 332 Euro in Bulgaria up to 2,202 Euro gross (twelve times a year) in Luxembourg. Together with ÖGB President Katzian, AK President Renate Anderl also has supported the negotiation regarding the Minimum Wage Directive, among other as an important instrument in tackling wage inequality. ETUC Deputy General Secretary Esther Lynch emphasised that the Directive is even more necessary in the current cost of living crisis and that it could be a game changer for millions of working people. However, it is vital that the Directive will be properly implemented by the Member States.
Next steps by Council and EU Parliament
Now, the negotiation compromise of the trilogue has to be confirmed by EU Parliament and Council. The Council expects agreement within the scope of the Social Minister Council on 16 June 2022. EP co-rapporteur Jongerius expressed hope that still sceptical Member States such as Demark or Sweden, which fear an impact on their progressive national collective bargaining system, could be persuaded to accept the negotiation result. Council only requires a qualified majority for the legal act. Voting in the EU Parliament will probably take place in the Employment Committee at the end of June 2022 and in the plenary in September. This will be followed by a two-year national implementation period.