According to the Eurofound’s annual review of minimum wages in the EU, there have been wage increases for minimum and low-wage earners in most EU Member States, with rises in statutory minimum wages in almost all countries since January 2018; including significant increases in Lithuania, Spain, Greece and low-wage newer Member States. While these increases are welcomed as good news for minimum wage workers, Eurofound’s research shows workers may not automatically feel the positive impacts of these changes in terms of income and reductions in wage inequality. This is because these increases can be offset by changes in taxation; that there are many groups of workers that do not avail of minimum rates; and, although women are proportionately more likely to work in minimum wage jobs, increasing the minimum wage may not mean closing the gender pay gap.
This report presents the latest developments in terms of minimum wages and the main debates around the setting of the new rates for 2019 and beyond in the EU and Norway. It complements this information with new comparative findings on workers on, around and below the minimum wage level, together with recent national policy-related research.
Several Member States in Europe have looked to address issues such as in-work poverty and the gender pay gap through increases to the minimum wage – but have pushed through changes without fully adhering to existing social dialogue processes. As a result, revisions to rates may not have been evidence based. For example, as women are more likely to be employed in minimum wage or sub-minimum wage jobs, it is assumed that increasing the minimum wage can narrow the gender pay gap, but changes to the minimum wage can decrease low paid women’s employment and increase the level of non-compliance. They can also produce ‘ripple effects’, by potentially increasing the wages of higher earners, where men are more represented, either dampening the impact, or even exacerbating the issue.
In a number of Member States there are groups of workers, such as younger workers or seasonal workers – to which the statutory rate does not apply. Depending on implementation, minimum wage changes could either increase their wages, or compound existing wage inequality. There is also the issue of taxation: in Lithuania minimum wage workers saw a large rise in the nominal rate – at 39% the nominal increase was the highest in the EU – but this was mainly a gross figure on their payslips, as changes in tax and social contributions meant that the increase to net pay was a more modest, but not insignificant, 7.5%.
Overall, these increases in minimum wage rates took place in the context of a favourable economic climate, combined with continuing labour shortages in certain areas; which increased the bargaining power of workers, and made it possible for businesses to pay higher wages. Europe also played a role, with the reference to ‘adequate minimum wages’ in the European Pillar of Social Rights sparking national debate on the issue.
For further information: Eurofound’s annual review of minimum wages in the EU – 2019