Interview | An EU Minimum Wage ?
A Conversation with MEP Dragoș Pîslaru, Chair of the EMPL Committee
In May 2021, EU leaders convened in Porto and vowed to the deepening of the European Pillar of Social Rights. On 7 June, in the last weeks of the French Presidency of the Council of the EU, the European Parliament and the Council reached a provisional political agreement on the draft directive on adequate minimum wages in the EU at a time where inflation is skyrocketing.
Dragoș Pîslaru, from Romania, is chair of the Employment Committee of the European Parliament (EMPL) was elected as an MEP in 2019. He sits with the Renew Europe group. He has previously worked both in the private and public sector, and was Romania’s Minister for Labour, the Family, Social Welfare and the Elderly in 2016-17.
What will the directive change for companies and workers ?
There are two main packages of changes, that should improve the issue of minimum wages for both sides of the social dialogue spectrum, while also helping countries without a statutory minimum wage decrease instances of in-work poverty.
First the directive sets out a clear and predictable set of criteria that Member States should follow when setting statutory minimum wages. This includes the cost of a national basket of goods and the real cost of living, as well as indicative values that government may use, such as 60% of the gross median wage and 50% of the gross average wage. This set of criteria, indicative as it is, gives countries common, predictable tools to use, avoiding politicking and bickering, taking the politics out of what should be a very objective decision. Companies therefore will find it better as they will be spared the vagaries of political decisions and have a predictable approach to follow.
Second, the directive lays down a minimum ceiling of 80% coverage for collective bargaining for all EU countries, both those that have minimum wages and those where social partners engage to define the issue. While this can be done in such a way as to protect national practices, the objective is common and that is to give more workers access to adequate representation in collective bargaining and to social dialogue. In turn this will make the process in all Member States more representative of real needs. The commission will support this objective through technical assistance and an Action Plan.
Minimum wages vary widely across the EU, ranging from 332 euros in Bulgaria to 2,202 euros per month in Luxembourg.
The directive states that Member states may apply indicative reference values commonly used internationally, such as 60% of the gross median wage and 50% of the gross average wage. How binding are these reference points ? How will the directive avoid weakening the competitiveness of countries which depend on lower relative wages for their exports ?
The word “may” is key here. Of course, as this is one of the key reference points, many member states could be compelled to use it. At the same time, it is proportional to local specificities and respects national wage differences. This means that countries that are competitive through a healthy dynamic of labor competition and adequate skills should not lose this edge, while at the same time ensuring that nobody has to suffer in-work poverty. If there are workers who simply cannot afford a decent life for themselves and their families while in full employment, that has little to do with healthy or sustainable competition. Businesses suffer long term from that as well.
Since January, eight negotiating rounds have taken place between the Council and the European Parliament. What were the main sticking points between the European Parliament and the Council ?
In truth there have been eight main negotiations or trilogues, at political level, but dozens and dozens of technical meetings and negotiations. Everything was negotiated to the bone and we still have to see the Directive pass the vote of the Council of the EU and of the Plenary of the Parliament. Some of the key points were issues like the indicative nature of criteria, the solutions available to countries without statutory minimum wages but also their gains from this Directive, or issues like Article 6 that deals with variations and exceptional deductions from the statutory minimum wage rate for specific groups of workers.
EU negotiators agreed that EU countries will have to strengthen sectoral and cross-industry collective bargaining as an essential factor for protecting workers by providing them with a minimum wage. Member States in which less than 80% of the workforce is protected by a collective agreement will have to create an action plan to progressively increase this coverage. Do you think it is the role of the EU to promote collective bargaining ?
In 2020, BusinessEurope Director General Markus J. Beyrer chastised the proposal as ‘quasi-compulsory collective bargaining imposed by public authorities’. Denmark and Sweden, where the directive will not apply, still pushed against the legislation as they consider it encroach on their social model. How do you view this argument ?
First of all, the directive will apply in all Member States. How it will apply, that is however for the Member States to define, within the framework drawn by the co-legislators of the Union, which are formed also by representatives from Sweden, Denmark and all other countries without statutory minimum wages.
As the Chair of EMPL I seek balance and I find that the needs of businesses are just as important as those of workers. We worked hard to find a middle ground in this text, and that is why I think predictability and de-politicising the establishment of minimum wages is something that also helps business.
Concerning collective bargaining is promoted by principle 8 of the European Pillar of Social Rights, which was signed in Gotherborg, Sweden, by all EU members, but is also a very old and healthy practice in many countries, starting with the Scandinavian Member States. It has many benefits, if done properly, and helps also employers. However, unequal coverage can create imbalances, thresholds, can create discrimination and empower some sectors over others, represent better some workers over others. More people at the negotiating table, or more people being represented, from both sides, can only lead to more inclusive decisions.
If some countries have fears, I also believe the Directive gives them the breathing space to implemented in such a way that any possible disturbances are avoided. It is up to them.
Romania on the other hand only has a coverage of about 20%, which obviously is way below any acceptable norms. This makes the process very skewed and as such a push, complete with the technical assistance that the Commission will offer, is more than necessary.
What are the next steps for the proposed directive ? And when it is meant to enter into force ?
Next steps are a vote in the Council of the EU and one in the Committee on Employment and Social Affairs, both in June. Afterwards a plenary vote in the European Parliament and then, well, two years for implementation, replete with full assistance from the Commission to Member States to do so.
