As early as 2020, the Commission is proposing a draft law on EU-wide standards for minimum wages. Now the states agree on a compromise. Germany also has to take additional measures in one area – despite the recently decided increase in the minimum wage.
EU states and the European Parliament have agreed on uniform standards for minimum wages in the European Union. According to the European Parliament’s chief negotiator, Dennis Radtke, the compromise includes standards on how statutory minimum wages are to be set, updated and enforced. In addition, the draft law stipulates that EU countries must define action plans to increase collective bargaining coverage if the rate is below 80 percent, said the CDU politician. The lives of millions of workers will improve significantly.
The EU countries announced that statutory minimum wages should be updated at least every two years in the future. There is an exception for countries that use an automatic indexation mechanism – for example, when salaries automatically increase with inflation. A period of four years applies here. According to the information, the social partners must be involved in the procedures for setting and updating the minimum wage. Both sides have yet to formally confirm the compromise. The EU countries then have two years to transpose the directive into national law.
Federal Labor Minister Hubertus Heil described the 80 percent target as an ambitious plan. “But we have instruments that make this possible – such as a federal law on adherence to collective agreements, so that public contracts go to companies that pay collective wages,” said the SPD politician on the sidelines of an OECD meeting in Paris. “The value of work in particular must be important throughout Europe: anyone who works must be able to make a reasonable living from it – that applies in Stockholm and Lisbon as well as in Berlin and Bucharest.”
In Germany it was recently decided that the minimum wage should rise to twelve euros from October 1st. Germany already has one of the highest minimum wages in the EU. Only in Luxembourg is more paid, according to information from the Federal Statistical Office and the Federal Ministry of Labor. However, the rate of collective bargaining coverage in the Federal Republic – i.e. how many employees benefit from collective agreements – is well below the 80 percent that is now being aimed for. According to the Federal Statistical Office, Germany was 44 percent in 2019.
In October 2020, the EU Commission had already proposed a draft law. With the agreement that has now been reached, the challenge was that the EU treaties set narrow limits: the European Union may not set any specific wage levels, but only issue guidelines. This is one of the reasons why Nordic countries in particular, which do not have a statutory minimum wage but have a relatively high collective bargaining agreement, were critical. They fear that Brussels will interfere too much in national affairs.
Denmark’s Labor Minister Peter Hummelgaard was disappointed by the negotiations. There is no doubt that Denmark never wanted an EU law on minimum wages. The agreement that has now been negotiated will be looked at closely, the minister said. The German employers’ president, Rainer Dulger, also expressed criticism: “European criteria for the appropriateness of national minimum wages will continue to politicize wage setting in a dangerous manner.” He asked Germany to vote against the bill.
On the other hand, there is praise from the Greens: “Many citizens are struggling to make ends meet, and that is why this agreement must be translated into higher wages as quickly as possible,” said Katrin Langensiepen, deputy chair of the Committee on Employment and Social Affairs affairs in the European Parliament.
The EU Parliament was not able to assert itself in the negotiations with the demand that the amount of minimum wages should be determined on the basis of average values. “We now have a Cola light, but with a lot of taste,” said Radtke. You give a very “clear recommendation” to the EU countries. This is that minimum wages are fair and equitable if they reflect 60 percent of the median income and 50 percent of the average income. The median is also known as the mean wage and is an arithmetic variable: 50 percent of employees earn more, 50 percent less. According to the Ministry of Labour, a minimum wage of twelve euros amounts to 2064 euros – for comparison: half of the average wage in Germany is around 1988 euros, 60 percent of the median is around 2056 euros.
