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Fearing poverty, the Swiss from Geneva have recently approved the introduction of the highest guaranteed minimum wage in the world: 4,086 Swiss Francs, meaning about 3,700 Euro. Being promoted by left-wing parties and trade unions, this measure aims at fighting Corona-virus induced poverty in the said Swiss city, yet it also comes right in time to be grist to the mills of EU discussions referring to the minimum guaranteed wage.

On the 16th of September, the European Commission was confirming its intention to urge the establishment of a minimum wage, meant „to offer a decent living standard” to each citizen from the Community. More recently, at the end of October, the European Commission proposed an EU regulation to protect workers throughout the Union, that aims at establishing minimum wages for a decent living irrespective of the workers’ location of employment. When they are established at adequate levels, „minimum wages have not only a positive social impact, but also bring broader economic benefits, because they reduce salary inequalities, contribute to maintaining national demand and raise motivation at the workplace”, as the Commission shows in its motivation. The Union’s executive power stresses the fact that the current economic situation has particularly affected the branches where low-wage workers represent a majority, such as cleaning services, retail commerce, healthcare and long-term care services.

Yet it is not known in what way the same minimum wage could be imposed on all member states that depend on national economic, fiscal and budget policies currently not aligned and very difficult to align in the future as well. For the time being, the von der Leyen Commission is trying rather to establish a common calculation standard that should lead to obtaining a minimum wage of 60% of the national average. According to the Bruxelles experts, the minimum wage would stimulate work, would enhance productivity, raise the domestic demand and the economy’s resistance and could contribute to a reduction of the income divide between men and women. The Commission’s proposition, that will have to be negotiated with the governments of member states and the European Parliament, is only establishing the common standards for a minimum wage, and „creates a framework to make minimum wages more adequate and facilitate the access of workers to the protection offered by the minimum wage in the EU. It does not oblige member states to introduce a legal minimum wage and also does not establish a common level of minimum wage”, as the European Commission states. In crisis periods, the dignity of work must be sacred. These are the words of the President of the Commission, Ursula von der Leyen, cited by Euractiv: „What we are planning today is a framework for minimum wages, in full respect of national traditions and freedom of social partners. The improvement of work and life conditions will not protect our workers only, but also the employers who are paying decent salaries, and will create a ground for a fair, inclusive ad resilient economic revival”.

Yet, some critics of the concept are emphasising that the imposition of a minimum wage at a European level will result in an increase of inflation and massive attrition of jobs, especially from small and middle-size entrepreneurial companies and from micro-enterprises, where the wage burden exerts heavy pressure on the companies’ budgets. To this, the European Commission’s leader’s reply was that „the dumping height wages are destroying the dignity of work, punishing employers who are paying decent salaries and distorts fair competition on the common market”. Consequently, the existence of a minimum wage for a decent living will bring fresh wind into the wings of the European labour force.

In a context in which the minimum wages vary from a little over 300 Euro monthly in Bulgaria, to over 1,200 Euro monthly in Luxemburg, the big discrepancies can be found in the utter differences in the political approaches on the matter as well. The European Executive wishes to press for „collective negotiation, and the proposition will fully respect the possibilities of various nations and their traditions”, as Ursula von der Leyen was saying, having in mind the reaching of a set of clear and stable criteria for all national states, and referring to a process of negotiation between all trade unions and all employers, and to „functional” monitorisation mechanisms.

Yet, the idea of a European minimum wage has not seduced everybody. Barclays Capital’s main economist, Thorsten Polleit, was testifying for DW that when it comes to consolidation of the growth and employment of labour all over Europe, the minimum wage is „most surely the wrong instrument”, since in the rich areas of Europe, wages are „too big”, and a minimum wage would not contribute to the creation of so much needed jobs in lower-wage regions with poor economies. Other critics maintain that minimum wages are holding less productive workers from entering the labour market, and this interdiction in its turn creates a rise in underemployment. The only way to solve this problem remains the open interplay between demand and offer, a game in which the minimum wage finds no place. Critics of the minimum wage are thus maintaining that these policies are nothing else but protectionism against the unwanted competition.

John Monks, General Secretary of the European Trade Union Confederation, says that minimum wages will be advantageous for foreign workers that could be protected by a collective agreement or by a powerful legal minimum wage mechanism. Fiscal consultant Mihaela Mitroi, EY România partner, shows that along with the benefit of reducing inequalities among citizens, a raise of minimum wages will expand the base of taxation, stimulate domestic consumption and demand, which in turn will only help the economy recovery.

From a realistic perspective, differences between countries are currently too big for a European salary harmonisation. A minimum wage level that would be acceptable in Latvia would be too small for Germany, and an amount that would work well in Romania would be insufficient in Belgium. At the present moment, the discrepancies are simply too big to ask for a harmonized minimum wage. In the richer countries (for example, the northern member countries), the minimum wage is the result of collective negotiations, while in countries with weak economies, such as Romania, the minimum standard is established – with a deep electoral appeal – by the Government.

In the European Union, the magnitude and complexity of economic and social inequalities between north and south and east and west renders the problem impossible to solve by means of a European minimum wage alone. In many poorer countries – such as Romania – it is a complex of factors such as saving, financial stability, cost efficiency and above all investments in human capital that can together lead to a rise of individual welfare and a boost of the domestic economy. And above all, the minimum standard desired by Europeans can be assured by better economic and financial education.

Given the reality of so different stages of development of national economies, and in the absence of common economic and fiscal policies, an equal degree of welfare of all Europeans remains a chimera and, most certainly a European political dilemma as well.

Author: Daniel Apostol

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