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Commentary of the Union of Entrepreneurs and Employers on the European minimum wage

Warsaw, 26th November 2021

Commentary of the Union of Entrepreneurs and Employers on the European minimum wage

Position of the European Parliament on the directive on adequate minimum wages in the European Union.

On 11th November 2021, the European Parliament’s Committee on Employment and Social Affairs (EMPL) adopted the Parliament’s position regarding the European Commission’s proposal for a directive on adequate minimum wages in the European Union. The position provides for making part of the proposals contained in the draft directive stricter.

The first proposed amendment concerns Article 4 of the draft directive. Under the original proposal, member states with collective bargaining coverage less than 70% of workers should establish a framework of favourable conditions for their conduct, by law after consultation with the social partners or by agreement with social partners, and subsequently establish an action plan to promote collective bargaining. According to EMPL’s adopted position, the required percentage of employees covered by collective bargaining should amount to 80%.

It is also proposed to include thresholds among the rules for determining the minimum wage in an individual member state. These thresholds should come up to 50% of the average gross wage and 60% of the median gross wage in a given country. The draft directive referred to these values only as an example of recognising the minimum wage as “adequate”, whereas the proposed amendment introduces these values directly into Article 5 of the draft directive.

Yet another major amendment is the removal of the entire Article 6 from the draft directive. It provides that member states could, in certain cases, allow different levels of statutory minimum wage for specific groups of workers. This provision would also allow for the possibility to apply specific deductions which could bring workers’ remuneration below the minimum level.

While it is true that the proposed position does not require a plenary vote by the Parliament, the Scandinavians have already announced that they would seek to vote. In Sweden and Denmark, minimum wages are as a rule the subject of agreements between employers and employees. Their culture differs from most European countries in terms of minimum wages, as it is not established by law, and yet, thanks to extensive negotiations, even the lowest wages are quite high.

The opinion of the Union of Entrepreneurs and Employers on the directive on adequate minimum wages in the European Union.

The Union of Entrepreneurs and Employers has expressed its views on the issue of the minimum EU wage on many occasions. We believe the directive might be harmful to both the labour market and the European economy. It can aggravate the situation of the most vulnerable workers, make it harder for the EU to recover from the ongoing crisis, and disrupt well-functioning collective bargaining systems. And above all else, we oppose the introduction of the directive on grounds that the EU lacks the necessary competences to act in the field of wages. The political nature of the European Pillar of Social Rights is non-binding, and the directive is bound to have negative effects both in social and economic terms. Referencing Art. 153 sec. 1(b) of the Treaty on the Functioning of the European Union as the basis for the proposed changes does raise objections too. Indeed, this provision gives the Union the possibility to support member states in activities related to working conditions, however, the same article in sec. 5 expressly states that “the provisions of this Article shall not apply to pay (…)”.

In the opinion of Union of Entrepreneurs and Employers, the amendments to the directive proposed by EMPL constitute further interference of the European Union in matters in which it should not interfere at all. Should we assume that Art. 153 sec. 1(b) provides for interfering with the minimum wage policy in individual member states, these activities should only be of a supportive nature, instead of negating consultation mechanisms efficiently operating in certain countries (particularly in Scandinavia).

The solutions proposed in the directive may also contribute to the inflation crisis in Europe. Increasing wages should go hand in hand with growing GDP and depend on the market, not only on a legal framework imposed by means of a political decision. Some employees may find themselves at a weakened position as a result of these changes, as employers, fearing additional costs, may be reluctant to offer employment contracts, and will only offer part-time jobs.

What we also find worth emphasising in this context is the fact that the directive will not bring about any significant changes in terms of remuneration in Poland. The Polish minimum gross salary amounts currently to PLN 2,800, and it will increase to PLN 3,010 as of January 2022. Meanwhile, the average monthly salary in the enterprise sector, including profit payments, in the third quarter of 2021 amounted to PLN 5,885.75. This means that EU regulations will have little to no impact on the policy regarding the lowest wages in our country. On the other hand, the introduction of the directive will result in further formalisation of the labour market, and will therefore limit the possibilities of shaping the minimum wage policy in the future, especially in a crisis.

See more: 26.11.2021 Commentary of the Union of Entrepreneurs and Employers on the European minimum wage

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