Minimum wages are a matter for national governments, not the EU

European Commission must avoid taking ‘misguided action’ on minimum wages argues EESC‘s Stefano Mallia.
Stefano Mallia

By Stefano Mallia

Stefano Mallia is President elect of the EESC Employers' Group

19 Oct 2020

The Employers' Group of the European Economic and Social Committee (EESC) – which gives voice to Europe's employers' organisations at the EU level -- has taken a clear stance against any binding EU action on minimum wages.

As employers, we have fundamental doubts about the need, feasibility, added value and legal basis for any kind of EU action. In her State of the Union address, European Commission President Ursula Von der Leyen pledged to propose a legal instrument to support Member States in setting up a framework for minimum wages.

While it is still unclear what the Commission will propose, it is important that various concerns raised by employers with regard to this initiative are also discussed in EU Member States.

During recent discussions, organised by the EESC, a number of stakeholders, especially businesses and employers' organisations, expressed their strong opposition to any form of a legally binding instrument, both for reasons linked to the lack of EU competence and more importantly, because of the harmful effects such an initiative would have on national collective bargaining systems.

The EESC contributed to the debate through its recently published opinion entitled “Decent minimum wages across Europe”. This opinion is in itself a reflection of different views, also present at the national level, as to whether the EU can or should indeed take any action on minimum wages.

One of the main points of controversy highlighted in the EESC opinion is whether any EU legal initiative, especially a directive, would be legitimate. The firm view of European employers is that the EU treaties exclude any kind of EU competence when it comes to the setting of wages.

For the Employers' Group, it is clear that the EU has no competence over wages, particularly wage levels. Setting minimum wages is a matter for the national level, to be done in accordance with the specific features of respective national systems.

"Employers across Europe are fighting for survival; therefore, it is crucial that at this particular point in time we avoid any misguided action on the part of the EU"

Similarly, the EU does not have competence to intervene in national collective bargaining systems: shaping national systems is a matter for a Member State, not for the EU.

Employers strongly believe that mutual learning and the European Semester can be used to find solutions that address country specific realities while taking into account the diversity of national circumstances and industrial relations systems.

The COVID-19 pandemic has hit Europe hard. In the second quarter of 2020, euro area GDP fell by 14.7 percent compared to 2019. We are facing an economic recession of historic proportions with dramatic consequences for people and businesses.

I firmly believe that we have not yet seen the full impact of the crisis which is to hit capital and labour markets. This makes it even more important that the topic of minimum wages is approached in a manner that fully takes into account the economic consequences of any action.

 Employers across Europe are fighting for survival; therefore, it is crucial that at this particular point in time we avoid any misguided action on the part of the EU.

It must not be forgotten that wages – including minimum wages - are first and foremost a compensation for work done. They cannot be seen as the silver bullet that will address poverty, which we are unfortunately witnessing to be on the rise, especially in this time of crisis.

Minimum wages must be seen in the light of the economic realities we are living in, as well as in the light of the social packages being provided by individual Member States.

"What we must avoid at all costs is that we fall into the trap of coming up with a one-size-fits-all approach that will trigger serious negative consequences from which it will then be difficult to disengage"

Accordingly, the debate on this topic cannot exclusively focus on the fairness or adequacy of minimum wages. It should also be about safeguarding the sustainability and economic viability of the companies that provide jobs. If companies become unviable, then jobs will inevitably be lost.

Despite the fundamental differences in views within the EESC on a number of questions, there are also important issues on which the EESC's three groups - representing employers, trade unions and NGOs respectively – agree upon.

One such issue is, for instance, the need to respect different features of national social dialogue and collective bargaining systems and the autonomy of social partners. There is also a consensus on the importance of involving social partners in the statutory minimum wage setting systems.

The Employers' Group is concerned that a wrong kind of EU action on minimum wages would only end up weakening the role and autonomy of social partners and harming social dialogue and collective bargaining systems that are already working well in a number of Member States.

It is not possible to transplant a system of one country to another. However, there is scope for discussions on how to ensure that national systems produce the best outcomes both for employers and for workers. Where social partners need support, we should look into addressing specific needs by promoting exchanges of best practices and capacity-building.

What we must avoid at all costs is that we fall into the trap of coming up with a one-size-fits-all approach that will trigger serious negative consequences from which it will then be difficult to disengage.

This is not something we can afford, especially at this particularly sensitive juncture.

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