Taking Stock of the EU's Minimum Wage Directive
A Conversation with Business Europe's Maxime Cerutti
In May 2021, EU leaders convened in Porto and vowed to pursue the implementation 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 when inflation is skyrocketing.
We had a chat about the proposal with Maxime Cerutti, social affairs director at Business Europe.
When the European Commission issued the proposal, Business Europe underlined that it did not believe a directive was a suitable option. Can you walk us through the risks that you identified with the EU Minimum Wage Directive ?
The issue of EU intervention on the matter has been very controversial from the start, as the Treaty identified the matter as a national competence. That means that this is not a topic where the EU is a legitimate player from the perspective of regulating minimum wages.
Within the EU, we have a very diverse picture in terms of how different Member States proceed with setting minimum wages, and how cooperation between or with social partners is organized. We have, on the one side, what you call the statutory minimum wage systems, and on the other systems where the minimum wage is decided via collective agreements.
One of our key concerns since the outset of this debate has to do with the nature of the chosen instrument. The truth is that a directive creates judicial competence of the European Court of Justice (ECJ). And that means that in future EU case law will look into practical cases in the Member States that are related to minimum wage setting. Instead, we argued that the preferred tool should have been a Council recommendation rather than a directive.
Another concern is that the newly agreed Directive sets a goal of reaching 80% of collective bargaining coverage in the EUMember States.. It is true that there are more than 10 Member States with rather weak social partners and, in these countries,we are calling for much better support to build up the capacity of social partners so that they can grow and develop into stronger organisations. However, setting a goal in law is a way of intervening in the freedom to decide whether to join an employer or trade union organisation and in the way in which industrial relations are organized in particular Member States. We are very much in favor of social dialogue based on free choice. There is no blueprint on how to improve social dialogue and the issue here is the essential need to respect social partners’ autonomy.
Finally, the compromise reached between the European Parliament and the Council is a concern because it includes some quantitative targets for minimum wage setting in the provisions of the directive, rather than in the recitals — i.e.50% of the average wage and 60% of the median wage. In our view, setting the level of minimum wages is and should remain a national competence.
What about the economics of the proposed directive ?
A key concern is also the very high inflation that is there.Skills shortages and recruitment difficulties are leading to market driven wage increases. Political intervention, like the minimum wage directive, is likely to fuel further inflationary effects, whereas we need to do everything to avoid a wage price spiral in this economic context. It is very important that social partners act responsibly and ensure that their wage deals do not fuel inflation.
What do you expect now that the directive is out ?
The next step is for the Member States to transpose this directive in their national legislation. This transposition process will be very important to ensure that the directive's application respects the diversity of national industrial relations systems.