New EU directive on minimum wage and standard of living

With 505 votes in favor, 92 against, and 44 abstentions, European Parliament adopted new legislation on adequate minimum wages in the European Union (EU) on September 14, 2022. The minimum wage should ensure a decent standard of living, while EU rules must respect national wage-setting practices.

   The new directive will apply to all EU workers who have an employment contract or employment relationship. The EU countries in which the minimum wage is already protected exclusively via collective agreements will not be obliged to introduce these rules nor to make these agreements universally applicable, according to the EU statement.

   Most importantly, countries will still have the power of setting the wages. However, the difference is that member states must guarantee that their national minimum wages allow workers to lead a decent life, considering the cost of living, and wider pay levels. In particular, the national criteria shall include at least the following elements:

a) the purchasing power of statutory minimum wages, considering the cost of living,

b) the general level of wages and their distribution,

c) the growth rate of wages,

d) long-term national productivity levels and developments.

   Also, in countries where fewer than 80% of workers are covered by collective bargaining will have to establish an action plan to increase the coverage.

   One of the crucial aims of the Union is to promote the well-being of its peoples and to work for the sustainable development of Europe based on a highly competitive social market economy, aiming to ensure full employment, social progress, a high level of protection, and an improvement of the quality of the environment while promoting social justice and equality between women and men (Article 3 of the Treaty on EU).

   In practice though, governments do not always follow such aims. Not all workers are effectively protected by minimum wages. Not all workers can have a contract aiming on their well-being. For instance, temporary work, on-demand work, short-term contracts, and part-time employment are just a few examples of work conditions today.

   Monitoring of the minimum wage and reliable data collection on a state level is critical. Authorities must help employees instead of tackling their ability on employee voice. Workers and their representatives must be able to defend their rights relating to minimum wage protection and other relative pay schemes.