The new EU directive aims to set transparent minimum wage standards, such as a threshold of 60% of the median wage and recommends regular indexation to help maintain purchasing power amid rising prices. Establishing a statutory monthly minimum wage is seen as essential in the fight against poverty.
This year marks a major step toward improving living and working conditions in EU member states, as the new EU directive on minimum wages is set to take effect by November 15.
Overview of Minimum Wage Thresholds in the EU
Currently, 22 of the 27 EU countries have established minimum wage levels. Five countries—Denmark, Italy, Austria, Finland, and Sweden—have not implemented a minimum wage threshold. Cyprus introduced its minimum wage only last year. Among the 10 candidate and potential EU candidate countries, eight have established a national minimum wage, including Montenegro, Moldova, North Macedonia, Georgia, Albania, Serbia, Turkey, and Ukraine, while Bosnia and Herzegovina and Kosovo do not have a minimum wage.
In countries where minimum wage laws exist, levels vary greatly. For instance, Luxembourg’s monthly minimum wage stands at €2,571, while Bulgaria’s is €477.
In two-thirds of EU countries, pre-tax minimum wages are below €900.
Adjustments for Purchasing Power
When adjusted for purchasing power standards (PPS), the disparities in minimum wages across Europe decreased. This adjustment considers the cost of goods and services in each country, making it possible to compare the effective purchasing power of wages. According to Eurostat, the PPS-adjusted minimum wage ranges from €542 in Albania to €1,883 in Germany.
Share of Workers Earning Minimum Wage
In several countries, a notable percentage of workers earn close to the minimum wage. In 2018, more than 10% of workers earned less than 105% of the national minimum wage in countries like Slovenia, Bulgaria, Romania, Poland, and France. Countries like Germany also saw this rate above 5%.
Determining an Adequate Minimum Wage
Setting an adequate minimum wage remains a challenge. The EU directive suggests using benchmarks such as 60% of the median wage or 50% of the average wage to determine adequacy. In 2022, the minimum wage fell below 50% of the median wage in 10 EU countries, including Spain, Hungary, Ireland, Croatia, Lithuania, the Netherlands, Czech Republic, Estonia, Belgium, and Latvia. Only Portugal, Slovenia, and France had a minimum wage above 60% of the median wage.
Regular Adjustments and Collective Bargaining
Inflation surges in 2022 have eroded real minimum wages in many EU countries. In response, the OECD and the EU are advocating for regular wage reviews to protect low-wage workers from inflationary pressures. The directive also encourages collective bargaining and workers' rights protection as part of the broader strategy to ensure fair wages across the EU.