In a context of inflation which affects European countries, minimum salaried workers in 15 of the 21 Member States with a minimum wages recorded a decline in their wages in real terms between January 1, 2021 and January 1, 2022. This despite relatively large increases in nominal rates EU during the period.
The impact of inflation on low wages is an important aspect of Eurofound’s work Minimum wages in 2022: Annual reviewpublished shortly after the political agreement on a minimum wages between the European Parliament and the EU Member States. The Eurofound report shows that there are already signs that the proposal for a directive is having a positive impact, with certain actors refocusing the debates on the subject, preparing possible changes to the system or the criteria for setting wages, or upgrading wages in accordance with the “international reference values” mentioned in the proposal.
In statutory nominal terms minimum wages increased to a greater extent than the previous year in most Member States. In five regions of the center and east European Member States, the percentage increase in statutory rates reached double digits: Hungary (19.5%) and Lithuania, Estonia, Romania and Croatia (all above 10%). In the pre-enlargement Member States, minimum wages generally increased more modestly, with the largest increases reaching 4-6% in Portugal, Spain and Belgium.
However, inflation reversed the effects of these increases in most Member States. If current inflation trends continue, minimum wages will hardly increase in real terms in any country in 2022, and significant losses in the purchasing power of minimum wage earners will become a dominant theme – unless the problem is solved by additional increases or other support measures for low-wage earners during the year.
The report indicates that substantial debates between national actors on how to promote collective bargaining and increase bargaining coverage take place only in Denmark, Latvia and Norway (also analyzed in addition to EU Member States). The establishment of action plans to promote collective bargaining is an important element of the new EU directive on minimum wages and will be an essential requirement for Member States.
The report also shows that minimum wages can play a key role in reducing wage inequality. Findings for Spain show that the impact of the 22% increase in minimum wage in 2019 led to the largest reduction in wage inequality in EU Member States the same year. This is probably due to the minimum wage increase, which counterbalanced the high level of wage inequality in Spain, a gap that had widened in the year preceding the increase.
Speaking on the release of the report, Eurofound’s Executive Director Ivailo Kalfin said “This research clearly shows that although there have been substantial nominal changes in minimum wages in several Member States, these are unlikely to be felt sufficiently in real terms by low earners. The provisional agreement between the European Parliament and Council come at a crucial time, we must ensure that low wages are as protected as possible from the large-scale effects of inflation across Europe.”
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