Closing the Chasm: Central and Eastern Europe’s Continued Minimum Wage Climb

Minimum wages in Central and Eastern Europe continue to rise, narrowing the gap with Western European levels.

Minimum wages across the European Union have been on a sharp ascent, particularly in the bloc’s central and eastern reaches, narrowing a yawning chasm in pay levels that once seemed immutable. Hiking minimum wages has become a mainstream policy, pushing wage floors higher at a clip often faster than average or median earnings. The need to attain adequate minimum wages is recognised across the bloc, including via a a new EU directive, nudging national wage-setting into line.

Among the 22 EU states with a national minimum wage (some rely purely on collective bargaining), the story for the past quarter-century has been one of remarkable convergence. Rewind to 2000, and Luxembourg’s minimum wage stood at 47 times higher than Romania’s. By 2025, the gap between the highest (still Luxembourg, at around €2,638 a month) and lowest (Bulgaria, hovering near €551) has shrunk to less than five times.

At the beginning of the century, minimum wages in many Central and Eastern European countries were below €100 a month. Fast forward to today, and nominal rates in places like Poland and Lithuania have leapfrogged those in southern states such as Portugal and Greece. This isn’t just about shifting exchange rates or price levels. Measured in purchasing power standards (PPS), which account for differences in the cost of living, the ratio between the highest and lowest minimum wage has plummeted from over 20:1 in 2000 to a far more modest 2:1 by 2025. A genuine catching-up has been under way.

Convergence and the Current Map

Despite this convergence, a clear minimum wage map of Europe persists. The highest rates are concentrated in six western economies. A middle tier includes primarily Mediterranean countries such as Spain, Portugal, Greece, Malta, Slovenia, Croatia and Cyprus. The lowest group comprises only post-2004 central and eastern joiners. These persistent differences, mirroring broader pay disparities, remain a key engine driving workers from East and South towards better prospects in the West and North.

Looking at recent moves, the period between January 2024 and January 2025 saw the largest nominal increases concentrated where wages started lowest. Romania notched up a hike of nearly 23%, while Estonia saw a more modest 8%. Older Member States generally applied more cautious adjustments. Crucially, with inflation easing somewhat, minimum wage earners in most countries enjoyed a boost in real terms – their pay packets stretching a bit further than before.

The Directive’s Push and Future Questions

Enter the EU’s new Minimum Wage Directive. Due for national implementation by November 2024, it aims to ensure statutory minimum wages are ‘adequate’. While governments retain the final say on the numbers, the directive insists on robust frameworks: frequent updates, clear criteria for setting rates, and proper involvement of consultative bodies and social partners.

Perhaps most influential, it pushes countries to use ‘indicative reference values’ to gauge adequacy, for example this could be 60% of the gross median wage or 50% of the gross average wage. Unsurprisingly, an increasing number of governments are now referencing such values, particularly the proportions of average wages, when calibrating their annual hikes. Minimum wages were already outpacing average/median wage growth in many places; the directive looks set to cement this trend as countries strive to hit these relative benchmarks.

This focus addresses one leg of the ‘adequacy’ stool – ensuring the minimum wage is fair relative to other earnings. But the second leg – whether it guarantees an adequate standard of living – remains somewhat shaky. Addressing this extends beyond minimum wages and encompasses the broader economic landscape: the local cost of living, household composition, the earnings of other family members, and the bite of taxes or the buffer of benefits. Most EU states have not sufficiently assessed this crucial dimension. Slovenia is the rare exception, linking its minimum wage adjustments to changes in the cost of a defined basket of goods.

Transposition of the directive has often been less a grand overhaul and more a quiet tweak. Where changes have happened, they frequently involve simply copy-pasting the directive’s wording into existing national laws or assigning the new consultative roles to familiar institutions.

The practical effect of these ‘on paper’ shifts bears watching. Will reaching the selected reference values mean future minimum wage growth slows to simply keep pace with average/median pay? Will the targets themselves start creeping upwards? Or will countries opt for new approaches to reference values over time which also address the second leg of the adequacy stool? Adding a layer of uncertainty is a pending ruling from the European Court of Justice. Denmark, which champions collective bargaining over statutory minimums, has challenged the directive’s legality. A decision expected in 2025 could well alter the EU’s approach, coming at a time when economic competitiveness is increasingly dominating the Brussels agenda. The path for Europe’s minimum wage is still being paved, and not without potential bumps ahead.