Fair wages are key to Europe’s recovery

Ensuring a high wage floor in the EU is not just the right thing to do to lift the low paid but is integral to recovery from the pandemic.

Standing up to the powerful is never easy, but the European Commission president, Ursula von der Leyen, needs to do exactly that if she is to keep her promise to deliver fair minimum wages for all in the European Union. Combatting exploitation cannot be achieved by recommendations or examples of best practice—the EU needs a directive. First and foremost, the directive should strengthen the right to collective bargaining between trade unions and employers, already shown to be the best way of securing fair pay.

The European Trade Union Confederation (ETUC) supports a strong EU initiative to end exploitation and ensure all workers earn enough to escape poverty and live in dignity. We have carried out extensive consultations with our affiliates across Europe—representing 45 million workers—on the proposals put forward by the commission, following von der Leyen’s pledge to ensure a minimum wage that secures a decent standard of living. One thing is clear: new legislation must not encroach upon existing national collective-bargaining systems which are already delivering good results.

High road

But that does not mean EU action is not possible nor required. Too many workers in Europe are denied the right to collective bargaining. This means the EU has to adopt a dual approach: blocking the low road of competition on exploitative low wages and paving the high road of collective bargaining. 

Blocking the low road means obliging member states to end exploitative low pay. The directive is necessary to stop ‘social dumping’, when member states compete on low wages and set worker against worker in a disastrous race to the bottom. The EU does not have the power under its treaties to set an EU-wide minimum wage level—wage-setting is a national competence—but it can legally oblige member states to ensure decent pay, in consultation with social partners (trade unions and employers).

At the same time, paving the high road should entail progressively raising the lower wage levels to meet the highest standards across Europe. Member states with weak collective-bargaining systems should have to draw up national action plans to increase the number of workers covered by collective agreements. To be effective, such plans need to include positive measures: rights for trade unions and funding to underpin social dialogue.

Procurement rules

For example, public-procurement rules should make recognition of the right to trade union organisation and collective bargaining one of the conditions imposed on companies tendering for public contracts. Public bodies spend around €2 trillion (14 per cent of gross domestic product) a year in the EU on purchasing goods and services. This could be invested in securing fair wages and improving working conditions, rather than fuelling wage competition to achieve ever-lower prices. Companies which refuse to bargain or implement collective agreements should be barred from state contracts, grants and other financial support, including recovery funding under Next Generation EU.

Effective collective bargaining, following the Nordic example, means that trade unions must have the right to gain access to workplaces, physically and digitally, and to organise workers without the threat of victimisation. Employers should be legally obliged to recognise, and negotiate with, unions.

The directive should incorporate a social progress clause, to guarantee trade union prerogatives and protect collective bargaining and the autonomy of social partners against damaging court rulings.

Poverty risk

In 17 of the 21 member states (plus the United Kingdom) which currently apply minimum wages, rates are so low they leave workers at risk of poverty. This scandalous state of affairs must change. A fair, national, statutory minimum wage rate should be at least 60 per cent of the median wage and 50 per cent of the average wage. Minimum wages should not be eroded by deductions for other costs, such as uniforms or breakages, and must not include bonuses and tips. And young people should no longer be exploited through unpaid internships and other forms of low-paid or unpaid ‘work experience’.

Those member states which currently set wages exclusively through collective bargaining should never be obliged to introduce a statutory system, and those who believe the ETUC would back such a policy have misunderstood. Having a statutory minimum wage is not an alternative to collective bargaining. This measure should be about bringing the Nordic levels of collective bargaining and wages to the rest of the EU, not imposing statutory minimum wages on the Nordic countries.

On the contrary, the directive should oblige member states to invest in building collective bargaining as an essential element of the EU treaty requirement for a social-market economy driving towards greater equality and upward wage convergence. It must not hold back wage growth in individual countries or prevent social partners at national level from making progress on increasing wages, including minimum wages.

Collective bargaining

Collective bargaining coverage (see figure) plays a key role in wage levels and in preventing exploitative low wages. In nine of the 11 countries with the lowest proportion of employees earning low wages (less than two-thirds of the national median), more than 70 per cent of the workers enjoy pay rates negotiated by trade unions. On the other hand, across the EU, 76 million workers (39 per cent) are excluded from collective agreements. 

The commission recognises that ‘countries with higher collective bargaining coverage tend to have a lower proportion of low-paid workers’. But instead of strengthening bargaining, past EU stances, for example country-specific recommendations, have tended to decentralise and weaken bargaining systems.

Collective bargaining coverage (percentage of workforce) 2016-2018, with 2000 for comparison

Measures in the forthcoming directive must ensure that all workers can be covered by collective bargaining—not just in traditional manufacturing sectors but also in services, as well as the self-employed and freelances, platform, domestic and homeworkers. These groups must not be prevented from organising collectively by misplaced ‘competition’ rules.

Furthermore, as more and more people work from home as a consequence of the coronavirus, we cannot allow distance to undermine trade union organisation and solidarity.

Fatal error

In the wake of the 2008 financial crisis, European governments made the fatal error of attacking bargaining systems in the name of austerity. The EU must learn from its past mistakes as it struggles to recover from the pandemic. This time around, fair wages must be a key component of Europe’s recovery strategy. 

The support of the ETUC cannot be taken for granted, and we will assess the proposals when they are published in light of the six demands set out in our reply to the commission:

• involvement of social partners;
• a threshold of decency below which no statutory minimum wage should be paid;
• an end to exclusions and deductions from statutory minimum wages;
• a guarantee of the right to collective bargaining, with national action plans to increase the number of workers covered by collective agreements;
• a social progress clause to prevent bad interpretations by the courts, and
• no damage to effective collective-bargaining systems—in particular no member state should be required, directly or indirectly, to introduce a statutory minimum wage.