Social partners agree to minimum wage increase

In July 2007, the national-level social partner organisations agreed on the introduction of a monthly minimum pay rate of €1,000, to be implemented by the sectoral bargaining parties by 1 January 2009 at the latest. If the latter fail to establish these minimum wage standards, the social partners intend to enforce the new pay provision through a national cross-sectoral agreement. However, the scheme does not cover employees in the liberal professions and in agriculture.

On 2 July 2007, the President of the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB), Rudolf Hundstorfer, and the President of the Austrian Federal Economic Chamber (Wirtschaftskammer Österreich, WKÖ), Christoph Leitl, signed an agreement ‘in principle’, which aims to introduce a national minimum monthly gross pay rate of €1,000. The signatory parties agreed to establish the new minimum wage across all sectors of the national economy through sectoral collective agreements, at the latest by 1 January 2009. Sectors affected by the agreement will include textiles and leather, food manufacturing and several branches of the private services sector, such as hairdressers, pedicurists, cosmeticians and taxi drivers. It is estimated that between 20,000 and 30,000 employees will be affected by the agreement.

Details of provisions

The parties to the agreement are committed to urging the different bargaining units to secure a gross monthly pay level of at least €1,000 for all pay grades within their respective representational domains in all sectors of the economy. This minimum pay rate relates to regular full-time work – that is, of more than 35 hours a week – and does not include any form of additional pay. Since virtually all collective agreements in Austria provide for a 13th and 14th month of payment, a monthly gross pay rate of €1,000 paid 14 times a year corresponds, in practice, to a gross monthly amount of €1,167.

In line with the general collective bargaining pattern in Austria, the implementation of the minimum wage provision will remain the responsibility of the bargaining parties at branch and sectoral level. According to the joint ÖGB-WKÖ agreement, minimum pay levels currently set at between €900 and €1,000 should be raised to at least €1,000 by 1 January 2008, or – if the last bargaining round took place in the first half of 2007 – by 1 July 2008. Those few branches and sectors where the lowest pay grades are currently set below €900 a month shall be allowed a longer pay adjustment deadline of 1 January 2009.

To monitor the effective and timely implementation of the minimum wage provision, the agreement provides for the establishment of a special monitoring commission comprising one representative from both sides of industry and from the Austrian Institute of Economic Research (Österreichisches Institut für Wirtschaftsforschung, WIFO), with the latter holding the chair. If the sectoral social partners fail to implement the new minimum pay threshold by the specified time, the national-level social partners are prepared to enforce the minimum pay rate through a national cross-sectoral agreement (Generalkollektivvertrag) – as discussed by the previous government in 2003 (AT0303202F) – to come into effect by 1 January 2009.

Commentary

By introducing a minimum pay rate of €1,000, the social partners are pursuing three main objectives:

  • tackling the incidence of the working poor, in particular among women, and attempting to counteract the trend of growing pay inequalities;
  • creating incentives for employees to work in the lowest wage segment of the economy, thereby curbing undeclared work;
  • demonstrating their capacity to use their powers appropriately in pay-related matters to thwart any advances of statutory pay regulation.

However, while the beneficial effect of minimum wage regulations for employees in the lowest wage segments are broadly undisputed, the problem of increasing pay inequalities cannot be resolved by the introduction of higher minimum pay standards. Rather, this problem may only be overcome by a more ‘solidaristic’ trade union bargaining policy.

Apart from this, the most serious weakness of the new minimum pay regulation concerns the limited scope of the WKÖ’s representational domain. As a result, thousands of poorly paid employees engaged in liberal professions and in agriculture, who are organised in separate chambers outside of the WKÖ, will not be covered by the minimum wage scheme. This is because the representatives of these occupations have, thus far, refused to enter into negotiations over higher minimum wage standards.

Georg Adam, Institute of Industrial Sociology, University of Vienna

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