&w=3840&q=90)
Minimum wages on the rise: Effects and policy lessons from a decade of change
Data: 10 figures
The approach of EU governments towards minimum wages started to change from the turn of the century and national minimum wages have risen sharply, particularly since the mid-2010s, becoming more binding and shaping wage dynamics more broadly. Drawing on recent Eurofound research, this policy brief examines how national minimum wage increases may affect employees’ pay levels, wage inequality, collective bargaining and the wider employment structure. Findings show sizeable knock-on effects along the wage distribution, a compression of wage inequality at the bottom (especially following large hikes in national minimum wages), a narrowing gap with collectively agreed wage floors, and an association with a shift towards higher-paid jobs in the employment structure. However, a national minimum wage should not be seen as a standalone solution to poverty or broader inequalities, while its possible disemployment effects also need to be considered.
Over the past 25 years, national minimum wages have increased significantly across the EU, with the strongest growth in central and eastern European countries. Progress has been most remarkable over the last decade, with national minimum wages increasing faster than inflation and, in most countries, faster than average wages.
While minimum wage increases are not generally associated with significant changes in overall wage inequality, they are linked to a reduction in inequality at the bottom of the wage distribution: a 1% increase in the real minimum wage is associated with a 0.128% reduction in the p50/p10 wage ratio. Significant reductions in wage inequality emerge following large increases of more than 15%, as also illustrated by specific examples in Germany, Slovenia and Spain, which substantially compressed the wage distribution from the bottom.
Rising minimum wages are narrowing the gap with collectively agreed wage floors, without stopping collective bargaining: the gap narrowed from 7.9% in 2015 to 3.6% in 2025. This potentially reduces the room for negotiated increases in basic pay but increases in national minimum wages are not discouraging the conclusion of new collective agreements.
Minimum wage increases can contribute to changes in the employment structure: a 1% increase in the real national minimum wage is associated with a 0.1% decline in the employment share of the lowest-paid jobs and a small increase in the employment share of higher-paying jobs. This suggests that employment effects should be assessed not only through changes in total employment, but also through changes in the composition of jobs.
Minimum wages are not a magic bullet: while they can raise pay meaningfully and reduce wage inequality, particularly among lower-skilled, younger or female employees, complementary measures such as tax and benefit systems, collective bargaining and active labour market policies are essential. Productivity-enhancing investments in skills, technology and work organisation can help firms absorb higher wage floors.
This section provides information on the data contained in this publication.
Eurofound recommends citing this publication in the following way.
Eurofound (2026), Minimum wages on the rise: Effects and policy lessons from a decade of change, Publications Office of the European Union, Luxembourg.
&w=3840&q=75)
