Labour market change

Minimum wages in 2020: Will COVID-19 derail the quest for fair pay?

Minimum wages, one of the cornerstone issues for Ursula von der Leyen’s Commission, were a hot topic in the EU at the beginning of the year. Then the COVID-19 public health crisis struck. Now, with an economic crisis and recession looming, the question is not only what impact the crisis has had on minimum wage earners, but also what is the impact on the debate itself. How can the European Commission and Member States ensure minimum wages that are fair and provide a decent standard of living during and following a ‘black swan’ such as the Coronacrisis?

 

Very different COVID-19 implications depending on sector

Minimum wage workers are traditionally among the most vulnerable workers of an economy. In the EU, 7 out of 10 report having at least some difficulty making ends meet, according to EU-SILC data from 2018. However, this figure varies greatly between countries: from less than 10% in Denmark, Finland and Sweden to 50–60% in Bulgaria, Croatia and Cyprus, and as high as 80% in Greece. [1]

With COVID-19, minimum wage earners have been disproportionately exposed not only to the health risks, but also to the employment impact. Overall, the public health crisis has affected two types of minimum wage earners particularly hard but in very different ways.

On the one hand, there are the essential workers – those that kept our societies running during the lockdowns. They work in sectors such as agriculture and retail and in occupations such as cleaners and helpers, in jobs with some of the highest shares of minimum wage earners. Eurofound, based on EU-SILC 2018 data, identified that 15% of agricultural workers, and up to 20% in some agricultural jobs, are minimum wage earners; the figure is 13% in retail and 25% of cleaners and helpers. [2]

In a recent statement, Nicolas Schmit, European Commissioner for Jobs and Social Rights, argued for a decent minimum wage, highlighting the paradoxically weak economic position of many essential workers: ‘These workers kept our societies and economies alive when all else had to stop. But paradoxically, they will be hit the hardest by the crisis. Work towards an initiative on minimum wages in the EU is an essential element of our recovery strategy. Everyone deserves a decent standard of living.’ [3]

A second group of minimum wage earners are those who were let go or furloughed when confinement rules were implemented. Eurofound’s recent Living, Working and COVID-19 survey found that 29% of respondents had lost their job or contract, temporarily or permanently, due to COVID-19.  [4] The sectors and occupations hardest hit were again those where Eurofound’s analysis of EU-SILC 2018 data found high shares of minimum wage earners, such as accommodation and hospitality (16%), arts, entertainment, recreation or domestic household work (14%) and personal service workers (16%). [5]

Although household composition and how many people work in the household are important influencing factors, living off a minimum wage often forces people into precarious financial situations. Saving money is not always an option if you’re already struggling to make ends meet. While the COVID-19 survey did not differentiate on income level, it did ask about respondents’ current financial situation compared to before the pandemic, and almost 40% of respondents reported their situation to be worse. Close to half indicated their households cannot make ends meet, and over half said they cannot maintain their standard of living for more than three months without an income. The situation is even more dire for the three-quarters of unemployed respondents who cannot get by for more than three months, with 82% reporting their household has difficulty making ends meet. [6] It doesn’t require much imagination to work out how these findings relate to those minimum wage earners who have lost their jobs to the crisis.

The way forward

It is difficult to find the silver lining in the COVID-19 cloud, but the exposure of the gap between the value frontline workers bring and the low wages they receive has highlighted an unfairness that may for once and for all be addressed.

In the political sphere, minimum wages have become widely accepted. So much so that the political will has turned the minimum wage debate into a bi-partisan issue. Ursula von der Leyen, member of the EPP, which is traditionally more centre-right, in her political guidelines pledged to present a legal instrument to ensure that all workers in the Union are protected by a fair minimum wage, allowing for a decent living wherever they work.

At the EU level, the political will seems determined to follow through since the second phase of the minimum wage consultation was launched in early June. As a previous Eurofound analysis remarked: ‘The EU will not set a common minimum wage, but we can expect that it will try to establish a shared framework where minimum wages can be determined at the national level. It could agree on common criteria and objectives; monitor performance through a certain set of indicators; or promote that economic convergence keep in step with wage increases.’ [7] At this stage, the consultation sets out possible options for a legal instrument to achieve this aim.

However, it is not the EU level that will implement any agreed rules but the Member States and the social partners. And with a looming recession, will the political will dwindle under pressure from business struggling with shrinking margins? But, as the European Commission states: ‘Ensuring that all workers in the EU earn a decent living is essential for the recovery as well as for building fair and resilient economies, and minimum wages have an important role to play.’ [8]

There is some talk of the COVID-19 pandemic being a turning point that has opened up the possibilities for more rapid progress towards a more equal and fair society. Making minimum wages adequate and fair is one important step – we would be remiss to let the opportunity slip.

Image © Alexandros Michailidis/Shutterstock


References

  1. ^ Eurofound (2020), Minimum wages in 2020: Annual review , Publications Office of the European Union, Luxembourg, p. 66.
  2. ^ Eurofound (2020), Minimum wages in 2020: Annual review , Publications Office of the European Union, Luxembourg, p. 14.
  3. ^ European Commission (2020), Fair minimum wages: Commission launches second-stage consultation of social partners , press release, 3 June, Brussels.
  4. ^ Eurofound (2020), Living, working and COVID-19 First findings – April 2020 , Publications Office of the European Union, Luxembourg, p. 4.
  5. ^ Eurofound (2020), Minimum wages in 2020: Annual review , Publications Office of the European Union, Luxembourg, p. 14.
  6. ^ Eurofound (2020), Living, working and COVID-19 First findings – April 2020, Publications Office of the European Union, Luxembourg, pp. 7–9.
  7. ^ Eurofound (2020), EU seeks views on the minimum wage, blog post, 17 February.
  8. ^ European Commission (2020) Fair minimum wages: Commission launches second-stage consultation of social partners, web page, 3 June.

Uuringud, mis tehti enne Ühendkuningriigi lahkumist Euroopa Liidust 31. jaanuaril 2020 ja avaldati hiljem, võivad sisaldada andmeid 28 ELi liikmesriigi kohta. Pärast seda kuupäeva võetakse uuringutes arvesse ainult 27 ELi liikmesriiki (EL 28 miinus Ühendkuningriik), kui ei ole märgitud teisiti.

Part of the series

  • Minimum wages in the EU

    This series reports on developments in minimum wage rates across the EU, including how they are set and how they have developed over time in nominal and real terms. The series explores where there are statutory minimum wages or collectively agreed minimum wages in the Member States, as well as minimum wage coverage rates by gender.  

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