Minimum wages in the EU

As the EU economy advanced its recovery following the pandemic, the high rate of inflation throughout 2022 meant that wage setting actors made their decisions under a cloud of uncertainty. While nominal increases in statutory minimum wages reached an all-time high, minimum wage workers in most countries saw their purchasing power decline or just about compensated at the beginning of 2023, based on preliminary harmonised inflation figures. With inflation expected to persist, a further depreciation of minimum wages in real terms can be expected in most Member States, as only a few foresee additional increases in 2023.

Dit verslag werd opgesteld in het kader van het driejarig (2021-2023) proefproject “De rol van het minimuminkomen bij de vaststelling van de universele arbeidsgarantie”, dat door de Europese Commissie in opdracht is gegeven aan Eurofound. Het verslag is gericht op de derde module van het project: onderzoek naar minimumlonen en andere vormen van beloning voor zelfstandigen.

Minimum wages have risen significantly in 2022, as the EU Member States leave behind the cautious mood of the pandemic. However, rising inflation is eating up these wage increases, and only flexibility in the regular minimum wage setting processes may avoid generalised losses in purchasing power among minimum wage earners. On 6 June 2022, the Council of the EU and the European Parliament reached a political agreement on the Directive on adequate minimum wages proposed by the Commission in October 2020. Once formally approved, EU Member States will have to transpose it into national law within two years.

Na een voorzichtige loonronde voor 2021 zijn de nominale minimumlonen voor 2022 aanzienlijk gestegen naarmate de negatieve gevolgen van de pandemie afnamen en de economieën en arbeidsmarkten verbeterden. In dit verband hebben 20 van de 21 EU-lidstaten met wettelijke minimumlonen hun tarieven verhoogd. In de Midden- en Oost-Europese lidstaten was er sprake van een aanzienlijke verhoging in vergelijking met de lidstaten van vóór de uitbreiding, terwijl de grootste stijging zich in Duitsland voordeed.

The first overview of minimum wage setting for 2022 shows that, while some negotiations are still ongoing, virtually all EU Member States have increased their nominal statutory rates. Compared to last year, when most countries settled for cautious increases against a background of deep uncertainty caused by the pandemic, growth in statutory rates for 2022 was stronger, reflecting an easing of the situation. This was especially the case in central and eastern European countries, where some increases were in double digits. Nevertheless, inflation is back in the picture and should be monitored in the coming months to get an insight into how the increases in nominal minimum wage rates translate into actual changes in the purchasing power of minimum wage earners.

While the number of employees earning the minimum wage has increased across Europe over the last decade, spurred by significant minimum wage hikes, a clear gender divide emerges, with minimum wage earners more likely to be women. Minimum wage earners are also more likely to live in materially deprived households.  

In dit verslag wordt samengevat hoe de minimumlonen voor 2021 werden vastgesteld in 2020 – het jaar dat gekenmerkt werd door de COVID-19-pandemie. Het geeft een beeld van de moeilijkheden waarmee nationale beleidsmakers zich geconfronteerd zagen en van de wijze waarop zij bij hun besluitvorming over het minimumloon hebben gereageerd op de uitdagingen van de economische en maatschappelijke ontwrichting als gevolg van de pandemie. Ook geeft het de mate weer waarin minimumlonen aan de orde waren in de steunmaatregelen in verband met COVID-19.

Decision-makers approached minimum wage setting for 2021 cautiously due to the economic uncertainty caused by the pandemic. Despite this, nominal statutory minimum wages rose in most Member States and the UK, although at lower rates than in recent years.

​​​​​​​Despite the unusually tough economic and labour market conditions, most EU Member States made nominal and real increases to their minimum wages in 2020. This is what a first overview of recent minimum wage developments reveals. Some countries lived up to earlier promises or pre-agreements, while other countries strayed somewhat off their original path but still maintained the overall trend of increasing minimum wages in line with other wages. Although most countries were cautious in the level of increase granted, low inflation rates meant that the value of minimum wages still went up beyond rises in consumer prices. For the time being, at least, it can be concluded that the policy response in the context of the COVID-19 pandemic is distinct from the approach taken during the global financial crisis, when a greater number of countries moved quickly to freeze nominal minimum wages.

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?