EurWORK European Observatory of Working Life

Austria: Social partners agree on €1,500 monthly minimum wage for all sectors

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The social partners have agreed on a monthly gross minimum wage of €1,500 for all sectors, to be implemented nationally by 2020. The federal government asked them to negotiate on this in early 2017, warning them that it would legislate for a minimum wage if the social partners could not find a solution.

In January 2017, Austria’s federal coalition government asked the social partners to negotiate on the implementation of cross-sectoral monthly minimum wage of €1,500 (gross, for full-time employment) and on working time flexibility, with solutions to be presented by mid-2017. If no social partner agreement was found by then, the government threatened to implement statutory regulations instead. However, on 30 June, the outcome was presented at a press conference by the heads of the four main social partner organisations:   
  • Austrian Trade Union Federation (ÖGB);
  • Chamber of Labour (AK);
  • Federal Economic Chamber (WKÖ);
  • Austrian Chamber of Agriculture (LKÖ).

This set out their general agreement on the implementation of a monthly minimum wage of €1,500. The new minimum wage is to be implemented via sectoral collective agreements (which take place year-round) by 2020 (in all those sectors where the minimum wage is currently lower). The rate has already been implemented in several sectors in this year’s spring collective bargaining rounds. In other sectors, agreements on a gradual implementation by 2020 were made.

Each sector has its own timeline. In the textile industry, for example, the lowest monthly incomes are to be increased to €1,500 (from their current level of €1,325) by 1 December 2018; in the  hotel and restaurant sector, the increase will be from €1,420 to €1,500 by May 2018, and for the hairdressing sector to €1,500 by April 2019.

In 2020, there will be an evaluation to see which sectors have reached the minimum wage and whether supportive framework conditions would be needed for those which have not. Currently, some 300,000 employees who are covered by a collective agreement earn less than €1,500 per month. Half of them are employed in the hotel and restaurant sector (34%) and in the commerce sector (15%).

Negotiations on working time flexibility fail

The social partners could not agree on working time flexibility, even though they had been ‘very close’ to an agreement. The labour side would have agreed to the employers’ request for a maximum daily working time of 12 hours – but only if the overall working time were to be lowered. However, further negotiations on this topic look certain in the coming weeks and months, even though no concrete timetable has been agreed.

The social partners’ motivation to reach an agreement on working time flexibility might have been somewhat limited by political circumstances – such as the crisis in the federal coalition government, with the de facto cancellation of its cooperation following the resignation, in May, of Austria’s Vice Chancellor Reinhold Mitterlehner as leader of the conservative People’s Party (ÖVP). An election has been called and is due to be held on 15 October.

Reactions to the agreement

Both sides of the negotiating social partners were happy to have reached an agreement on a cross-sectoral minimum wage, and emphasised that this would show (following criticism on the social partners’ role from various sides) how well the Austrian social partnership works. Because an agreement was reached, no legislative measures would be needed. The social partners have always been responsible for agreeing working time and wage policy, so it was important for them to prevent the government carrying out its threat to interfere.

Christoph Leitl, President of WKÖ, had said that a pragmatic solution could be reached and that he was content that the timeframe of 2020 had been negotiated, so as not to put too much stress on sectors which would have found the large income increases over a shorter time period diffficult.

Rudolf Kaske, President of AK, and Erich Foglar, President of ÖGB, were also pleased with the agreement. Mr Kaske stressed that wage policy should remain within the power of the social partners and that AK’s target of a minimum wage of €1,700 should not be sidelined. Mr Foglar considers the agreement to be substantial and the sectoral solution as the preferred one; in his opinion, collectively agreed minimum wages should in any case be preferred over statutory ones.

However, the President of LKÖ, Hermann Schultes, who was also involved in the social partner negotiations, was less enthusiastic, stating that the new minimum wage would be a challenge for the agricultural sector.

Christian Knill, Chair of Austria’s largest industrial sectoral association, Association of Metalworking Industries (FMMI) (a subsectoral association of WKÖ), has shown disagreement that no solution on working time was found. Kari Kapsch, President of the Federation of Austrian Industries (IV), a voluntary employer association, called the outcome of the negotiations ‘unfortunate’, saying that it was incomprehensible that there was a unilateral agreement on minimum wages, which he claimed would cost Austrian business up to €900 million, without the social partners also finding a modern and fair regulation on working time.

However, Austria’s Federal Chancellor Christian Kern, of the Social Democratic Party (SPÖ), has shown support for the social partners. He thanked them for their commitment towards the national implementation of the monthly minimum wage of €1,500. Economic Minister Harald Mahrer, a member of ÖVP, regretted that no solution had been found and emphasised that the topic should head the agenda of the next federal government. Birgit Schatz, the employees’ spokesperson for the opposition Green Party (Die Grünen), acknowledged that the agreement brings some improvement, but nonetheless pointed out that the outcome is still far from the low-pay threshold of about €10 gross per hour.

Macroeconomic effects 

According to a recently cited, but not yet published, study by the Austrian Institute of Economic Research (WIFÖ) and commissioned by AK, the new agreement means that the affected workers (around 291,000 or 9.1% of all dependent employees) will see their average hourly wage increase by €1.26 or 17.1%. The macroeconomic effects of the minimum wage are small, which can be attributed to the comparatively moderate increase in overall household incomes. The rate is not expected to affect employment, but it is expected to cause an increase in consumption, which is strongest in the lowest third of incomes.

Commentary

The outcome of the social partner negotiations represents a sort of minimum compromise. With the collapse of the federal government in the second quarter of 2017 and elections scheduled in October, the social partners were under no pressure to present a far-reaching solution. The agreement is based on a so-called general agreement (Generalvereinbarung), which presents a timetable only up to when the target should be reached. It is also a voluntary obligation, whereas a general collective agreement (Generalkollektivvertrag) would have been more binding and would have also covered those (albeit few) sectors in which no collective agreements apply (Austria has a collective bargaining coverage of about 98%). Thus, no sanctions will be imminent if sectors fail to reach the new minimum wage by 2020. Also, for several sectors, the agreement is a bit late; the minimum wage in these sectors is expected to reach €1,500 by 2020 anyway, because pay increases, which are usually above the annual inflation rates, are negotiated in the annual collective bargaining rounds

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