New government calls for EUR 1,000 monthly minimum wage

In March 2003, Austria's renewed coalition government of the conservative ÖVP and populist FPÖ presented its official programme for the coming legislative period. It includes substantial changes in the statutory unemployment cover system, as well as an appeal to the social partners to agree on a nationwide minimum rate of pay of EUR 1,000 per month. The government's minimum pay initiative has received a mixed response.

After a three-month period of negotiations with all parties in parliament, the conservative People’s Party (Österreichische Volkspartei, ÖVP) decided at the end of February 2003 to continue its previous coalition government with the populist Freedom Party (Freiheitliche Partei Österreichs, FPÖ). The earlier coalition government of these two parties had resigned in September 2002 because of insurmountable conflicts between them, mainly caused by internal disputes within the FPÖ. The general elections subsequently held on 24 November 2002 saw the ÖVP emerge as the clear winner with more than 42% of the vote, whereas the FPÖ lost almost two-thirds of its 2000 vote, receiving only 10.0%. (AT0302201N).

New government’s labour and social affairs programme

On 6 March 2003, Chancellor Wolfgang Schüssel of the ÖVP presented the government’s programme in parliament. This programme involves continuing the current'austerity programme' which has brought about notable cutbacks in social security and welfare provision. In line with this, the section on'labour and social affairs' includes an amendment to the unemployment cover scheme. It is planned that the existing unemployment assistance (Notstandshilfe), a supporting benefit for unemployed people who have exhausted their entitlement to regular unemployment benefit (AT9804182N), will be integrated into a new social assistance (Sozialhilfe) scheme. Social assistance is not part of the statutory social insurance system but part of the regional social security system (AT0011234F). Hence, some experts claim that this reform would transform a statutory social insurance benefit into a - more or less - arbitrarily endowed'charity' scheme run by the federal states (Länder).

Moreover, the government plans to relax the so-called'provisions of reasonableness' (Zumutbarkeitsbestimmungen) which apply to job offers to unemployed people, obliging them to accept jobs which are a long distance away and jobs which are quite unrelated to the unemployed person's original occupation. In the event of refusal by unemployed people to take up such a job offered by the Labour Market Service (Arbeitsmarktservice, AMS), their unemployment benefits would be cut.

Minimum pay rates

The second main subject addressed in the government programme's section on'labour and social affairs' relates to minimum pay rates. It proposes that every worker employed in a full-time job should be receive a minimum monthly rate of pay of EUR 1,000 . The government thus appeals to the social partners to conclude collective agreements to this effect. However, it should be ensured that, in particular in poorly performing branches, jobs should not be endangered.

Statements made repeatedly by some government representatives suggest that this minimum rate of pay should be established by a national cross-sectoral agreement (Generalkollektivvertrag), concluded by the top-level organisations of the two sides of industry. Such agreements are very rare in Austria, and have never dealt with pay . Furthermore, due to the principle of free collective bargaining, the government lacks any capacity for enforcing the introduction of minimum pay rates in this way. Therefore, several representatives of the Chamber of Economy (Wirtschaftskammer Österreich, WKÖ) employers' organisations have rejected the government’s initiative, although most of them are linked to the ÖVP.

It seems that this issue has not been clarified within the coalition parties, since several business-linked representatives of the ÖVP have also expressed reservations. Business has always argued that minimum wages distort the operation of the labour market. The government programme's point that the implementation of a minimum rate of pay should not endanger employment in poorly performing sectors appears to be an attempt to accommodate business interests. However, this hardly seems compatible with the idea of a general (ie cross-sectoral) minimum rate of pay.

Background to minimum wage debate

Austria has no minimum wage legislation. It is only sectoral collective agreements which set a floor for pay levels. Despite its extraordinarily high coverage (TN0212102S), the Austrian collective bargaining system does not rule out extremely low pay. This is due to the unions’ restricted bargaining power in certain sectors (TN0208101S).

Several recent studies have found that the pay rates of well-paid and low-paid jobs are diverging. Estimates by the Austrian Association against Poverty (Österreichische Armutskonferenz) - see table 1 below - suggest that in the period from 1995 to 2001, in terms of their average gross income, the best-paid decile of Austrian employees increased their share of total income from 28.8% to 29.3%, while the share of the lowest-paid 60% declined from 31.5% to 29.9%. In 2001, the best-paid 5% of employees had the same total income as the lowest paid 45% of employees.

Table 1. Distribution of gross income (wages and salaries), 1995 and 2001
. 1995 2001 Growth in nominal gross income from 1995 to 2001
Total income in EUR billion Share Total income in EUR billion Share
1st-3rd decile 5.4 7.4% 5.5 6.5% 1.0%
4th-6th decile 17.8 24.4% 20.1 23.4% 13.4%
7th-9th decile 29.6 40.3% 35.0 40.8% 19.4%
91st-95th percentile 7.7 10.5% 9.2 10.7% 18.1%
96th-100th percentile 13.0 17.7% 15.9 18.5% 23.0%
Total 73.5 100.0% 85.8 100.0% 16.7%

Source: Armutskonferenz 2003.

In 2001, the number of employees earning less than EUR 1,000 (gross) per month amounted to about 70,000 to 80,000 full-time employees and more than 500,000 part-time employees - see table 2 below. Expressing all full-time jobs and part-time jobs in terms of full-time equivalents, some 314,000 people had a gross income of less than EUR 1,000 monthly in 2001, which is about one 10th of all employees in Austria. The 2002Social Report published by the Ministry of Social Affairs estimates that about 57,000 employees are'working poor', with 178,000 people concerned when spouses and children are included. Notably, these figures do not take into account those poor people with no regular work.

Table 2. Low-paid employees (expressed as full-time equivalents) as % of total employees, by income levels and gender, 2001
Monthly gross income Women Men
Under EUR 1,000 17% 5%
Under EUR 1,100 22% 6%
Under EUR 1,200 28% 8%
Under EUR 1,300 35% 11%
Under EUR 1,400 42% 14%
Under EUR 1,500 49% 18%

Source: Statistik Austria 2003.

Since the questions of poverty and'working poor' have become important subjects not only of expert debate but also in public opinion during recent years, the FPÖ as well as parts of the ÖVP have repeatedly used the popular slogan of a general EUR 1,000 minimum rate of pay. However, critics state that such slogans are easy to make, as the introduction of such a minimum pay rate would be the responsibility of the social partners.

Responses

The two parliamentary opposition parties, the Social Democratic Party (Sozialdemokratische Partei Österreichs, SPÖ) and the Greens (Die Grünen, GRÜNE), have strongly criticised the government’s plans to abolish statutory unemployment assistance by incorporating it into regional social assistance. The transformation of a statutory benefit based on obligatory insurance contributions into a regional social assistance benefit is seen as the introduction of a'poor people’s assistance system', instead of maintaining an all-encompassing statutory social security system. The extension of the social assistance scheme without establishing any legal claim on its benefits is likely to exclude groups which are politically and socially marginalised, such as migrant workers from outside the European Economic Area (EEA), representatives of both the SPÖ and GRÜNE have argued.

However, the basic idea of a cross-sectoral minimum wage of EUR 1,000 a month has been supported by the SPÖ and the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB). ÖGB has called for a general EUR 1,000 minimum rate of pay since 1999, but has always sought to rely on collective bargaining rather than seeking any statutory pay regulations, in order to preserve its bargaining domain.

The Greens consider the proposed minimum wage of EUR 1,000 too low and are calling for a statutory minimum monthly rate of pay fixed at EUR 1,100, with a flexible adjustment to the annual inflation rate. They oppose the idea of regulating minimum pay by a national cross-sectoral agreement, since even such an agreement would not cover all employees (eg those employed by employers which are not members of the WKÖ). Karl Öllinger, an expert in social affairs for the Greens, questions the official figure of 70,000 to 80,000 full-time workers who are paid less than EUR 1,000 per month. According to his estimates, the actual number is about 200,000 full-time employees. Therefore, the minimum rate of pay should be fixed by law, since the social partners are argued to have failed to arrive at minimum wage rates which prevent growing numbers of'working poor'.

Commentary

The government’s programme for the coming legislative period aims to continue its'austerity programme'. Accordingly, the planned restructuring and transformation of the present statutory unemployment assistance (which is a social insurance benefit) into a new form of decentralised social assistance at regional level is widely seen as a severe cutback in Austria’s social security system.

The plan to implement a national EUR 1,000 monthly minimum rate of pay is interesting. Corresponding demands have been made by groups representing employees within the ÖVP since 1999 and by the FPÖ since 2000. However, since the coalition partners do not intend to introduce minimum wage legislation, a general EUR 1,000 minimum rate of pay remains unlikely to be realised. Hence, the government’s position on minimum pay appears to be'symbolic politics'. It was only the FPÖ which initially proposed a national general agreement on minimum wages in the course of the 2002 election campaign, without mentioning that collective bargaining falls within the purview of the social partners, whose legitimacy and competences have been challenged by several FPÖ representatives.

The social partners want to maintain control over pay. Therefore, they see any statutory pay regulation as an interference with their domain. Nevertheless, they differ widely on the question of a collectively agreed cross-sectoral minimum wage. As Reinhold Mitterlehner of the WKÖ stated, any higher wages have to be paid for by business, and such a minimum wage would endanger low-productivity companies and - in the long run - distort the labour market. The ÖGB, however, regards very low wages below EUR 1,000 for a full-time job as inadequate. Therefore, it continues to seek a cross-sectoral minimum wage of EUR 1,000, since the minimum pay rate is still lower than this level in some sectors (eg agriculture, hotel and catering, textiles and leather production, and public and private services).

At any event, the introduction of higher minimum standards of pay cannot resolve the problem of growing pay inequality. This might be overcome only by a more'solidaristic' union bargaining policy. The current process of union mergers (AT0110205N) may work into this direction. Similarly, the question of more equality is also linked to the willingness to include marginalised groups of employees as well as'atypical workers' (TN0205101S) in the system of collective bargaining. (Georg Adam, University of Vienna)

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