EU: European Parliament adopts directive on minimum wages

On 14 September, almost two years after the European Commission presented the directive on adequate minimum wages, it has been adopted by a majority of EU Parliament members (505 for, 92 against). The directive proposes mandatory criteria for increasing the minimum wage (purchasing power, overall wage levels, productivity) and intends to affirm the role of the social partners in setting its level. While the first version of the text set a minimum employee collective bargaining coverage rate of 70 per cent, with Member States required to put action plans in place to exceed that level, an agreement between the Council and the MEPs raised this threshold to 80 per cent in June (c.f. article No. 13084). Since the start of 2022 several European countries have been raising their minimum wage rate not least because of surging inflation (c.f. article No.13200 Estonia and No.13190 Cyprus). According to the European Trade Union Confederation however, the various increases granted have been insufficient to cover the rise in prices in any European country. For example, while the legal minimum wage rose 11.9% in Estonia and 6.5% in the Czech Republic, their real minimum wage equivalents each fell by 10% (due to inflation rates of 22% and 16.6% respectively). Given that as of the end of 2021 only 2 Member States had complied with the recommendation of a minimum wage of 50% of the average gross wage (c.f. article No.12808), the concrete effects of the directive remain uncertain, not least since the criterion is only a recommendation.