European Minimum Wage Policy: A Concept for Wage-Led Growth and Fair Wages in Europe

Minimum wages on the European agendaIn February 2012, the Greek government decided on a radical, 22 per cent cut of the national minimum. The decision was taken in the face of opposition from both the trade unions and the employers' associations which had jointly appealed to keep the minimum wage level as determined in the national collective agreement (Paphitis and Corder, 2012). However, the Greek government was under strong pressure of the so-called Troika, composed of the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF), which had insisted that a radical drop in the national minimum wage would be necessary in order to restore the competitiveness of the Greek economy. As a result, the workers in Greece are confronted with a measure which has already been described as being "among the most radical steps backwards inflicted in peacetime in modern Europe" (Taylor, 2012). What happened in Greece was only the culmination to date of European interventions on national wage developments. At the beginning of 2011, it was Ireland which was the first country to cut its hourly minimum wage by 1 euro, which was equivalent to a reduction of 11.5 per cent. Again, it was the EU-ECB-IMF Troika which had strongly pushed in favour of the wage cut. Consequently, the Irish government included the reduction of the minimum wage as a major "structural reform" in its Memorandum of Economic and Financial Policies to the international creditors (Irish Government, 2010). When in February 2011 a new Irish government came to power with the promise to restore the old minimum wage level, this was accepted by the Troika only after the government's announcement that it would compensate employers by an equivalent reduction in the pay-related social insurance contributions (IMF, 2011a). In Portugal, the government agreed as part of its arrangement with the Troika that "any increase in the minimum wage will take place only if justified by economic conditions and agreed in the context of regular program reviews" (IMF, 2011b, p. 14). While the Portuguese government had frozen the minimum wage for the first time since decades, the Troika had de facto ensured itself a veto power against further wage increases in the coming years. Similar to Portugal, the Spanish government had decided for the first time since the introduction of the national minimum wage in the 1960s to suspend its annual adjustment (Carear, 2011). At the same time the ECB had sent a letter to the Spanish government, demanding the introduction of a new form of "mini-jobs" to be paid below the national minimum wage in return for the central bank's purchase of Spanish bonds (El Pais, 2011). Since several years a major influence on the development of minimum wages especially by the IMF could also be observed in many Eastern European countries (Schmidt and Vaughan-Whitehead, 2011). Against the background of the recent economic crisis in Europe, wages have become a core issue on the European policy agenda. Although the EU Treaty has explicitly excluded wages from the regulatory competences of EU institutions, the latter are becoming more and more active in influencing both the national wage developments as well as the national systems of wage setting. With the adoption of the so-called Euro-Plus Pact in March 2011, wages have become officially declared as a main adjustment variable for economic imbalances and national competitiveness in Europe (Dufresne, 2012; Janssen, 2011). As the European Commission has put it, "reforms on labour markets and in particular to wage setting mechanisms need to ensure efficient adjustment of labour costs in order to facilitate absorption of macroeconomic imbalances and to reduce unemployment" (EC, 2011a, p. 20). The same view has been taken by the IMF, which demands to give priority to structural reforms at the labour market as a major precondition for economic recovery in Europe (Allard and Everaet, 2010). …