Recently, within the institutions of the EU, agreement was reached on new rules concerning minimum wages. Contrary to what some had fantasised, there will not be a common minimum wage for all member states. This would not be possible as each member state is in a different stage of economic development and lifestyles are not the same.
In effect, the rules respect the powers of national authorities and social partners to determine wages. Moreover, the minimum wage is to be set at a level which is considered to be adequate to ensure a ‘decent standard of living’.
There are some countries that have relied on collective bargaining to set the minimum wage and the minimum wage is not enshrined in the law, as in the case of Malta. Such countries will not be forced to legislate on the matter. These countries include Austria, Cyprus, Denmark, Finland, Italy and Sweden.
The minimum wage varies widely among countries and ranges from €332 per month to €2,202 per month. In Malta, it is €792 per month. To this one needs to add benefits that may be given to low-income earners and benefits which are actually available to all the population, such as free education and health, as in Malta.
The cost of living is another factor to consider as prices of various goods and services are not the same in all member states. Yet another factor to consider is the circumstances of each country. For example, because distances are short in Malta, our transport costs are less than in other countries.
As such, the ‘decent standard of living’ I mentioned earlier on is to be considered with a certain flexibility.
A great deal of emphasis in the discussion on these common rules concerning the minimum wage was on the existence of collective bargaining processes in the member states. This implies the existence of social dialogue, and even here we have a great deal of disparity.
We cannot have social harmony if income inequalities are growing
Some countries have a history of social dialogue going back decades, while in other countries, it is still a relatively new phenomenon. Moreover, the culture in some countries is that in social dialogue one aims for a win-win situation, while in other countries, the culture is that the winner takes all.
Member states in which less than 80 per cent of the workforce is protected by a collective agreement will have to create an action plan to progressively increase this coverage.
In Malta, we have a high incidence of workers protected by a collective agreement because public sector wages are covered by a collective agreement. Within the private sector, the incidence is below the 50 per cent level, especially since we have a significant number of employees working in the services sector, which is generally not unionised.
In Malta, we have also pre-empted some of the issues faced by other countries with legislation that protects employees of providers of contracted services and employees forced into self-employment.
Once one talks of minimum wage rules, one would expect to talk next about minimum pension rules – an area which is still totally within the competence of national governments. Such a discussion would need to be placed within the context of fiscal harmonisation in the EU.
This agreement on the minimum wage may be seen as an important milestone in improving the wages of the lowest paid workers. This can be a thorny issue as some may argue that wages should increase only if such an increase is accompanied by higher productivity.
What needs to be appreciated is that we cannot have social harmony if income inequalities are growing. Irrespective of the minimum wage, we cannot continue to have a situation where heads you win and tails I lose.
Unfortunately, when there has been an economic slowdown or economic growth, lower income persons have always ended up on the losing end.