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17 March 2015

Minimum wages in Europe still very modest

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The Wirtschafts- und Sozialwissenschaftliche Institut (WSI) within the Hans-Böckler-Stiftung based in Düsseldorf, Germany has updated its Minimum Wage Database which is available in German and English..

The WSI Minimum Wage Database provides an overview of the development and current levels of minimum wages in 30 countries, including all 22 EU Member States which have a statutory minimum wage. This makes the WSI Minimum Wage Database one of the most comprehensive cross-nationally comparative sources of information on minimum wages.

The most recent data reflecting the situation in January 2015, illustrates that there are still considerable differences in minimum wage levels across Europe. In a nutshell, three different groups can be identified: the first group, with relatively high minimum wages, includes seven western European countries, ranging from Great Britain with 8.06 euros per hour to Luxembourg with 11.12 euros per hour. However, as Dr. Thorsten Schulten the coordinator of the WSI Minimum Database points out, without the 30% devaluation of the British pound against the euro in recent years, the minimum wage for the UK would today be well above 9 euros, which would place the UK right in the middle of this first group of countries. The second group, with minimum wages of between 3 and 7 euros, is made up of five countries: Slovenia (4.57 euros), Malta (4.16 euros), Spain (3.93 euros), Greece (where the minimum wage was cut by 20% in February 2012 bringing it down to 3.35 euros), and finally Portugal (3.04 euros). The third group, with minimum wages of below 3 euros, is exclusively comprised of central and eastern European countries ranging from Poland (2.42 euros) to Bulgaria (1.06 euros).

The data on the development of minimum wages, shows that after years of declining real hourly minimum wages during the crisis, in 2014 there seemed to be some light at the end of the tunnel. In 2014, real hourly minimum wages increased in the majority of countries. Only Malta, Ireland, Belgium and Luxembourg reported a (marginal) decrease.

However, a closer look at the data shows that the most significant increases in real hourly minimum wages of more than 3% were seen almost exclusively in central and eastern European countries, where minimum wages traditionally are very low. The only exception is Portugal with an increase of 4.4%. However, since Portugal is the country with the lowest absolute minimum wage of all the western European countries, the substantial increases in the real hourly minimum wage can be interpreted as being part of a general catching-up process. The increase of real hourly minimum wages in the rest of the western European countries was actually quite modest, ranging from 1.5% in the UK to 0.1% in the Netherlands. Thus, even though the figures for 2014 seem to suggest a reversal of the previous trend of falling real hourly minimum wages, the overall level of minimum wages still remains at a fairly modest level – too modest to have a serious impact on the current trend of rising income and wage inequality in many EU countries.

Further reading:

WSI: Minimum wage database 2015

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