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21 March 2018

Modest increases in minimum wages in the European Union

In early 2018, the legal minimum wage experienced a median increase of 4.4% in the EU Member States. Taking into account inflation, this increase is limited to 2.8%. These figures are taken from a report by the Institute of Economic and Social Research (WSI) of the Hans-Böckler Foundation, an organization accountable to the German trade union movement. The report is based on the WSI Minimum Wage Database which offers a comprehensive analysis of current minimum wage developments in Europe and beyond.

The highest increases in the minimum wage were recorded in Central and Eastern European countries. For example, the nominal minimum wage increased by 52% in Romania. These figures need to be put into perspective because the hourly minimum wage is less than 3 euros per hour in most Eastern European countries. Bulgaria ranks last with 1.57 euros per hour, ten times less than the hourly wage in Luxembourg. Taking into account the cost of living and purchasing power, the difference between the two countries mentioned above is only one-third.

The authors of the study find that the existence of a legal minimum wage is no guarantee against poverty. In that respect, in ten EU countries, the minimum wage represented in 2016 less than 50% of the median income, which is considered as the poverty line. Some countries often listed among the most economically prosperous member countries are in this group: Germany, Belgium, the Netherlands. In the latter two countries, there is even a downward trend in the minimum wage relative to the median wage.

Among the EU Member States, the smallest gap between minimum wage and median wage exists in France, followed by Slovenia and Portugal.

“Without the support of a robust system of collective bargaining, it is difficult for a statutory minimum wage on its own to contain the spread of low-wage employment. Minimum wages should, therefore, be viewed preferably as a support for collective bargaining and not as a substitute for it", conclude Thorsten Schulten and Malta Lübke, the authors of the study.

Further reading:

Schulten T. and Lübke M., WSI Minimum Wage Report 2018, Institute of Economic and Social Research, Report n°39, March 2018

WSI Minimum Wage Database

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