How serious is the Commission about its social commitments?

The 2018 country-specific recommendations (CSRs) were the first real test of how serious the European Commission is about living up to its commitments made in the European Pillar of Social Rights (EPSR) in the field of wages and collective bargaining because they were the first set of CSRs that were issued after the Pillar’s proclamation in autumn 2017. Against this background, the 2018 CSRs in the field of wages and collective bargaining are ambiguous. On the one hand, they no longer exclusively aim at implementing supply-side oriented policies which exclusively view wages as costs and collective bargaining as an institutional rigidity that needs to be curtailed. One reason for this, however, may be that most of the supplyside ‘reforms’ have already been implemented so there is neither need nor scope for further supply-side ‘reforms’

On the other hand, however, neither do the CSRs fully embrace and support the EPSR’s commitments. As has been usual in recent years, the 2018 CSRs can be divided into formal recommendations and ‘informal’ or ‘hidden’ recommendations, which means that in addition to the official CSRs there are recommendations that are only to be found in the recitals that precede the actual recommendations.

Formal and informal recommendations

Given the non-binding character of formal CSRs, there is no real difference between formal and informal recommendations in practice because the effect of both in terms of influencing national policies relies on moral suasion. As regards content, the CSRs (both formal and hidden) can be divided into four standard recommendations concerning: (1) the reform of wage-setting systems, (2) the change of wage policies, (3) the reform of minimum wage-setting and policies, and (4) the reduction of the gender wage gap.

Let’s start with the positive aspects. These encompass the recommendations to address the gender pay gap in Austria, Czechia, Germany and Estonia in order to increase female labour market participation and realise women’s full labour market potential. By fostering wage convergence between men and women these recommendations can be seen as an attempt to ensure appropriate wages for women. Also positive are the recommendations addressed to Germany and the Netherlands, who were asked to create the conditions for higher wage growth in order to boost internal demand and to contribute to a rebalancing within the euro area.

A supply-side approach

All the other recommendations more or less follow the Commission’s usual supply-side oriented approach which primarily aims at ensuring and improving cost competitiveness. To this end, Finland is asked to align wages with productivity and Croatia is asked to reform public wage-setting to ensure control over the public sector wage bill.

Two informal recommendations support a further decentralisation of collective bargaining. Italy is asked to support more bargaining at firm and territorial level in order to improve the swift adaption of wages to local economic conditions; and Finland received the informal recommendation to continue with more decentralised bargaining at sectoral and local level to ensure that wage increases do not harm cost competitiveness.

Similarly, Bulgaria and Romania – the two countries with the lowest absolute minimum wages but the most dynamic minimum wage development during the past years – were asked to increase transparency in minimum wage-setting which can be understood as an invitation to ensure more moderate minimum wage increases. As usual, France, the country with the highest relative minimum wage level, received the formal recommendation to ensure that minimum wage developments are consistent with the objectives of job creation and competitiveness.

Still a lot missing

To sum up, the 2018 CSRs are more interesting for what they do not include than for what they do. Completely absent in the field of wages and collective bargaining are, for instance, any recommendations supporting the restoration of multi-employer collective bargaining systems that have been dismantled during the crisis years. Also absent are recommendations that live up to the commitment of ensuring fair wages which provide for a decent living standard and adequate minimum wages that satisfy the needs of workers and their families. If this had been the case, those countries with a relative minimum wage level below 60% of the national median wage would have received a recommendation on ensuring a more dynamic minimum wage growth.