Advancing social justice, promoting decent work
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ILO participates in a Conference on European Minimum Wages
On 16 November, a conference on European minimum wages, organised by Agnes Jongerius, Member of the European Parliament (MEP), and the Group of the Progressive Alliance of Socialists & Democrats in the European Parliament (S&D), took place in Brussels.
The conference on European minimum wages took place in Brussels in the context of current legislative discussions underway at the European Parliament and the Council on the European Commission’s proposal for a directive on adequate minimum wages. The focus of the conference was on addressing in-work poverty and ensuring that workers in the European Union receive adequate minimum wages so that they and their families could enjoy a decent standard of living and are protected against undeservedly low pay and poverty.
European and international policymakers, academics, and experts working in the field of employment and social affairs attended the event both in-person and online, including the European Commissioner for Jobs and Social Rights Nicolas Schmit and the Belgian Federal Minister of Economy and Employment, Pierre-Yves Dermagne. Patrick Belser, ILO Senior Economist and an expert on wages, participated in the panel discussion on “Minimum wages in the EU: The way forward” and was joined by Esther Lynch (ETUC Deputy General Secretary), Professor Thorsten Schulten (Hans-Böckler-Stiftung) and Maria Häggman (Finnish Confederation of Professionals STTK).
At the global level, more than 90 per cent of ILO’s member States have minimum wage systems in place set either through collective bargaining or statutory mechanisms; even if the level, effectiveness and coverage vary significantly across countries. Minimum wages are an important labour market tool in putting a floor on wages and protecting people from poverty. Well-designed minimum wages can contribute towards reducing inequality and promoting decent work for all, while poorly designed minimum wages, in contrast, can put workers’ well-being at risk, undermine effective implementation, and risk encouraging informality.
As the ILO’s Global Wage Report 2020-21: Factsheet for the European Union shows, statutory or negotiated minimum wages exist in all EU Member States, where 21 out of the 27 countries have a statutory minimum wage, while around one in five countries, namely Austria, Belgium, Denmark, Finland, Italy and Sweden have minimum wages set exclusively or primarily through binding collective agreements. In many EU countries with a statutory minimum wage, higher collectively agreed minimum wages in particular industries or sectors often coexist.
According to research conducted by the ILO for the Global Wage Report 2020-21, an estimated 26.5 million wage earners in the EU are paid at or below the minimum wage, corresponding to 15 per cent of all the wage earners, of which 19.2 million earn less than the existing hourly wage either because they are not legally covered or because of non-compliance with existing wage rates. More than 80 per cent are aged over 25, and more than one third of these workers have children, highlighting the importance of ensuring adequate wages for workers and their families. Mr Belser also highlighted that more than half of all minimum wage earners are women (15 million) while young workers (those aged under 25), workers with lower education, and rural workers are also over-represented groups in the labour market. Minimum wage earners are also more likely to have temporary contracts and part-time jobs than those paid above the minimum wage.
Mr Belser also noted that, when it came to minimum wage fixing, the use and availability of good data and evidence-based decision making was crucial components in ensuring wages were adequate and highlighted how social dialogue can help ensure a proper balance is reached between the legitimate needs of both workers and enterprises when setting minimum wage levels.
History of the ILO and minimum wages
Minimum wages have been an important subject at the ILO since its creation in 1919. Based on the view that “universal and lasting peace can be established only if it is based upon social justice”, the ILO constitution called in its preamble for an urgent improvement of conditions of labour, including the provision of an adequate living wage. In recent times, the 2019 ILO Centenary Declaration of the Future of Work called for “strengthening the institutions of work to ensure adequate protection of all workers” including “an adequate minimum wage, statutory or negotiated”. Furthermore, as part of the ILO’s 2021 call to action for a human-centred recovery from the COVID-19 crisis, governments, employer, and worker delegates from 181 countries committed to work individually and collectively and with the ILO to protect workers through, among other things, an adequate minimum wage, either statutory or negotiated.
The ILO defines a minimum wage as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”.
ILO Convention No. 131 on Minimum Wage Fixing and its Recommendation No. 135 sets out the key principles that should be taken into consideration when drafting an initiative on minimum wages. These principles are the following: (i) broad scope of application, covering all groups of wage earners, (ii) full consultation with social partners, and if possible direct participation on the basis of equality, (iii) an adequate minimum wage level, (iv) need to adjust and monitor the adequacy, and (v) clear definition of the minimum wage and implementation, including monitoring and enforcement measures. On the issue of adequacy, which was the main focus of the conference, ILO Convention No. 131 calls for an evidence-based approach when addressing this issue using two sets of criteria when determining the adequacy of the minimum wage:
The needs of workers and their families – taking into account the cost of living, the general level of wages within the country, social security benefits, and the relative living standard of other social groups; and
Economic factors – including the requirements of economic development, levels of productivity, and the desirability of attaining and maintaining a high level of employment
The ILO Office in Brussels is committed to working with the EU to ensure workers have an adequate minimum wage, which is central for a human-centred recovery from the COVID-19 crisis and beyond.
