Minimum wages in Europe (2013)

By Lluis Torrent, in UnitedExplanations

Did you know that the minimum wage in Luxembourg is 11.5 times higher than in Romania? Welcome to inequality in Europe: 6 countries have minimum wages above €1000 whereas 10 countries have minimum wages below €400. Find out which ones.

At the turn of the year, many governments adjust national minimum wages. As shown in the graph below, minimum wages are currently over €1000 in six European countries. However, there are other countries in Europe which also cross this threshold: a number of states (such as Germany, Denmark, Norway and Finland) are not included in this list because they do not have a statutory minimum wage, using a system of collective wage agreements instead. On the flipside, in ten countries, minimum wages are set under €400. Welcome to inequality in Europe .

Minimum wages are generally set by law; however in some cases, collective agreements are used to determine the minimum salary a worker receives in exchange for his or her work. This amount is not necessarily updated every year, nor does an adjustment always result in a wage increase. In Spain, for example, minimum wage for 2012 remained unchanged with respect to 2011 as a consequence of the economic crisis. In 2012, however, it rose by 0.6%. In other countries, such as Portugal and Greece, minimum wages were even decreased (by 3% in Portugal (2012) and by 22% in Greece (entry in force: March 1, 2012)).

Minimum wages in Europe 2013

What is minimum wage?

Minimum wage is the lowest amount a worker can be legally paid for his or her work. Twenty-one European countries have – in varying shapes and forms – a statutory national minimum wage (comparable to non-European countries, such as Canada, Japan and the USA). This group is made up of most of the EU-15 member states (Luxembourg and Portugal also have statutory national minimum wages) and all ten new member states. Whereas France, Greece, Portugal, Spain and the Benelux countries have a long tradition of protecting pay at the bottom of the labor market, Ireland and the UK did not introduce national minimum wage systems until the late 1990s. In Austria, Denmark, Finland, Germany, Italy and Sweden – the remaining ‘old’ EU member states – as well as in Norway and Cyprus, collective wage agreements are the main mechanism used for regulating the lowest salaries.

The cost of living varies immensely between countries (a loaf of bread could cost €5 in one country and €2 in the next). In order to achieve a more reliable comparison of minimum wages, Purchasing Power Parity (PPP) can be applied. This measure takes into account the national variations in cost of living.

One minimum wage for all of Europe?

Only a few weeks ago, Jean-Claude Juncker, president of the Euro Group, proposed a common minimum wage and other solidarity measures to avoid losing “the social dimension of the European Union”. Seeing as minimum wage in certain European countries is 11.5 times higher than in others, this would be no easy feat. Addressing the European Parliament’s Committee on Economic and Monetary Affairs, Juncker stated: “[i]t is essential to agree on a European minimum wage”, because if it does not, the EU runs the risk of “losing the support of the working class”. Last week, the seventeen Eurozone countries chose a new Euro Group president, Dutch Minister of Finance Jeroen Dijsselbloem, to succeed Mr. Juncker, who had been in office since 2005.

Important notes on the graph above:

a) Germany currently has no national minimum wage. While statutory minimum wages exist, they vary according to industry and region.

b) Denmark, Italy, Austria, Finland, Sweden, Iceland, Norway and Switzerland do not have legally determined minimum wages. Salaries are regulated by industry, company or individual agreements.

c) For countries where wages are paid out in 14 installments (Greece, Spain and Portugal), salaries have been adjusted into 12 monthly installments.

d) The minimum wages above are the gross amounts paid to full-time workers over 23 years of age (before personal income taxes and social security contributions).

e) The wages above apply to full-time employment (approximately 40 hours per week in most of the countries included).

f) Six countries have not yet published their adjustments of minimum wages, as far as the author was able to ascertain: Luxembourg, Ireland, France, Slovenia, Croatia and Slovakia. In these cases, the wages for July 2012 are included. The United Kingdom updated its minimum wage in October 2012.

g) Data was retrieved from Eurostat or other sources, except in the following cases: France, Malta, Bulgaria, Hungary, Estonia, Latvia, Lithuania and the Czech Republic.

h) There is no ‘precise’ way to compare wages. Purchasing Power Parity corrects the differences in average costs of living between countries, but does not take into account the possible variations in price levels between cities within the same country. Moreover, many other factors may play a role, such as the number of children in a household, or the cost of pre-schooling.