2018 minimum wages in the EU
Which EU countries apply a statutory minimum wage?
In 2018, 22 out of the 28 EU Member States apply a generally binding statutory minimum wage. In Cyprus, a statutory minimum wage exists but is limited to specific occupations. In the remaining five EU Member States (Austria, Denmark, Finland, Italy and Sweden), while there is no statutory minimum wage, the minimum wage level is de facto set in (sectoral) collective agreements. It is important to note that the coverage of these agreements varies between countries and, as some employees are not covered, they may not be entitled to any minimum wage. According to an article by Garnero et al (2015), the combination of sectoral minima and high collective bargaining coverage can be regarded as the functional equivalent of a binding statutory minimum wage, at least for earnings inequalities.
How high are statutory minimum wages in 2018?
There is a huge variation in the statutory minimum wage rates valid at 1 January 2018 across EU Member States. These can be divided into three groups: High-range countries with minimum wage rates of around €1450 or more. This group includes affluent Member States located in the west of the Union: Belgium, France, Germany, Ireland, Luxembourg, Netherlands and the UK. Mid-range countries with minimum wage rates of between €650 and €900. This group includes the southern EU Member States: Greece, Malta, Portugal, Slovenia and Spain. Low-range countries with minimum wage rates of around €500 or less. This group is composed entirely of the new EU Member States in the eastern part of the Union: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia.
Table 1 shows the nominal rates in national currency as well as converted to euros and adjusted to the average monthly amount. The highest adjusted minimum wage was observed in Luxembourg and reached almost €2,000. Bulgaria had – at €260.8 – the lowest minimum wage rate, comprising about one-eighth of the Luxembourg level. The Bulgarian rate is relatively low – even compared to other low-range countries – and the second lowest rate (in Romania) is €407.3.
As pointed out in a paper by the European Commission, the cross-country differences in minimum wages contract if the minimum wage is expressed in purchasing power standards (PPS). The adjustment for price levels partly evens out the gaps between low-range, mid-range and high-range countries that were identified when minimum wages were ranked in euro terms. In 2017, the highest minimum wages in PPS was applicable in Luxembourg (€1,615.3). This was ‘only’ 3.3 times more than the Bulgarian minimum wage in PPS (€491.4).
The EU commission recommends that the Netherlands take action in 2017 and 2018 to:
1. Use fiscal policy to support domestic demand, including investment in research and development. Take measures to reduce the remaining distortions in the housing market and the debt bias for households, in particular by decreasing mortgage interest tax deductibility.
2. Tackle remaining barriers to hiring staff on permanent contracts. Address the high increase in the self-employed without employees, including by reducing tax distortions favouring self-employment, without compromising entrepreneurship, and by promoting access of the self-employed to affordable social protection. Based on the broad preparatory process already launched, make the second pillar of the pension system more transparent, inter-generationally fairer and more resilient to shocks. Create conditions to promote higher real wage growth, respecting the role of the social partners.