Cost of Living, Living Wages, and Minimum Wages in EU-27 countries
For once, the European Commission had a good idea – admittedly, prompted by the trade unions. It proposed in autumn 2020 to adopt a European framework for minimum wages, so as to ensure that they are “adequate”, “decent”, that they allow a person to lead a life of dignity. But how do you judge the adequacy of a salary? There are two methods to achieve this. The first is to determine the minimum wage based on a percentage of real wages (median or average) of the country in question. As such, La France Insoumise considers that the adequate level from this point of view corresponds to 75% of the median salary, so as to be significantly above the poverty line.
The second method assesses the cost of living imposed on workers, measured from a «basket» of goods and services, and deduces the amount below which one cannot live with dignity – and therefore get paid respectively. These baskets of goods and services, sometimes also called “reference budgets”, initially require considerable scientific work, in order to aggregate the current prices for food, housing, healthcare, etc. in a given country or region. In France, for example, a “Higher Commission for Collective Agreements” used to be responsible for evaluating the composition of the average household budget and that it be taken into consideration to determine the value of the minimum wage; it has since disappeared as such.
At European level, the European Commission launched in 2013 a project aimed at instituting a methodology and comparable baskets across Member States, without carrying out the project, due to a lack of political will. This is the whole point of this study. To shed light on the debates on the subject, it seemed important to me that a first proposal of baskets in the 27 member states be available and put forward for discussion. The study, after explaining the methodological choices made, consists of as many case-studies as there are countries in the European Union. How should we read these case-studies?
• First, a list of incompressible expenses (or at least measured here as such) for a typical family and a single person is drawn up, presenting a range which takes into account various variations (living in metropolitan areas or in rural or peri-urban areas, individual preferences and lifestyles, etc.). • These expenses are then mirrored with the salaries necessary to cover them, taking into account the automatic pay slip deductions, for both of the aforementioned typical households. These salaries correspond to the estimates of living wages in the country in question.
• Finally, these estimates are put in context, by comparing them to the real wages observed for different categories of workers, and to the minimum wages in force when they exist, both in monthly and hourly values. What do we observe? —› The lowest basket in the EU is in Bulgaria, at € 370-500 per month for a single person and € 485-675 for a family. However, the minimum wage in force in this country is only 335 €;
- —› in almost all cases, minimum wages are lower than the real wages paid to low-skilled workers – despite the fact that among Europeans paid at minimum wage there are also qualified and / or experienced workers;
- —› In many countries, particularly in Eastern Europe, the minimum wages in force are grossly insufficient to cover the essential needs even of an individual living alone, without dependent children (Bulgaria, Slovakia, Poland, etc.) – and a fortiori insufficient to provide for the needs of a family.
- —› Elsewhere, legal minimum wages may be adequate for a single person but not for a family (Belgium, Cyprus, Greece, etc.).
- —› Finally, in a handful of countries, legal minimum wages can cover the needs of a family, on the condition that it tightens its belt severely (lower range of decent wage estimates – Ireland, Lithuania, Luxembourg, etc.).
This study obviously does not conclude the matter, rather it intends to catalyze further discussion. This is an effort which has the merit of existing but which, for greater accuracy, calls for the involvement of European governments, their national statistical institutes, and of course the workers themselves as well as their representatives.
In addition, any scientific method, however robust it may be, cannot do without democratic debate when it comes to determining living costs and standards. Researchers can determine the cost of a standard basket but are not qualified to establish the legal duration of working time, for example, which is a matter of political choice. The baskets’ composition, which also depend on inevitably variable cultural and geographical factors, will always be the result of debates and political compromises between the various actors concerned.
Cost of Living, Living Wages, and Minimum Wages in EU-27 countriesFR