Ensuring adequate minimum wages in an age of inflation

Summary:

Minimum wages have risen significantly in the European Union (EU) in 2022, as Member States have left behind the cautious mood of the COVID -19 (coronavirus) pandemic. Yet increasing inflation is eating up these wage increases—and only flexibility in the processes for setting minimum wages may avoid general losses in purchasing power among low earners.

On June 6th, the Council of the EU and the European Parliament reached a political agreement on the directive on adequate minimum wages, proposed by the European Commission in October 2020. Once formally approved, member states will have to transpose it into national law within two years. The directive encourages the setting of wage floors at adequate levels in those countries (21 of the 27) with statutory minimum wages. Individual member states will set such a level, taking into account socio-economic conditions, long-term productivity trends and the purchasing power of the minimum wage.