Statutory minimum wages in the EU 2017

In 22 out of 28 EU Member States, a generally applicable statutory minimum wage exists; the level of this minimum wage varies greatly from one country to another. This article provides information on statutory minimum wage levels, how the minimum wage has been determined for 2017 and minimum wage coverage across the EU. The data show that the minimum wage grew more over the year preceding 1 January 2017 than the year before.

There should be a minimum salary in each country of the European Union.

Jean-Claude Juncker (18 January 2017)

In January 2017, European Commission President Jean-Claude Juncker stated that there should be a minimum wage in every EU Member State. The European Commission is preparing a reform of the EU’s functions, which it will present in advance of celebrations for the 60th anniversary of the Treaty of Rome, at a summit in Rome on 25 March 2017. It is understood that these proposals may closely relate to the level and setting of statutory minimum wages.

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Member States with a statutory minimum wage

The term ‘minimum wages’ refers to various legal restrictions of the lowest rate payable by employers to workers. Statutory minimum wages are regulated by formal laws or statutes. This article investigates the statutory minimum wages generally applicable in a given country and not limited to specific sectors, occupations or groups of employees.

In January 2017, some 22 out of 28 EU countries apply a generally binding statutory minimum wage – Belgium, Bulgaria, Croatia, Czech Republic, Estonia, France, Germany, Greece, Hungary, Ireland, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and the UK. Those with no general statutory minimum wage are Austria, Cyprus, Denmark, Finland, Italy, Sweden. In the majority of EU Member States where there is no statutory minimum wage (Austria, Denmark, Finland, Italy and Sweden), 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 have any minimum wage.

Level of statutory minimum wage

The level of statutory minimum wages greatly varies between EU countries. As of 1 January 2017 (unless indicated otherwise), the lowest minimum wages (usually less than €500 per month) are found in the new Member States (NMS). Of these, Bulgaria applies the lowest monthly minimum wage in the EU – BGN 460 (€235). Immediately following is Romania, which from 1 February 2017 will apply a monthly minimum of RON 1,450 (€322). Two of the NMS – Malta and Slovenia – form a middle group, together with Portugal, Greece and Spain, in which the minimum wage ranges between €500 and €1,000 per month. Of the EU15, Portugal has the lowest monthly statutory minimum wage. Notably, in Greece (only the private sector ), Portugal and Spain, employees are entitled to 14 monthly wage payments per year; in many other Member States they receive 12 monthly minimum wages. A majority of the EU15 have the highest minimum wages, exceeding €1,000 per month: the highest – in Luxembourg (€1,999 per month) – is 8.5 times the Bulgarian minimum.

Note: The conversion to euro has been done with the exchange rates as of 1 January 2017. For Romania and the UK, the agreed increased minimum wage rates have already been presented. As of 1 January 2017, the minimum wage in Romania was RON 1,250 (€277 as at 25 January 2017) and the National Living Wage in the UK was GBP 7.20 (€8.37). For France, a ‘month’ represents 151.67 hours of work, based on the 35 hours working time regulation. - Source: Eurofound’s Network of European correspondents

Nominal increases in minimum wage

The growth in minimum wage this year has accelerated as compared with last year. Of 22 countries with a minimum wage, 15 applied greater increases over 2016–2017 than 2015–2016. Between January 2016 and January 2017, the NMS generally experienced a more pronounced growth in statutory minimum wages than the majority of other EU countries (Figure 1). If the minimum wage on 1 January 2017 is compared with that of one year previously, Romania, Hungary and the Czech Republic had the highest increases – 38%, 15% and 11% respectively. (The increase for Romania refers to the period 1 January 2016 to 1 February 2017.) Of the EU15, the minimum wages grew most in Spain (by 8%). In contrast, the minimum wage did not change in Greece, where it was first cut and then remained unchanged since 2012. In France and Malta, the minimum wage rose by about 1% in both 2015 and 2016. In June 2016, Belgium’s minimum wage grew (by 2%) for the first time since December 2012.

Increase in nominal minimum wage, 1 January 2016 to 1 January 2017

Note: In Romania, the wage of RON 1,450 RON is valid as of 1 February 2017. The reported increase in the UK refers to the increase in the National Living Wage between 1 April 2016 and 1 April 2017. - Source: Eurofound’s Network of European correspondents

In Slovenia, the definition of what falls under the minimum wage has been changed. From January 2016, three allowances paid for working unfavourable hours (for night work, Sunday work and work on public holidays) have been exempted from the minimum wage and henceforth paid separately. With a one-year delay (at the end of 2016), the tax legislation was also changed to follow the change in the minimum wage legislation. Recipients of the minimum wage, often working unfavourable hours, will from 2017 onwards once again be in a tax-neutral position, as against the period prior to the exclusion of the above-mentioned allowances from the minimum wage.

It is also worthwhile looking at the development of the minimum wage over a longer period. As Figure 2 shows, nominal developments in the statutory minimum wage since 2010 differ considerably across countries. Over the seven-year period, the minimum wage grew most in Romania (by 142%), Bulgaria (92%), Hungary (73%) and Estonia (69%). It is important to mention that these countries started with relatively low minimum wages in 2010; moreover, that the convergence with high-income countries is still far from over, as can be seen from the comparison of the minimum wage rates in Table 1. Of the EU15, the UK experienced the biggest growth in the minimum wage (26%). This was in large part due to introduction of the National Living Wage, which replaces the national living wage for workers aged 25 or more. Countries with the most modest growth over the observed period were Ireland (rise of 7%), France (10%), and the Netherlands and Belgium (both 10%). Greece is the only Member State in which the minimum wage now is lower than that of 2010 (by about 20%). The statutory minimum wage also temporarily decreased (by about 12%) in Ireland – in 2011 – but was restored to its original level within six months. In January 2015, Germany introduced a statutory minimum wage for the first time.

Statutory minimum wage development since 2010 in selected Member States – nominal; Index, 2010 = 100

Note: The index, 2010, is equal to 100. - Source: EurWORK Network of European correspondents

Real increases in minimum wage

The change in the statutory minimum wage should be viewed in the context of changing price levels. For this reason, the real changes in the statutory minimum wage over the period 1 January 2010 to 1 January 2017 have been calculated. As shown in Table 2, after this calculation, Bulgaria, Romania, Hungary and Estonia still have the greatest increases in the minimum wage: these range between 23% in Estonia and 84% in Bulgaria. However the real rates are considerably lower than the nominal ones. Of the EU15, Luxembourg saw the highest increase in the real terms (by almost 5%). In four countries, however, minimum wages decreased in real terms: the Netherlands (by- 0.7%), Malta (-1.4%), Belgium (-4.3%) and Greece (‑24%). Overall, across the EU, the minimum wage is in real terms growing more slowly in the EU15 than in the NMS, indicating convergence between the two groups over the medium term.

Note: The scale ranges the greatest increase to the greatest decrease. The nominal minimum wage rates were converted to real terms using the monthly HICP index (prc_hicp_midx) for the period January 2016 to December 2016, as updated by Eurostat on 19 January 2017. - Source: Author calculation using data from Eurofound’s Network of European correspondents and Eurostat