The European Commission has proposed a new EU Directive to set a framework for minimum wages in the bloc, the EC announced in a statement on Wednesday. Hungarian parties including governing Fidesz and opposition parties MSZP and DK have welcomed the proposal.
According to the Commission, when set at adequate levels, “…minimum wages do not only have a positive social impact but also bring wider economic benefits as they reduce wage inequality, help sustain domestic demand, and strengthen incentives to work…. and can also help reduce the gender pay gap.”
The Commission, however, emphasized that the new proposal is a framework for minimum wages, “in full respect of national traditions and the freedom of social partners.”
The proposal also outlines that it fully respects the subsidiary principle: “it sets a framework for minimum standards, respecting and reflecting Member States’ competences and social partners’ autonomy and contractual freedom in the field of wages.”
Thus, instead of setting a single common minimum wage for member states, the proposal instead wants countries with statutory minimum wages, like Hungary, to put in place the conditions for minimum wages including clear and stable criteria for minimum wage setting, indicative reference values to guide the assessment of adequacy, and regular and timely updates of minimum wages.
These Member States are also asked to ensure the proportionate and justified use of minimum wage variations and deductions, and the effective involvement of social partners in statutory minimum wage setting and updating.
Most experts today agree that a common minimum wage across the EU would be a desirable and beneficial decision for employees only in the short run, as it could also cause a lot of severe economic problems
. Unemployment could dramatically increase as employers would try to reduce their steep expenses by employing a smaller labor force. Small businesses may go bankrupt in a short time because they can’t yield their increased expenses. Lastly, to avoid wage tension, most wages would be raised, further increasing employer expenses and forcing them to raise the prices of products and services.
The directive essentially sets the conditions for Member States so it is the EU countries that have to adopt their relevant legislation.
This process, both the law-making and its implementation will be monitored by the European Commission. If the legislation proves to be lacking or inadequate, the committee could initiate an infringement procedure against the Member State. If all fails, ultimately the European Court of Justice could be the one to enforce the Member State to do what the Committee suggests.
DK, Socialists welcome proposal
The new proposal was welcomed by both governing Fidesz and leftist opposition parties, although obviously evaluated from a different perspective.
“We have achieved what no one has ever before: it will be an obligation of the EU to raise people’s standards of living, leftist opposition Democratic Coalition (DK) MEP, Klára Dobrev said.
“We have been fighting for a long-time to ensure that there are no second-class citizens in the EU, because all Hungarians in Europe are entitled to a fair wage. Orbán’s government had attacked our goals with every possible means. However, they will not be exempt from the rules that are currently being drafted, and all EU member states will be obliged to comply with them,” Dobrev emphasized.
According to Socialist (MSZP) MEP István Ujhelyi, the new proposal takes into account both economic and development disparities between the EU countries, but in the long term wants to guarantee fair conditions and a fair minimum wage for all European workers.
“A monitoring system that will constantly examine the minimum wage system and accessibility in the Member States is definitely one to be supported, but it is only the first steps towards full implementation,” said Ujhelyi.
Fidesz: EC proposal reinforces ‘Hungarian model’
In a statement, Fidesz wrote that during the preparation of the proposal for an EU directive on minimum wages, two totally contradictory ideas were encounter.
“The left-wing has proposed measures that would increase indebtedness, lead to radical tax increases and redundancies, increase unemployment and weaken the economy,” Fidesz emphasized.
“Against this unfair and inhumane economic policy, the European Commission’s proposal supports the practice of the Orbán government, strengthening the Hungarian model of tax cuts, family support, a stable budget, job creation, and wage growth,” the party wrote.
Featured photo by Szilárd Koszticsák/MTI