Who earns minimum wages in Europe - European Trade Union ...

4. Summary and suggestions
for further research
Minimum wages continue to stir controversial policy debates. The current
economic climate in Europe might contribute to increase the pressure on
wages at the bottom of the wage distribution and, as a consequence, renew the
interest in wage floors as a tool to protect workers and employees. This report
contributes to a better understanding of minimum wages by providing a solid
empirical assessment of minimum wage policies and their socio-economic
consequences for a range of European countries.
An obstacle to providing comparable information on wage minima for
different countries is the institutional diversity of European minimum wage
systems. This diversity reflects the historical evolution of each of the national
collective bargaining systems. While one has to acknowledge the existence of
national idiosyncrasies, it is nevertheless useful to distinguish European
countries with the help of a straightforward typology. Central and Eastern
European countries, the UK and Ireland, as well as Luxembourg, the
Netherlands, Cyprus, Spain, and Portugal operate minimum wage systems
that produce a "clean cut" in the income distribution. By contrast, all of the
Nordic countries, Austria, Belgium, Germany, Greece, and Italy operate
minimum wage systems that are "complex", i.e. many different minima coexist
side by side so that the left tail of the wage distribution is much smoother
in these countries. This typology therefore helps to link the institutional
arrangements that underlie the different minimum wage system and the
overall shape of the income distribution. The two types also differ with respect
to who is affected by minimum wage policies: whereas in clean-cut systems
the affected individuals are concentrated in a small segment of the wage
distribution, wage floors in complex systems can also affect workers and
employees with relatively high remunerations.
In addition to qualitative differences between minimum wage systems, the
report documents international variations in the (absolute and relative) levels
of minimum wages. While these levels follow no clear geographical pattern, it
appears that complex systems are more likely to generate relatively high wage
floors compared to systems that determine a single wage minimum at the
national level. By and large, ‘clean-cut’ systems typically involve social
partners to a relatively low extent and offer them merely a consultative
function in the process of setting the minimum wage. As a consequence, these
countries seem to be less effective in guaranteeing wage floors that help to
compress the lower end of the wage distribution and protect wage earners
from poverty.
48 Report 124