The EU Directive on Adequate Minimum Wages: Preliminary Assessment of Potential Impacts

After long, intense negotiations, the Directive on Adequate Minimum Wages was adopted in October 2022 and must be implemented at national level by November 2024.

Those member states which have a statutory minimum wage will have to ensure that its level is ‘adequate’ – the Directive mentions 60% of the median wage as a reference value. The aim is to help workers achieve ‘a decent standard of living’ while also reducing the gender pay gap, because women are overrepresented in low-paid jobs.  

All member states will have to bolster collective bargaining, and where the coverage rate is less than 80%, they will have to put into place an action plan to increase it.

What will the consequences be for hourly wages, employment, household poverty and gender inequality? Is the Directive likely to succeed in its aim of improving working and living conditions for men and women? To answer these questions, Professor Anxo:

• presents the legislation

• looks at which member states will be most affected (there are many which fall a long way short of the targets mentioned above)

• summarizes historic and contemporary research on the impacts of minimum wages, including on the gender pay gap, and

• describes the industrial relations systems which are prevalent in the EU, and the main trends affecting these in recent decades.

He concludes that the Directive is, on the whole, an effective instrument: increasing minimum wages can improve employment conditions and reduce the gender pay gap at the lower end of the wage distribution. Strong collective bargaining is likewise associated with better pay and higher gender equality. However, to reverse the general weakening of social partners’ labour market governance and to address other gender inequalities in the field of work and income, other tools would be needed.