Working but poor – How the EU can fix decent minimum wages for everyone

This week the EU minimum wage directive will become reality in the European Parliament plenary. But what is the EU minimum wage directive? And how exactly will it help people in the EU to pay their rising bills? The Greens/EFA MEP Mounir Satouri tells you everything you need to know about the new directive.

Joana is 42, a single mother to a six-year-old son and works in a bakery in Prague. Although she is working full-time and gets child support from the state, her income is not enough to cover the rent for her small apartment and provide healthy food for her child or pay her bills.

This is the reality of millions of people across Europe – people of all ages and with all kinds of different backgrounds. Making ends meet was already tough before the war in Ukraine. Now the cost-of-living crisis is driving more and more people into poverty, even if they are working full-time in a secure job.

So how come we can not pay our bills although we work 40 hours a week or more? What can the EU do to fix this? And what would change if there was a minimum wage for everyone?

Minimum wages in the EU – How to bridge the differences?

What is minimum income?

Minimum income is a system that guarantees that you have sufficient income to be able to live and pay your bills if you contribute to the labor market or community work in some form or another. This way minimum income is supposed to reduce poverty and ensure a decent standard of living for everyone.

What is minimum wage?

Minimum wage is the minimum amount per hour that employers and companies have to pay to their employers and workers. It is often defined by national legislation or collective agreement so employers cannot legally pay beneath this hourly rate.

Whether it’s fixed by law or by collective agreements through trade unions, the minimum wage differs greatly from country to country within the European Union. In July 2022, the minimum wage was just €363 per month in Bulgaria but stretched to €2313 per month in Luxembourg. When it comes to Purchasing Power the Luxembourgish minimum wage is almost 3 times as high as the Bulgarian one. Purchasing Power describes how much you can actually buy at the supermarket once you factor in how food and other goods are priced.

But how can we fix this inequality? How can we ensure a sufficient income and decent standard of living for everyone in work? The Greens/EFA Group in the European Parliament is supporting the directive for minimum wages in Europe. This new legislation calls on each EU country to set up a minimum wage that is proportionate to the cost of living. There are a number of defined criteria in the EU minimum wage directive that will guide the specific amount of the national minimum wage.

What will change with the new directive?

The European Parliament will adopt the directive for minimum wages in Europe on 14 September 2022. This day will mark an important victory for a more social Europe. Two-thirds of the countries in the EU will see their minimum wage increase.  The directive fights poverty on a European level – raising wages for people who are struggling the most. It will also even out the big disparities that exist right now between the member states.

The EU’s minimum wage directive will be a solid defense against the cost-of-living crisis.

The Greens/EFA fought hard to include platform workers in the directive, as all workers should benefit from this minimum legal protection. Platform workers, such as food delivery drivers, are almost always classified as independent and left without protection at work. The EU minimum wage directive will lift their wages to be able to pay their bills.

How will the EU minimum wage directive tackle the effects of inflation?

Today, 96.5 million people in the European Union are at risk of poverty or social exclusion. A dizzying figure that promises to explode in the coming months, as the energy crisis and the cost-of-living crisis deepens.

Faced with annual inflation in the eurozone at 8.9% in July 2022, minimum wages must guarantee workers the right to a dignified and decent standard of living.

Everyone must be able to buy healthy food to feed their families. Every family should have electricity and heating, especially during the winter. People should not have to choose between internet access or health care.

Minimum wage should be grounded in reality. Food costs and household bills are spiralling. Before fixing a minimum wage, EU governments must ask themselves honestly – what does it truly cost to feed a household today? The minimum wage directive will force them to answer – and to tie their country’s minimum wage to the real cost of living.

Who will benefit the most from the EU minimum wage directive?

In total, 25 million workers will see their wages increase by 20%. The rate of in-work poverty will drop by 10% thanks to the EU minimum wage directive.

In particular, the minimum wage directive is a massive win for women and marginalized groups or people within the labor market.

Women will especially benefit from a raise in minimum wages. They are overrepresented in the lowest paid sectors and first affected by low wages. This pay disadvantage increases with other intersecting discriminations, such as ethnicity, sexuality or socio-economic background.

The EU minimum wage directive will also directly affect the gender pay gap. The EU is expecting the gap to narrow by at least 5%. The gender pay gap in Europe peaked at 14.1% in 2019 and has changed little over the past decade.

How decent living wages will strengthen worker’s rights and the EU economy

The EU minimum wage directive will strengthen the role of workers unions and bring the number of employees covered by collective agreements to 80%. Since low-wage workers have weaker bargaining power, these measures are essential to secure their rights and reduce wage inequality.

Governments will have two years to bring their national laws in line with the new directive. But given the urgency of the cost-of-living crisis, we need them to act quickly. The Greens/EFA call on EU Member States to take the lead and fulfill their duty to protect low-wage workers as soon as possible.

This is a big win that will make a real difference in people’s lives. But the fight doesn’t end here. The minimum wage directive will guarantee that all workers earn a decent minimum wage no matter where they live. But a truly social Europe must protect all citizens, not just those in work. The next goal is to ensure an EU standard for a minimum income for all citizens. We call on the European Commission to show ambition and to propose a directive on a minimum income in the EU as soon as possible.