The European Commission on Wednesday proposed a directive aimed at increasing the minimum wages to make them adequate to the cost of living as they are inadequate for a decent life in the majority of EU member states.

“What we propose today is a framework for minimum wages, in full respect of national traditions and the freedom of social partners. Improving working and living conditions will not only protect our workers, but also employers that pay decent wages, and create the basis for a fair, inclusive and resilient recovery,” said European Commission President Ursula von der Leyen.

The minimum wage exists in all member states. In 21 member states, including Croatia, they are regulated by law while in six countries (Austria, Cyprus, Denmark, Finland, Italy and Sweden) the minimum wage is determined through collective bargaining.

In the majority of countries, the minimum wage is inadequate and the Commission wishes to ensure a higher adequacy of minimum wages.

The directive does not aim to align the level of minimum wages across the EU nor to establish a uniform mechanism for setting minimum wages in member states because the Union does not have that authority. The aim is to establish conditions to determine adequate minimum wages with clear and stable criteria which will be regularly supplemented to ensure the involvement of social partners.

Instead of proposing recommendations that are unbinding, the Commission decided to adopt a directive as a legislative act that defines the aims, while member states act autonomously and select how they will meet those aims. Once the directive is debated in the Council and the Parliament, member states will have two years to transpose it into their national legislation.

Member states where minimum wages are agreed in collective bargaining tend to have a low share of workers with minimum wages, which are higher than those where they are regulated by law. Hence, the Commission recommends collective bargaining.

Countries where minimum wages are regulated by law need to establish clear, transparent and stable criteria to determine the adequacy of the minimum wages. Those criteria should include at least the purchasing power of minimum wages, taking into account taxes and social benefits, the growth of gross wages and labour productivity developments.