(Un)beliveable wages? An analysis of minimum wage policies in Europe from a living wage perspective

Brian Fabo,Sharon Sarah Belli

doi:10.1186/s40173-017-0083-3

Abstract

Minimum wage is one of the most debated issues in the labour policy area. Often perceived as a trade-off between employment and equality in earnings, the debate on minimum wage is highly polarized. With regard to the undergoing discussions on the Social Pillar of the European integration, we aim to extend the debate to include the aspect of minimum living standards, by empirically showing the gap between minimum wages and the minimum living wages in the peripheral countries of the European Union.JEL Classification: J39

Highlights

In the 2016 State of the Union, Jean-Claude Juncker, the President of the European Commission, called for increased efforts towards construction of the European Pillar of Social Rights, stressing that Europe was not social enough and it needed a change in that respect (European Commission 2016)
minimum wage (MW) earners can afford to live in relative comfort, even though life in those countries is not cheap—the living wage (LW) tends to amount to about 1000 EUR or more
The Social Pillar of the European Union (EU) brings an impetus to think about MW from the perspective of the LW

Summary

Introduction

In the 2016 State of the Union, Jean-Claude Juncker, the President of the European Commission, called for increased efforts towards construction of the European Pillar of Social Rights, stressing that Europe was not social enough and it needed a change in that respect (European Commission 2016) Building upon this topic, in January 2017, President Juncker conceptualized his earlier statement within the framework of the minimum wage policy, stressing that while all member states are free to set the minimum wage in line with the local conditions, “There is a level of dignity we have to respect” (Guarascio 2017). Economic literature on MW (Cahuc and Zylberberg 2004; Borjas 2015) and empirical research on the topic (Adams and Neumark 2005; Neumark 2014) by and large agree that while raising MW increases wages of lowincome workers in particular, it results in companies laying off workers (with low-income workers again being among the first to be fired) and decline in economic output. The great ideological, institutional and political differences between the European Union (EU) member states result in the lack of consistence in setting minimum

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