Minimum wage, maximum anger | Economist
EEVERYONE WANTS to be a little Danish. Cosiness, a feeling of Nordic contentment achieved through baking, light and good company, became the philosophy of the day during lockdown. Danish dramas win garlands, while its comedies contain jokes so enjoyably dark that viewers can worry about ending up on a Europol watch list. Danish semen has also become a thriving export, thanks to the country’s combination of liberal rules for donors and reputation as a small nation of tall females.
But it is the Danish work system that attracts the most praise. Leftists drool over a model who sees hamburger flippers at McDonald’s pay the equivalent of $ 22 an hour. Those on the right are amazed that the country does not have a statutory minimum wage. Instead, employers and stakeholders sit down together and club out collective agreements that cover most workers. It is the same in neighboring Sweden. Employees benefit from salaries and benefits that are among the most generous on the continent; Employers can hire or fire with ease during a boom or bust. Denmark and its Scandinavian neighbors succeed in being both a workers’ paradise and a capitalist’s dream.
Telling Scandinavians how to run a job market is like teaching the French how to bake baguettes. Nevertheless, this is the position that the Nordic countries have found themselves in. Ursula von der Leyen, President of the European Commission, wants all workers to be covered by a minimum wage, regardless of whether it is through national law (as in most of the club) or through collective agreements (as in Scandinavia). Proposals that will lead to the subject of minimum wages being withdrawn EU laws are negotiated among I Ps and national governments.
At first glance, Denmark and Sweden have little to worry about. A common minimum wage is not on the table. In fact, it would be impossible for a club that includes Luxembourg, whose minimum wage is € 2,202 per month ($ 2,550) and Bulgaria, where it is € 332. According to EUs own treaties, only national governments can set a minimum wage. Yes, the Commission came to praise the Scandinavian system, not to bury it. It would rather everyone look a little more like Sweden or Denmark, with collective agreements galore.
Instead, the Commission wants to shape how national governments guarantee decent wages, rather than setting their level. According to its proposal, countries would still be responsible for the details. Those with statutory minimum wages would be forced to ensure that these are sufficient when measured against average incomes. For those without a minimum wage, a group that includes Italy, Austria, Cyprus and Finland, as well as the Scandinavian duo, the Commission wants at least 70% of workers to be covered by collective agreements – an obstacle that Scandinavians are already facing.
Still, the Scandinavian duo is still worried, and for some reason. All legislation has unintended consequences, especially at European level, where the European Court of Justice is as much a player as a judge. In Sweden, about 60% of collective agreements do not contain a minimum wage, points out German Bender, an analyst from Arena Idé, a Swedish think tank. With EU laws that now include rules on minimum wages, legal challenges would be possible. And strange things can happen. A case in the 1960s involving an unpaid electricity bill worth a few lira ended with the determination of the preference for EU law, which means EU rules trump national if the two collisions. The so-called “no bailout” clause in EUThe treaties did not do much to stop a series of rescue operations. A single ruling could upset the Nordic working model.
When suggestions start to roll, they are tricky to stop. Employment legislation is approved by a qualified majority of governments, so vetoes do not apply. Usually, however EU avoid substances that are sacred to national governments. The grounds that legislation – rather than issuing proposals – on minimum wages contravenes the Scandinavian principle of no state interference in wage setting fell on deaf ears. Denmark and Sweden “yellow card” the proposal for a directive on minimum wages, a formal protest, but without results. In it EUs Council of Ministers, where national governments are bargaining for a position, lawyers say it is perfectly legal. The French government, which will lead negotiations on the subject from January, is keen to get it done.
In addition to the absolute minimum
New rules on minimum wages are just the beginning of a broader commitment to workers’ rights EU level. Laws to make wages transparent have been proposed by the Commission. Proposals on how countries must treat “platform workers” – such as Deliveroo riders and Uber drivers – are under construction. For some, it is a welcome shift EU policy. During the austerity years, governments would be lean and mean. Angela Merkel was delighted to note that EU was 7% of the world’s population, a quarter of its economy, but about half of all its welfare expenditure. Today the song has changed. Generous welfare states and high occupational safety were once considered the reason for this EUmisery; now they are the solution.
For Scandinavians, this change is a cause for concern. Their system is not broken, but still EU insists on fixing it. There is little scope for circumventing the legislation. Denmark has an exception for the euro, as well as for European laws on justice and home affairs. Sweden is in theory obliged to join the euro eventually, but uses a loophole to hold on to its krona. However, such exceptions are a mere memory and are of no help in the present case. Europe no longer exists a la carte. Systems that work well, such as those in Denmark and Sweden, may need to be changed to help systems that work less well, such as those in Cyprus or Italy. “United in diversity” is EUs slogan. But unity trumps more and more diversity as EU digs deeper and deeper into the lives of its citizens. Everyone wants to be a bit like Denmark. But Denmark may soon begin to resemble everywhere else.■
This article appeared in the European section of the print edition under the heading “Minimum wage, maximum anger”