Collective Wage Bargaining in Europe Remains Stagnant

Thursday, June 26, 2014 | Published by

Euro BanknotesA recent study released by the European Foundation for the Improvement of Living and Working Conditions revealed that in 2013, the average nominal collectively agreed pay increases either remained the same or were lower than those in 2012.1

The significance of these developments cannot be underestimated. “The outcomes of collective wage bargaining are a major determinant of wage developments; they therefore influence the competitiveness of nations, sectors, and companies and employees’ income and so in turn shape aggregate consumer demand, a key factor in economic growth.1

Although the figures varied throughout the EU, the data indicated that the new Member States (joined in 2004 or later) had a lower degree of coverage than the older Member States, with the exception of Portugal and the United Kingdom. Meanwhile, Austria and Belgium had the highest coverage – almost all employees were covered under some form of a collective bargaining (wage) agreement.

Across industries there was a decline in nominal wages in the chemical sector from 2012 to 2013; in the retail sector there was an even split, with 10 countries reporting a higher or equal wage increase and 10 countries reporting a decrease in nominal wages. The most alarming statistics were in the civil service sector where “the majority of countries surveyed report[ed] pay freezes or pay cuts”.1

The level of statutory minimum wages also fluctuated. There was a recognizable decrease in Greece, whereas Estonia, Romania and Bulgaria had a 10%+ increase. Lithuania saw an almost 22% increase. Despite these gains by the new EU members, the old EU Member States have retained the highest minimum wage standards in Europe. The Netherlands is credited with having the highest minimum wage in the world, a mandated €66.77 a day.2 However, this only applies to persons aged 23 and older. Luxembourg (€1,801.49 per month for persons 18+), Ireland (€8.65 an hour – although in real terms this has decreased some since it was last adjusted in 2007 and does not account for inflation), Belgium (€1,501.82 to €1,559,28 per month for persons 21+), and the UK (£6.19 an hour for persons 21+) round out the top five EU Member States.2

For employers, this can interpreted as a positive outcome, as it keeps labour costs steady and allows companies to possibly expand their workforce and/or provide additional remuneration at their leisure, without the burdens of government mandated quotas. Also, for employers seeking to establish new operations, the comparative tools available by this and other studies provide concrete analysis on wage demands by sector and country and are helpful in identifying particularly strong or weak jurisdictions. Needless to say, in today’s turbulent economic times, employers can benefit from all available data when it comes to managing their workforce affairs efficiently.

1 “Developments in collectively agreed pay 2013” by the European Foundation for the Improvement of Living and Working Conditions, 2014

2 “Top 5: which countries are paying the highest minimum wage in Europe?” by, 2014