By Esther Lynch, ETUC Confederal Secretary
When they demand pay rises, workers and trade unions are all too often described as greedy – but nothing could be further from the truth. Pay rises are not only an important means of ensuring that workers share fairly in economic growth, they are also important for the economy as a whole in order to shore up sustainable growth. At the end of 2016 the Executive Committee of the European Trade Union Confederation (ETUC), which represents the national trade union confederations, therefore decided to organise a Europe-wide campaign for higher wages and stronger collective bargaining systems. At its core, this campaign is calling for a more expansive wage policy throughout Europe. To achieve this, it will support the demands of national trade unions for higher wages and place them in a pan-European context.
Since the major crisis of 2008/09, wage policy has become a focus of European economic policy. Under the new European economic governance, new procedures for coordinating economic policies have been developed, including the European Semester and the procedure for tackling macroeconomic inequalities. Through these procedures, the EU has acquired unprecedented influence over national wage policies. This influence has been most marked in the countries that were placed under the “supervision” of the Troika and forced to introduce far-reaching “reforms” of wage policy.
The EU’s wage policy in this context was based on the idea that the economic crisis was predominantly a crisis of inadequate competitiveness. As a result, a policy of wage freezes and pay cuts was propagated that led to huge falls in real wages in many European countries. To this day, real wages frequently remain below pre-crisis levels (Schulten 2016, ETUI 2017).
As the studies produced by the TURI (Trade Union related Research Institutes) network have shown (Müller et al. 2016), the wage policy applied by the EU is not only based on a completely incorrect analysis of the crisis but has in reality also resulted in Europe’s economic recovery being hampered by low demand. The situation in many European countries is still characterised by weak economic growth, high levels of unemployment and growing social division.
Aims of the campaign
Through the campaign, the ETUC intends to support a Europe-wide turnaround in wage trends. In our view, this is not only justified in terms of distribution policy but also economically necessary in order to put Europe on the path to more sustainable growth. The campaign will address the various dimensions of wage policy and their institutional foundations. The trade unions in the ETUC have agreed on the following aims:
- shifting political discourse and economic policy in the EU towards pay rises for workers and trade union pay negotiations;
- compensating for the losses of the past and adjusting real pay rises to productivity;
- encouraging “upward wage convergence” between EU countries:
- closing the pay gap: between genders, between young and older workers, between different countries and within companies;
- raising minimum wages, especially in countries in which they are particularly low;
- addressing the problem of excessive executive pay;
- promoting capacity development regarding trade union pay negotiations;
- generating a movement for pay rises, including an alliance for upward wage convergence in international companies;
- supporting the ETUC’s calls for EU funding and support for capacity development of social partners in the social dialogue and in pay negotiations and for recommendations to Member States on creating the right environment for strengthening/introducing efficient pay negotiations at the national level.
Discourse shifts in the EU
One of our primary tasks at the ETUC is to seek dialogue with the European institutions in order to influence the political discourse at the EU level. In this context, there have recently been some important shifts in the discourse on wage policy. For example, in its Annual Growth Survey 2017 the European Commission concedes for the first time that “too modest wage developments” may lead to “weaker aggregate demand and growth” (European Commission 2016: 11). And the European Central Bank (ECB) has long warned that price stability requires a greater wage dynamic to counteract deflationary tendencies. Only recently, Peter Praet, a member of the ECB Executive Board, called for higher wage dynamics in Europe in order to achieve the ECB’s inflation target of 2%.
Sadly, these insights have as yet had little impact on the EU’s policy recommendations, which continue to be dominated by the old model that relies mainly on wage restraint and the decentralisation of collective bargaining systems.
Strengthening collective bargaining systems
Establishing a stronger wage dynamic in Europe requires certain institutional conditions to be in place. The first condition is the strengthening of collective bargaining systems; the extent to which workers are covered by collective agreements varies hugely, from almost 100% in countries such as Austria and France to just 10% in the Baltic states. By focusing on decentralisation, EU policy has contributed to a significant weakening of collective bargaining systems in some countries, including Greece and Portugal. What is now needed is a fundamental change of course so that industry-wide collective bargaining systems are strengthened. This is particularly necessary in the countries of Eastern Europe, where the pay gap between local wages and wage levels in Western European countries has actually increased since the crisis of 2008/09 (Galgóczi 2017). An important tool for stabilising collective bargaining systems and increasing the coverage of collective agreements is the extension of collective agreements, which also ensures fair competitive conditions by requiring that all companies in a sector meet the same minimum standards.
European minimum wage policy
A second key condition for higher wage dynamics is the existence of appropriate minimum wages, which can effectively limit a competitive downward movement of wages. In some European countries, such as in Scandinavia, the high coverage of collective agreements means that these appropriate minimum wages can continue to be enshrined in collective pay agreements. In most European countries, though, there is a statutory minimum wage that also protects employees not covered by a collective agreement. However, in many countries minimum wages are set at an extremely modest level and are often below the poverty threshold of 50% of the national median wage.
In a resolution recently adopted by the Executive Committee, the ETUC has therefore spoken out in favour of a joint strategy for addressing low and minimum wages. The ETUC believes that the minimum wage should in principle be a living wage that enables the worker to participate appropriately in the life of society without having to depend on additional state support. Specifically, the ETUC states that the minimum wage should be at least 60% of the relevant national median wage. In countries where the median wage and hence the overall wage level is very low, it is suggested that the minimum wage should instead be based on 60% of the average wage. For many countries, this means that for a certain period, minimum wages will need to rise significantly more than other wages. In this context, the ETUC is calling not only for an adequate hourly wage but also for the guarantee of an adequate weekly wage; this is to ensure that employers do not compensate for a pay rise by reducing working hours, and also to counteract the growing use of zero-hours contracts.
The European Commission provided political support for this strategy in its proposal for a European Pillar of Social Rights, submitted on 26 April 2017 (European Commission 2017). The Pillar, which is built on 20 key principles for strengthening the social dimension of the EU, explicitly emphasises the right to fair wages that provide workers with a decent standard of living. It also refers to the need to ensure adequate minimum wages that satisfy the needs of the worker and his/her family.
Without explicitly using the term “living wages”, the Commission thus adopts key aspects of the trade unions’ demand for appropriate minimum wages. The principles are not legally binding in the strict sense of being legally enforceable by employees. Nevertheless, for Member States they represent a shield against Commission measures that thwart their endeavours to implement the principles. In addition, they set out important guidelines for the future wage policy of the European institutions – for example with regard to the country specific recommendations issued by the European Semester. It is now up to us, the trade unions, to hold the Commission to account, so that the fine words are followed by deeds.
What does the campaign mean in concrete terms?
A key objective of the ETUC campaign is to place the many national wage disputes into a pan-European framework and to make clear that the same aims are being pursued all over Europe – the aims of strengthening collective bargaining systems, enforcing higher wages and thus promoting more sustainable economic development. The ETUC has therefore set up a special online and social media platform that will provide up-to-date information about current conflicts and disputes.
In addition, the ETUC will produce materials on various aspects of wage policy and organise some central events at various locations in Europe. The purpose of this is to create a broad social alliance of trade unions, progressive employers, policy-makers, academics and social movement interested in re-orienting European wage policy. However, the success of the campaign also depends largely on the commitment of national member associations of the ETUC. To ensure that the campaign has broad-based support, it is essential that the national associations organise activities that are appropriate to the specific situation in their country. An example of such activities is the initiative launched by the German Trade Union Confederation (DGB) to strengthen collective bargaining coverage in Germany. It is only through joint activities at the national and European level that we shall be able to achieve our aim of a Europe-wide increase in wages and stronger collective bargaining systems.
ETUC (2016): The ETUC’s campaign for wage increases, resolution of the ETUC Executive Committee of 14/15 December 2016.
ETUC (2017): For a joint strategy on low and minimum wages, resolution of the ETUC Executive Committee of 15/16 March 2017
ETUI (2017): Benchmarking Working Europe 2017, Brussels.
European Commission (2016): Annual Growth Survey 2017, COM(2016) 725 final, Brussels, 16 November 2016
European Commission (2017): The European Pillar of Social Rights. https://ec.europa.eu/commission/priorities/deeper-and-fairer-economic-and-monetary-union/european-pillar-social-rights_en
Galgóczi, Béla (2017): Why central and eastern Europe needs a pay rise, ETUI Working Papers No. 1/2017.
Müller, Torsten/Schulten, Thorsten/Van Gyes, Guy (eds.) (2016): Lohnpolitik unter europäischer „Economic Governance“. Alternative Strategien für inklusives Wachstum [Wage policy under European “Economic Governance”. Alternative strategies for inclusive growth], Hamburg: VSA
Praet, Peter (2017): Ensuring price stability, remarks at the Belgian Financial Forum in Brussels, 4 May 2017.
Schulten, Thorsten (2016): ): Europäischer Tarifbericht des WSI – 2015/2016, in: WSI-Mitteilungen No. 8/2016, 621-630.
This article was first published (in German) in Sozialismus issue 6-2017