Minimum wages are prevalent in many euro area countries, and changes in minimum wages can have important effects on aggregate wage growth. Minimum wages exist in 15 of the 19 euro area countries.
Minimum wage levels are set using different methods – including predetermined formulas, expert committee recommendations, and consultation with social partners – and are often also subject to government discretion. The frequency of change differs from one country to another, but most countries revise their minimum wages every one or two years.
Following the spread of COVID-19 across the EU Member States in 2020, policymakers involved in minimum wage setting had a tough job deciding on the new rates. Faced with growing unemployment, huge economic uncertainty, and the disruption of normal negotiation and consultation processes, most European countries settled for rather cautious increases in their statutory minimum wages coming into effect in January 2021.
One year later, although the negative consequences of the pandemic are still visible, European economies and labor markets are recovering.
Statutory minimum wage rates were raised across virtually all EU countries for 2022. While four countries (Belgium, Estonia, Greece, and Spain) opted to freeze their statutory rates in early 2021, these rates were frozen for just one country (Latvia) between January 2021 and January 2022.
Importantly, increases in statutory minimum wages have been more generous than those seen a year ago. Across the EU, the average increase will be around 6% in 2022 (and it will be even higher once ongoing negotiations have concluded in some countries); in contrast, it was below 4% in 2021.
The largest increases in nominal statutory rates have occurred in seven central and eastern European countries (as seen at the top of the figure, where countries have been ranked from higher to lower rates of increase for 2022). Hungary’s statutory rate was increased from HUF 167,400 to HUF 200,000 in January 2021, a remarkable hike of 19.5%. Statutory minimum wage rates increased by more than 10% in Lithuania, Estonia, Romania, and Croatia, and by around 7% in Poland and Czechia. In Bulgaria, a new statutory rate is currently being negotiated, and although different rates have been proposed, the increase will again be significant (for instance, a new rate of BGN 700 would mean an increase of more than 9%).
In several countries, statutory minimum wages are updated according to a rule-based mechanism using set formulas and this generally results in rather modest year-on-year changes. For 2022, increases will be slightly above 3% in Germany and France, around 2.5% in the Netherlands and Luxembourg, and 1% in Malta. When compared to rises a year earlier, the magnitude of the 2022 increases stands out in France and Germany. In Germany the new government announced a place to undertake a once-off adjustment to increase the minimum wage by 22%, taking it from € 9.82per hour to €12 per hour. This will come into effect from the 1st of October 2022.
The statutory minimum wage in Germany has stood at 9.82 euros per hour since 1 January 2022. Arithmetically, this corresponds to a minimum wage level of 1,621 euros per month (in gross terms) for a full-time job. The Federal Statistical Office (Destatis) reports that the minimum wage currently amounts to 48% of the median gross earnings of all full-time employees. There are efforts in the EU to increase the national minimum wages to at least 60% of the respective median gross earnings.
Rates of increase in nominal statutory minimum wages for 2021 and 2022, EU Member States, in national currency and with percentage increases
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