Minimum wages boost pay without diminishing collective bargaining processes

New research shows that national minimum wage increases are effectively boosting the pay of low-paid workers while preserving the crucial role of collective bargaining processes. A comprehensive new Eurofound study provides empirical evidence on how changes to minimum wages affect both collectively agreed and actual wages, demonstrating a nuanced interaction that supports individual earnings and sustains established social dialogue across Member States.

The Impact of national minimum wages on collective bargaining and wages for low-paid workers report combines quantitative econometric analysis with qualitative national case studies, and contributes empirical evidence to the ongoing discussion regarding the interplay between national minimum wages and collective wage bargaining.

The study encompassed detailed analysis across six Member States – France, Germany, Portugal, Romania, Slovenia, and Spain – focusing on the residential and social care, and food and beverages manufacturing sectors. This selection facilitated an examination of how varying national contexts and industrial relations models influence the interaction between statutory minimums and negotiated pay.

With the EU Minimum Wage Directive, adopted in October 2022, continuing to influence national policy frameworks, understanding these interactions is particularly relevant.

The findings indicate that increases in national minimum wages have a measurable impact on the earnings of low-paid workers, irrespective of sector, occupation, gender, or age. A 1% increase in the national minimum wage was associated with a 0.31% increase in low-paid employees' actual wages between 2006 and 2021, with a more pronounced effect observed in the latter part of this period.

The analysis also suggests that the influence of these increases extends beyond the lowest earners, affecting workers at higher wage levels, which may have implications for their role in reducing overall wage inequality.

While some concerns from social partners were noted, the study found no conclusive evidence of a significant "crowding-out" effect on collective bargaining, whereby statutory minimum wages might reduce the scope or relevance of negotiated agreements, nor a substantial impact on the duration or renewal of collective agreements.

Instead, national minimum wages appear to exert a more indirect influence. The report highlights an increased prevalence of company-level pay bonuses and supplements as a mechanism to ensure actual wages remain above legal minimums when basic rates increase less rapidly.

Despite minimum wages not fundamentally diminishing the autonomy of social partners in collective bargaining, the research notes that continued support for robust collective bargaining institutions remains important, particularly in contexts with lower coverage, to facilitate equitable wage progression across the workforce.

Download the report:

• Impact of national minimum wages on collective bargaining and wages for low-paid workers

Further information:

• Topic page: Minimum wages in the EU