Cross-border Impact Assessment 2021
Dossier 1: Ex ante study on the cross- border effects of the EU’s proposed Minimum Wage Directive (TEIN study)
The entire dossier will become available here in English soon.
Joint research collaboration with the Transfrontier Euro-Institut Network (TEIN)
Dr. Nina Büttgen (ITEM)
Martin Unfried (ITEM)
José Victor Cremonesi Giarola (ROA/ITEM)
Dr. Bastiaan Didden (ITEM)
Clarisse Kauber (Euro-Institut)
Dr. Peter Ulrich (Leibniz/BTU-Cottbus/Viadrina)
Jessica Nouguier (Euro-Institut)
Roel Karstenberg (ITEM)
Dorien Coppens (ITEM)
This dossier studies the impact a binding common European framework for adequate minimum wages might have on cross-border regions in the EU and their inhabitants. With its proposal for a Minimum Wage Directive (October 2020), the European Commission aims to provide all workers in the Union with access to adequate minimum wages. Since the proclamation of the European Pillar of Social Rights (hereafter the Pillar) by the European Parliament, the Council and the Commission in November 2017, legislative action on strengthening “Social Europe” has been on the rise. After all, the Pillar is ‘to deliver on the EU’s promise of prosperity, progress and convergence, and make social Europe a reality for all.’ More precisely, the pillar postulates:
‘Principle 6 of the Pillar on “Wages” calls for adequate minimum wages as well as for transparent and predictable wage setting to be put in place, according to national practices and respecting the autonomy of the social partners.’
Just recently, the European Commission has highlighted (once more) the need for ‘Vibrant cross-border labour markets’ as one of its four priority clusters, which it will focus future policy actions on to strengthen EU Border Regions. The reality is, though, that many border regions continue to be characterised by socioeconomic asymmetries on both sides of the national border. For businesses (particularly SMEs), employees and job seekers to benefit from the advantages, which genuine cross-border labour markets may present, the Commission underlines that
‘cross-border regions should be seen as a “single” territory when it comes to education and training, skills and competences, employment, and access to social security. This [however] is not yet the case […]’
From this perspective, a vibrant cross-border labour market would – according to the Commission -provide businesses with access to a larger pool of skills and competences, facilitate the retention of (international) talent and enable job seekers’ access to more job vacancies.
Against this background, it seems timely to ask what effects the proposed EU Minimum Wage Directive may have on cross-border regions and their inhabitants. Minimum wages can be a sensitive topic in labour market policy (thinking back of the vivid discussions held in Germany before introducing the country’s first national statutory minimum wage in 2015). The topic implies important economic and social considerations. Given the European aim of connecting and ‘boosting’ border regions through cross-border labour markets and promoting Euregional development and cohesion, it is interesting to see if national minimum wages commonly aligned by a European framework for adequacy would play any role in this.
To gain insight into how that impact will be felt in different regions across Europe, the research has been conducted in close collaboration with several TEIN-partners. The analysis provides an ex ante assessment of the Directive’s possible effects on the cross-border territory between Belgium, the Netherlands and Germany (ITEM), the cross-border area between France and Germany (Euro-Institut) and the cross-border area between Germany and Poland (Leibniz/BTU-Cottbus/Viadrina).
Following up on the successful cooperation on the “Corona-dossier” of last year, the partners are pleased to continue the joint research initiative between ITEM and other TEIN-members. The 2020-dossier has offered thorough insights into sometimes far-reaching and dire border effects of policy and legislation, particularly accentuated by the crisis caused by the COVID-19 pandemic.
This year, for the first time, the collaborative study deals with a ‘traditional’ piece of EU legislation, albeit in preparatory stage. Hence, both the Commission’s proposal (October 2020) as well as the initial draft report of the European Parliament (April 2021) with potential amendments will provide the source legal texts for this analysis. Minimum wage setting – which is, in principle, a national prerogative – makes for a potentially controversial topic and goes to the heart of socio-economic development and citizens’ social rights. To consider the law’s potential (cross-)border effects, one must therefore first gain a picture of what the Directive’s implementation would mean for the concerned Member States individually. Would the minimum wage standards, as proposed by the Commission or the European Parliament, (have to) result in changes in national legislation? These Member States are Belgium, France, Germany, the Netherlands and Poland.
Second, we examine the role of minimum wages in the three cross-border border areas mentioned above in general, including a sectoral perspective. Based on this, we analyse what would be the cross-border impact of the directive in those regions in particular. This includes questions such as how (many) cross-border workers and businesses/sectors would be affected on either side of the border (Socio-economic/Sustainable Development and European Integration). Last but not least, we conclude with an evaluation discussing the proposed concept of adequacy on which the views of Commission and Parliament diverge markedly. The discussion will illuminate this topic in the context of the theme of Euregional cohesion, i.e. the idea of creating an joined cross-border economic and social space.
Based on the experience of the ITEM Cross-Border Impact Assessment of previous years, difficulties in data collection – particularly at the lower level or to highlight specific cross-border ‘flows’ – have been anticipated from the start. The authors will signal the specific limitations of data collection per region. When quantitative data are lacking, conversational evidence from ‘background talks’ with stakeholders is used to test qualitative indicators. ITEM and its TEIN-partners agreed to acquire relevant information in their respective regions. This has been used to fine-tune the analysis and narrative of the research report.
Summary of the thematic approach
All three research themes of the ITEM Cross-Border Impact Assessment are covered in this dossier. Under the themes of European integration and Socio-economic Development, the Minimum Wage Directive and its expected effects will analyse the existing national legislation (or alternative manners of wage setting, e.g. collective labour agreements as in Belgium) compared to the standards established by the directive. Here, both the Commission’s proposal and the potential amendments as contained in the first draft Committee report of the European Parliament (April 2021) serve as standard of comparison. For example, do the national legislations correspond to the indicated threshold of adequacy of the Directive, which according to the EP rapporteurs’ view would require the minimum wage to meet both 50% of the gross average wage in a country and 60% of the gross median wage? The comparison with the latest national values for median and mean gross wages reveals that only France has consistently met these thresholds. The rate of minimum wage in all other Member States studied has not even come close to the proposed rates in recent years.
Under the theme of Euregional/Cross-border cohesion, the findings from the previous sections will be accumulated, compared and tested for the three (cross-)border regions. Here, the analysis considers if cross-border interaction/ relationships will be diminished due to changes caused by the Directive. The cross-border regions thus take centre stage here. In addition, will the EU Directive have an impact as a measure against income inequality across the border/in the Euregional context? To what extent are relevant administrative data (e.g. the type and extent of social and employment services) already collected at the Euregional/cross-border context?
In addition to studying the effects of the cross-border regions between Belgium, Germany, France, the Netherlands and Poland, this dossier continues the partnership established between ITEM and various partners of the Transfrontier Euro-Institut Network (TEIN), a unique network consisting of universities, research institutions and training centres dedicated to cross-border cooperation in Europe. In doing so, this study serves to further the fruitful cooperation of regional studies on border effects in the aforementioned countries.
Proposal for a Directive of the European Parliament and of the Council on adequate minimum wages in the European Union, COM(2020) 682 final, Brussels, 28.10.2020. The Strategic Agenda for 2019-2024, agreed at the European Council in June 2019, called on the implementation of the Pillar at EU and national level.
Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on ‘EU Border Regions: Living labs of European integration’, COM(2021) 393 final, Brussels, 14.7.2021. ‘Cross- border regions need tailor-made solutions and policies that can maximise their potential, remove existing barriers and boost their economic recovery and resilience.’ (COM(2021) 393 at 5).
Ibid. at 9.
So far (September 2021), 13 MS Parliaments have submitted a contribution or a reasoned opinion. Among them were none of the countries under review. However, several MS, such as SE, expressed fundamental concerns about the compatibility with the subsidiarity principle. Wage formation is an exclusively national matter. See Procedure File: 2020/0310(COD) | Legislative Observatory | European Parliament (europa.eu).
J. van der Valk, ‘Dossier 5: Cross-border monitoring-a real challenge’, ITEM Cross-Border Impact Assessment 2019: https://itemcrossborderportal.maastrichtuniversity.nl/link/id/U8rHnsyQU5BsF9bj.
The EMPL Committee was due to send its report to the General Assembly for first reading in November 2021, after the Committee vote on almost 900 amendments was scheduled for October.