Sharp Teeth or Empty Mouths? European Institutional Diversity and the Sector‐Level Minimum Wage Bite

AuthorFrançois Rycx,Stephan Kampelmann,Andrea Garnero
DOIhttp://doi.org/10.1111/bjir.12104
Date01 December 2015
Published date01 December 2015
Sharp Teeth or Empty Mouths?
European Institutional Diversity and the
Sector-Level Minimum Wage Bite
Andrea Garnero, Stephan Kampelmann and
François Rycx
Abstract
The article explores the link between different institutional features of minimum
wage systems and the minimum wage bite. We notably address the striking
absence of studies on sectoral-level minima and exploit unique data covering 17
European countries and information from more than 1,100 collective bargaining
agreements. Results provide evidence for a neglected trade-off: systems with
bargained sectoral-level minima are associated with higher Kaitz indices than
systems with statutory floors, but also with more individuals actually paid below
prevailing minima. Higher collective bargaining coverage can, to some extent,
reduce this trade-off between sharp teeth (high wage floors) and empty mouths
(non-compliance/non-coverage).
1. Minimum wages in Europe: Room for debate
On 10 January 2013, Jean-Claude Juncker, at the time Prime Minister of
Luxembourg and outgoing president of the Eurogroup (the group of coun-
tries belonging to the Eurozone), told the European Parliament that Europe
needs ‘a basis of social rights for workers, minimum social rights for workers,
including of course one essential thing, a minimum wage — a legally com-
pulsory minimum wage in the Eurozone member states’. The European
Commission also issued a series of statements in favour of an EU-wide
approach to minimum wages. In April 2012, for example, the EU commis-
sioner in charge of social affairs argued that ‘setting minimum wages help
Andrea Garnero is at ENS, Paris School of Economics, and SBS-EM (CEB, DULBEA),
Université Libre de Bruxelles and IZA. Stephan Kampelmann is at SBS-EM (CEB, DULBEA),
Université Libre de Bruxelles. François Rycx is at SBS-EM (CEB, DULBEA), Université Libre
de Bruxelles and IZA.
British Journal of Industrial Relations doi: 10.1111/bjir.12104
© 2014 John Wiley & Sons Ltd/London School of Economics. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
53:4 D ecemb er 2015 0007–1080 pp. 760 –788
Sharp Teeth or Empty Mouths?
prevent a destructive race to the bottom in the cost of labour, and are an
important factor in ensuring decent job quality’.1Similar arguments were put
forward by the Party of European Socialists Congress, which called for
‘decent minimum wages’ by introducing an ‘EU target for the minimum wage
in terms of GNP per capita’ (Rasmussen and Delors 2006).
The EU, however, has small leverage to implement a European approach
to minimum wages because it lacks any official competence to issue directives
or regulations concerning wage policies. In this area, the European Commis-
sion can only promote its agenda through recommendations and the open
method of co-ordination (i.e. by setting objectives that are politically but not
legally binding). For example, it has recommended wage floors in order to
close the gap between male and female wages in Austria (Hermann 2006). But
the main factor that has worked against a European approach is the absence
of a clear consensus at the European level concerning whether the benefits of
harmonizing minimum wage policies outweigh the costs. The trade unions,
for instance, are far from unanimous in their support for European legisla-
tion that would impose statutory minimum wages everywhere in Europe. In
particular, many countries where there is no statutory minimum wage are
against a European scheme. Objections are notably very strong in Austria,
Italy and the Nordic countries (Lismoen 2006). On the other hand, trade
unions in countries such as Germany and Spain favour a European app-
roach to the issue (Bosch and Kalina 2010; Eldring and Alsos 2012).
Unsurprisingly, the European Trade Union Confederation has yet to develop
a clear stance on the issue of an EU-wide minimum wage.
The usual argument put forward by both employers and the unions against
a statutory minimum wage is that it could undermine the autonomy of the
social partners and thereby jeopardize the entire bargaining process. Unions,
in particular, fear a weakening of collective bargaining or exposing workers
to political arguments in which minimum wages could become one of the
adjustment variables. Some unions fear that a statutory minimum wage,
which could be close to wages in the lowest paid sector to avoid negative
effects on employment, will reduce wages across the entire economy and
therefore also in sectors where unions are strong. Some unions, therefore,
advocate a minimum wage for workers not covered by collective agreements,
but often insist more on the extension of collective bargaining than on
statutory minima. The most notable exception is Germany where unions and
political forces are discussing the adoption of a statutory minimum wage to
counterbalance the effect of decreasing coverage of collective agreements and
the increase in mini-jobs (low-wage jobs).2
Much of the antagonism inspired by the idea of a harmonized minimum
wage policy in Europe stems from the fact that the current minimum wage
arrangements differ widely among European countries (Eyraud and Saget
2005; Grimshaw 2013; Machin and Manning 1997). On the one hand, a
European minimum wage is seen as desirable in countries without effective
statutory minima and where collective bargaining agreements also fail to
provide sufficient protection from wage dumping. On the other hand,
© 2014 John Wiley & Sons Ltd/London School of Economics.
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