An EU minimum wage target for adequate in-work incomes?

Abstract

This article summarises the arguments in favour of an EU initiative on minimum wages and highlights the steps that have been taken so far, focusing, in particular, on the First Stage consultation document prepared by the European Commission. Based on this consultation document and previous proposals, this article assesses some of the issues related to promoting an EU target minimum wage as a percentage of a national reference wage. Focusing on the adequacy of minimum wages for workers and their families, this article highlights first, the impact rather technical issues relating to the definition of the reference wage may have, and second, the importance of considering the interaction of the minimum wage with the broader tax benefit system in ensuring adequate in-work incomes. Whereas an EU initiative on minimum wages certainly has merit, these two caveats illustrate the need for a clear definition of what one wants to achieve by this initiative, and indicate that specific goals will require additional accompanying measures, such as a further monitoring of the net incomes of minimum wage earners