‘Basic Income’ from Wages: Freedom of Contract versus Statutory Minimum Standards

Abstract

What is the ‘European minimum wage standard’? How might such a standard be introduced? Can wages guarantee a ‘basic income’? These are only some questions arising when hearing the Commission's President Juncker calling for a minimum wage in all EU countries while addressing the European Parliament on 15 July 2014, or when assessing the introduction of statutory national minimum wages in Germany in 2015. After first differentiating between basic income, minimum income and minimum wages, this paper evaluates three ways of guaranteeing a ‘basic income’ from wages: individual agreement, statutory uniform national minimum wages and collectively agreed minimum standards. An analysis of the legislative competences for pay and the historical development as well as current economic data serve as starting points, bearing in mind that employees' interests have always been deemed to be better represented at collective level rather than at the level of the single employment contract. Subsequently, it is argued that for analysing the advantages of wage setting-mechanisms, the whole (legal) system has to be assessed. For better illustration of this argument, a closer look is taken at the Austrian system and its main features responsible for guaranteeing wages at or above the national median wage.