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Europe — Minimum wage varies widely but so does purchasing power

21 July 2010

New 'Minimum Wage Statistics' published by the Statistical Office of the European Union (Eurostat) reveal that in January 2010, 20 of the EU's 27 Member States (Belgium, Bulgaria, the Czech Republic, Estonia, Ireland, Greece, Spain, France, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia, and the United Kingdom) and two candidate countries (Croatia, Turkey) had national legislation setting a minimum wage by statute or by national inter-sectoral agreement.

Monthly minimum wages varied widely, from 123 Euro in Bulgaria to 1,683 Euro in Luxembourg. When adjusted for differences in purchasing power to create a so-called Purchasing Power Standard (PPS), the disparities between the Member States are reduced While the minimum wage in Euro ranged from 123 Euro to 1,683 Euro in January 2010 (a factor of about 1:14), the minimum wage in PPS ranged from 244 to 1,413 (a factor of about 1:6). At the opposite ends of the scale were again Luxembourg (1,413 PPS per month) and Bulgaria (244 PPS).

The 20 Member States concerned together with Croatia, Turkey and the United States can be divided into three groups based on the level of minimum wage on 1 January 2010.

The first group includes the eleven countries with the lowest minimum wages, between 100 Euro and 400 Euro a month: Bulgaria, Romania, Lithuania, Latvia, Hungary, Estonia, the Czech Republic, Slovakia, Poland, Turkey and Croatia.

The second group comprises five Member States (Portugal, Slovenia, Malta, Spain and Greece) and the United States with an intermediate level of minimum wages, from just over 550 Euro to just below 900 Euro a month.

The third group comprises six Member States (United Kingdom, France, Belgium, the Netherlands, Ireland and Luxembourg) in which the minimum wage was above 1,000 Euro per month.

The countries in groups 1 and 2 with relatively lower minimum wages in Euro also have lower price levels and therefore higher minimum wages when expressed in PPS. On the other hand, countries in group 3 with higher minimum wages in Euro have higher price levels, and their minimum wages in PPS are relatively lower.

Comparing the ranking of the monthly minimum wages in Euro with those in PPS, the most remarkable change is for Ireland, which moves from second position in Euro to sixth in PPS. Many other countries change their position, but only by one or two ranks.

Germany, Cyprus and the Former Yugoslav Republic of Macedonia have statutory minimum wages that do not apply to all or the large majority of employees but are restricted to specific groups which are defined e.g. by sectors or by professions. These are excluded from the data collection.

Also excluded are countries where there are no statutory national minimum wages: Denmark, Italy, Austria, Finland, Sweden, Iceland, Norway and Switzerland. In these countries, wages are either determined by negotiations between the social partners, at company level or at the level of individual contracts. Typically, sectoral level agreements are widely applied and thus constituting de facto minimum wages.

To read the full report please click here


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