The European directive on minimum wages will go ahead. This was determined this Tuesday by the Court of Justice of the European Union (CJEU) in a ruling in which it confirmed a large part of this regulation, which was in doubt after being appealed by Denmark and Sweden when they considered that it represented an interference in their labor laws. However, the ruling does reduce the scope of the directive by overriding Member States with legal minimum wages when setting and updating those wages. The rule that prevents their reduction when they are subject to automatic indexation is also eliminated, according to this court.
These guidelines for what should be an adequate minimum wage, which have now been annulled, were being firmly defended by the second vice president and Minister of Labor, Yolanda Díaz, and her team in the negotiation with unions and employers to transpose this community directive into the Spanish legal system.
The directive on Adequate Minimum Wages, its official name, was approved at the end of 2022 and just a few weeks later it was appealed by Denmark. Sweden joined the appeal. Two Nordic countries questioned whether the EU could approve regulations of any kind for workers. They are based on the fact that the treaty on the functioning of the Union, in its article 153, expressly excludes this possibility.
Aware that the basic rules of the EU greatly limit the powers of the European institutions in the regulation of working conditions, the European Commission and the co-legislators (European Parliament and Council of the EU) agreed on a text that remains, rather, . And, for example, it advises that minimum wages tend to be 50% of the average salary in each Member State and 60% of the median salary.
This principle of prudence was not enough for the two Nordic countries that went to the CJEU to challenge the rule. There they found the support of the attorney general, who completely aligned himself with the Copenhagen complaint by issuing an opinion last January opining that “the directive should be annulled in its entirety.” Cypriot Nicholas Emiliou concluded that the rule “directly interferes with the exclusion relating to ‘remuneration’ of the Treaty. It follows that the Union legislator was not competent to adopt said instrument and that it acted, thereby, in violation of the principle of attribution of powers.” Although the ruling does not have to reproduce this argument, the truth is that the vast majority of the final rulings of the CJEU go in the same direction as the statement of the advocate general in the case.
In Scandinavian countries, the labor relations model is based on bilateral negotiation between unions and employers with minimal interference from the authorities. However, this does not translate into worse working and salary conditions; the high union density, with widespread membership among employees, means that their salaries are high. On the other hand, there is no minimum wage regulated by law, as they fear that it will be seen as a downward target.
But this situation is very exceptional. In addition to the two complainants, only Finland, Austria and Italy lack a legal provision setting a floor for salaries. Until 2015, Germany was also part of this group, but then a government coalition between Christian Democrats and Social Democrats established a minimum wage.
Although the directive remained in the field of recommendations, several investigations are beginning to show that it is having an impact in the countries of central and eastern Europe. There, unions have little presence and, therefore, less negotiating capacity. Instead, sy in collective bargaining in recent years, which has resulted in significant salary increases in recent years.
The Spanish case
Spain has not been an exception in this wave of minimum wage improvements. Since 2018, when the President of the Government, Pedro Sánchez, arrived at La Moncloa, this income has increased by 61%, going from 736 to 1,184 euros per month in 14 payments. In fact, the negotiation and increase of the SMI is one of the measures carried out by the current second vice president and Minister of Labor, Yolanda Díaz, who year after year, although the law does not require the Executive to negotiate the increase in the SMI with the social agents, opens a negotiation table with employers and unions to try to reach an agreement with both.
Currently, the Ministry of Labor has opened a table with employers and unions to negotiate the transposition of the European minimum wage directive. At that table, several issues are being discussed that, for the most part, have been previously agreed upon between the Government and the unions and that the employers do not share from the beginning.
The measures that have been addressed, in any case, require different ways to be addressed and their success will depend on that. Thus, of all the initiatives with which Labor wants to transpose this directive, it could only carry out one of them with relative ease, as it can be approved by regulatory decree: the shielding of future increases in this income, by prohibiting companies from compensating or absorbing each of the increases in the SMI with supplements or salary bonuses.
To carry out the rest of the issues that are being negotiated for the transposition of the community directive, the Government would need the difficult approval of the parliamentary majority. It would be the case of the change necessary for the law to establish that “the amount of the SMI will, in any case, be equal to or greater than 60% of the average net salary in Spain”, as stated in one of the latest drafts. Or the incorporation of new criteria for setting the amount of this income and the provision of greater weight and legal coverage to the prior report of the commission of experts, as well as its composition. For all of the latter, a legal change is required that can only occur with a parliamentary majority.
In any case, the tripartite agreement between the Government, the employers and the unions has not always been possible. The last time there was an agreement of these characteristics with all the agents involved to raise the SMI was in January 2020, shortly before the covid-19 crisis broke out, when Díaz agreed with employers and unions for an increase of 5.5% to 950 euros per month. On that occasion, the employers opted for the lesser evil, since they feared that the increase would reach 1,000 euros that year, because it was the amount agreed upon in the government agreement.
