Minimum wage policies in Europe – single-rate systems ‘less effective’

Minimum wage policies based on a single national minimum rate are less effective than others at protecting low-paid workers, according to researchers in Brussels.

Researchers at the European Trade Union Institute divided countries into those whose minimum wage systems produce a ‘clean cut’ in the income distribution – like the UK’s – and ‘complex’ systems where many different minima coexist side by side.

Key findings

  • ‘Clean cut’ systems seem less effective at guaranteeing wage floors that help compress the lower end of the wage distribution and protect wage earners from poverty.
  • ‘Clean cut’ systems also tend to involve social partners to a relatively low extent, offering them merely a consultative function over minimum wage setting.
  • Complex systems, in contrast, lead to a much smoother lower end of the wage distribution and are more likely to generate relatively high wage floors.

Source: François Rycx and Stephan Kampelmann, Who Earns Minimum Wages in Europe? New Evidence Based on Household Surveys, Report 124, European Trade Union Institute

Link: Report