Yellow card from Sweden and Denmark to proposed minimum wages in the EU

If nine or more EU countries’ parliaments make similar protests, the Commission must withdraw or redraft the proposal. 21 January is the deadline for presenting any challenges.  

If the yellow card process were to fail, the Danish government’s case at the Council legal service remains. It will shortly decide whether the Commission has the legal authority to put forward its proposal. If the Commission clears that obstacle too, individual member states could take it to court for breach of treaty. Whether this will happen remains to be seen. 

The two countries’ politicians are not the only ones to agree on this issue. There is a consensus in the labour market too. Both employers and trade unions are set against the proposal. Finland stands alone in the Nordic region on the issue – both politicians and trade unions have voiced support for the proposal. Many elsewhere in the EU agree with the Finns.

The clearest sign of the staunch opposition is the fact that both the Danish and Swedish parliaments have launched the yellow card procedure to stop the directive. 

“We do not believe the EU should intervene in wage formation and will protect the Danish model with all means necessary. We are sending a clear signal from a solid majority in parliament,” the leader of the Social Democrats Jens Joel told the Danish parliament. 

Vegard Einan, Secretary of State at the Norwegian MInistry of Labour and Social Affairs. Photo: Jan Richard Kjelstrup / ASD

Norway is not an EU member, yet will be subject to the new directive and is clearly against it. This is what Secretary of State Vegard Einan told a webinar organised by the Norwegian research foundation Fafo: 

“The government has been very clear since we learned about the Commission’s proposal. We believe wage formation should continue to be the responsibility of the social partners. We have good experiences with this in Norway. We agree with the partners that the Norwegian model has proven to be solid both in times of crisis and challenges, in times of growth and in economic downturns. It has also been good at distributing wealth.”

There is also strong opposition among trade unions in Denmark, Norway and Sweden. The common view seems to be that agreements are reached by the social partners and statutory intervention is not at all welcome.

“This was promised in the EU Treaty Article 153 (5),” says Bente Sorgenfrey, Vice President at FH – the Danish Trade Union Confederation. She is also one of the top leaders in the European Trade Union Confederation ETUC. 

The proposed directive underlines the collective agreement’s role, so would it not strengthen European trade unions?

“It might sound good, but wage formation is not part of the EU’s areas of expertise. Directives also continuously change and we do not want the legislators in this area – we want national competence,” she says.

Danish EU opposition might grow

Bente Sorgenfrey believes the 2008 financial crisis exposed the weaknesses of statutory minimum wages. When member states needed to borrow money, the European Central Bank demanded the lowering of minimum wages and pensions as a prerequisite for lending.  

Bente Sorgenfrey, Vice President at FH – the Danish Trade Union Confederation – and an ETUC board member. Photo: FH

“If you legislate for wages you hand the Central Bank strong tools. I found it frightening that they could force countries to lower minimum wages during the financial crisis. In our collective agreement system this is not possible,” she says.

When the EU interferes in what is considered to be a national area, you also risk more EU opposition in Denmark.

“If the directive became a reality, Danish EU opposition would increase, it could even perhaps lead to a demand for a referendum. There is a lot of emotion surrounding this directive,” says Bente Sorgenfrey.

Southern EU countries are also getting het up about the Nordic countries’ and trade unions’ negative attitudes. 21 EU countries welcome the proposal. As part of the ETUC leadership, Bente Sorgenfrey has heard it argued that Nordic trade unions lack solidarity.  

“Many see the directive as an opportunity to improve their own conditions, but if you look closer at the proposal, there are no clear improvements. This fact is also acknowledged behind closed doors at ETUC. We have had heated debates. Many are frustrated and want what we have, the best wage development in the EU.

“Some of the debate also centres on what we want Europe to be. Some want a federal EU and some of us want a European community of nation-states.”

Bente Sorgenfrey says Swedish and Norwegian trade unions cooperate closely, and that solidarity is an important issue. Norwegian trade unions want to improve union membership numbers in member states with low organisation levels by offering various types of support.  

“It is not that we don’t care. We want to show solidarity and demonstrate how to improve conditions for the lowest earners. One way could be to change the directive on public procurement to make it mandatory to buy goods and services from companies with collective agreements.”

A threat to the Swedish model

In Sweden, both trade unions and employers consider the minimum wage proposal to be a threat to their successful labour market model – despite the fact that the Commission is adamant their national models will be respected, and even saying it prefers the collective agreement model over legislation.

Therese Guovelin, First Vice President at Swedish LO. Photo: Fredrik Hjerling

“I have met Commissioner Nicolas Schmit several times. He had always been promising a ‘waterproof firewall’ to protect our model and ensure no-one is forced to introduce statutory minimum wages. I really believe they have tried, but it is not good enough. The so-called exception is a smokescreen. If you introduce a directive, all member states are obliged to implement it. And then it will be up to the EU Court of Justice to decide how our collective agreements are to be interpreted,” says Therese Guovelin, First Vice President at Swedish LO, the Swedish Trade Union Confederation.

Despite the strong opposition, LO is supporting the analysis and the aims that are behind the proposal. The Commission wants to reduce poverty and narrow wage gaps in Europe.

“This is something we also want of course. The way the problem is defined is completely correct from a trade union perspective, and something we really support. That is also why we support the EU’s social pillar. There is plenty of scope to put aside resources to strengthen the social partners’ role. You could also draw up recommendations for how to achieve fair living conditions. But it is up to member states to decide how to carry this out in practice.”

The Scandinavian trade unions are in a minority at ETUC, however. Guovelin admits that this is a problem.

“In many countries, trade unions have quickly lost ground both in terms of membership numbers and collective agreements. So they have given up hope and believe in statutory minimum wages. They would probably want us not to work against the proposal.”

Are you seen as lacking in solidarity?

“No, I don’t think so. Many also really admire how our model works,” she says.

The Swedish Confederation of Professional Associations Saco also opposes statutory minimum wages. Nearly all academics already earn more than what a minimum wage would be. Saco also has few, if any, agreements that include the lowest wage level.

“We mainly have agreements without numbers and want wages to be agreed through individual talks with the employer. If we got a minimum wage directive, this could overrule the criteria we have now. This would be something that would seriously disrupt our wage formation,” says Saco’s  Chief Legal Officer Lena Maier Söderberg.

She also points out that state interference would reduce the agreement’s legitimacy.

“As things stand, the parties themselves take responsibility for respecting the agreement. With a statutory minimum wage, you need a system with state wage inspectors. This is a less efficient system.”

Opposition also in Norway (and Iceland…) 

Peggy Hessen Følsvik, Deputy Leader at Norwegian LO, underlines that they have been opposed to statutory minimum wages for many years. But they do support all European workers’ right to organise and to earn decent wages. Yet the proposed directive with its legally binding parts – according to those who oppose it – has nothing to do with solidarity.

Peggy Hessen Følsvik, Debuty Leader at Norwegian LO. Photo: Trond Isaksen, LO. 

“This is one of the most difficult issues we have faced in recent years. I understand there are big expectations in many EU countries and broad support for a statutory minimum wage. We absolutely agree many countries need a salary hike, but there are big differences between labour markets and in particular wage formation processes. Solidarity in Europe cannot be about weakening our rights,” says Peggy Hessen Følsvik.

For Iceland, the proposed directive should not mean much change in the shorter term, believes Drífa Snædal, President for the Confederation of Icelandic Labour Unions ASÍ. Union membership is high; between 85 and 90% both among employees and employers. The collective agreement is universally applicable and also serves as a minimum wage benchmark.

“But the principles remain. We negotiate wages and therefore oppose the proposal together with Denmark, Norway and Sweden. We don’t trust the EU court either and do not want it to gain influence in this area. The minimum wage directive’s long-term effects are frightening. We fear wages will fall in the long term if we no longer control them through agreements, and people will become less inclined to join trade unions.”

Drífa Snædal, President for the Confederation of Icelandic Labour Unions ASÍ. Photo: Arnþór Birkisson.

Drífa Snædal understands why many trade unions, particularly in the old Eastern Europe, want a statutory minimum wage, but would rather see continued efforts to create trade unions.

“The Nordic countries have also been supporting the creation of trade unions in Eastern Europe out of solidarity. To propose a statutory minimum wage now is to capitulate and abandon the principle of strengthening the power of the employees.”

…but Finland trusts the Commission

Yet in Finland, the mood music is different. Maria Häggman, Head of International Affairs at the Finnish Confederation of Professional STTK, puts it like this:

“For us, the most important thing is that we will continue to have control over wage formation in Finland, and that the EU will not interfere in this. We believe this will be heeded. Since the social partners’ autonomy is safeguarded, we cannot see how the proposal will have much effect here. It could, however, have a positive effect in other European countries where there are bigger problems around wage formation.”

The other Finnish central organisations are also positive to the proposal. Pekka Ristelä, Head of International Affairs at Central Organisation of Finnish Trade Unions (SAK), welcomed the Commission’s initiative in a blog post, and did not consider it a threat to collective agreements. 

Maria Häggman believes the reason behind the different countries’ approaches partly stems from the fact that Finland has always been more positive to EU integration than the other Nordic countries. The clearest example of this is that Finland is part of the Euro-zone.

Another reason is that Finland has a national system with universally applicable collective agreements. This is regulated through the so-called employment contract legislation, which means a special commission has the power to decide that collective agreements which are national and representative of a sector, must be followed by employers.

But does not this in practice mean a kind of statutory minimum wage?

“No, but it does mean we have a high level of agreed minimum wages in our collective agreements. Legislation is a much more rigid structure which we do not want, and no-one can force it on us,” says Maria Häggman.

Another important difference is the fact that Finnish trade unions, unlike their Danish and Swedish counterparts, seem to trust the EU Commission’s promise to respect national wage formation models. 

“We cannot see how this would threaten our model. One of the really good things about the proposal is that it takes into account the fact there are different models. Another good thing is that there is an aim to strengthen the collective agreement model.”

Finnish employers do support the Nordic opposition to minimum wages, however, while the Finnish government gives the Commission’s proposal the thumbs-up.

“Our government program underlines the importance of a social dimension in the EU, and we consider reduced inequalities to be a key issue for EU cooperation. The Commission’s initiative takes both of these issues into consideration,” says the Minister of Employment Tuula Haatainen.