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Nordic opposition to minimum wage shows lack of solidarity?

| Text: Kerstin Ahlberg, editor EU & Arbetsrätt

Should we have a statutory minimum wage? Absolutely not say Nordic trade unions, and they’re usually backed by employers’ organisations. It’s an attitude people elsewhere in Europe find difficult to understand.

There’s an increasing demand in Europe to introduce some kind of common minimum wage across the EU, and the Nordic opposition to this is viewed as being selfish and lacking in solidarity according to a new report from Norway’s Institute for Labour and Social Research (Fafo).

None of the Nordic countries have a statutory minimum wage. Wages, including minimum wages, are regulated exclusively through collective agreements. In addition to this, Finland, Iceland and Norway have systems which bind all employers within a certain trade to minimum wages set out in collective agreements.

Elsewhere in the EU only Italy, Germany and Austria do not have any statutory minimum wage. Yet despite the widespread implementation of such minimum wages there is a growing call both from the European Parliament and from the European Trade Union Confederation (ETUC) to introduce an EU-wide minimum wage representing 50 to 60 percent of each country’s average wage. The reasons given are the increasing poverty which has come as a result of the financial crisis, a weakening of collective agreements in several countries and the increased risk of a further economic downturn and social dumping as a result of increasing labour mobility from east to west. 

Nordic trade unions are not among those calling for a pan-EU minimum wage. They don’t want the state to interfere in wages at all, let alone opening for EU regulations in this area. But in order to build a knowledge base for further debate, trade union confederations in Denmark, Norway,Sweden,Finland and Iceland have commissioned a group of researchers from Fafo to create an overview of how minimum wage systems work in a number of countries and to analyse which conditions might reduce the need to introduce statutory minimum wages in the Nordic countries.  

The researchers, Line Eldring and Kristin Alsos, note that particularly trade unions in countries where they are weak (and where they have also lost a lot of power in recent years) are more likely to support the introduction of a statutory minimum wage. Obvious examples are Germany, Great Britain and Ireland, where unions more or less have given up on using collective agreements as a tool for pursuing their objectives regarding wages. But introducing minimum wages in countries where collective agreements cover much of the workforce could challenge the system. 

The researchers also say there is little research into the effect statutory minimum wages might have on union membership and the negotiation of collective agreements. One theory says it could have a positive effect by bringing the social partners together in order to negotiate the size of the minimum wage. That theory is less relevant in countries which already enjoy well developed relationships between the social partners, like in the Nordic region. Here the debate centres on whether a minimum wage would complement or compete with the collective agreements. 

The researchers can see several reasons for Nordic scepticism in this area. Firstly a statutory minimum wage would to a large degree deviate from the principle of the autonomy and the contractual freedom of the social partners - both of which are very strong in the Nordic region. Secondly, collective agreements have a strong ‘infectious effect’ on wages, also in areas which are formally not covered by them. With a statutory minimum wage it would become acceptable to relate to that rather than to the collective agreement’s minimum wages, which in the long term could put strong pressure on the collective agreement. Thirdly, the parties fear the motivation to organise can be weakened both among employers and workers. In the end the entire basis for the Nordic model could be completely eroded.    

On the other hand, the researchers argue, even Nordic countries might find positive sides to establishing a national basis for wages. Here too union membership is falling while low-salary competition increases. A statutory minimum wage would protect vulnerable groups in areas where union membership is low, and where regulation through collective agreements is less relevant. This could also prevent the emergence of new low-paid groups and would guarantee all workers a wage they could live off. It would also be a simple regulation which would be easy to communicate to workers and employers - an advantage especially in relation to foreign companies. 

It is unlikely the EU Commission will propose European minimum wage legislation in the near future. It has so far turned down any such requests, arguing that the EU has no competence to adopt such legislation. But the debate on a European minimum wage seems to carry on in the European Parliament and at the ETUC. There, the Nordic attitude is easily interpreted as being solely focused on domestic conditions while it fails to recognise the size of the low-pay problem in some countries. At worst the Nordic organisations are being perceived to be self-centred and lacking in solidarity.

The challenge facing Nordic trade unions now is to show solidarity with trade union movements in other countries while at the same time work against solutions which can undermine the collective agreement system. Citing a colleague, the researchers say the Nordic players enjoy a strong influence in European organisations, but that they use it more to apply the breaks than to move things forward and to set the agenda. But, the researchers say, because of the Nordic trade unions’‘ strong involvement in handling challenges like low-salary competition and social dumping at home, they should on the contrary have a great potential for being active and constructive participants in the development of strategies and a policy which could unite the European trade union movement.

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