Logofigaro 1 2It's time to stop telling the tale

of the European minimum wage  

Drapeaux union europeenneLe Figaro/Tribune by Francis Journot, published mai 14, 2019 - Francis Journot, initiator of the "International Convention for a Global Minimum Wage" project, explains why it is illusory to believe in the "European minimum wage" by arguing that the project is incompatible with the structural disparities of the 28 countries of the European Union. It advocates for a global minimum wage in other ways.

The theory of a European or global minimum wage based on a proportion of each country's median wage has always proved unconvincing and few economists still support it today. The International Labour Organization (ILO) has renounced the introduction of this model for several decades. The European Commission is now avoiding this subject, which annoys Member States and prefers to refer to a more general notion of "European economic and social convergence" or the equally sibylline objective of a "European foundation of social rights".   

But French President Emmanuel Macron, certainly short of progressive ideas, woke up this old sea snake. However, the project is incompatible with the structural disparities of the 28 countries of the European Union and would be hazardous. Candidates for election to the European parliament are now engaged in a real competition and the recommendations vary almost from single to double: Nathalie Loiseau, head of the list of the presidential party LREM, wants a European minimum wage corresponding to 50% of the median salary of each EU country and a social policy expert teaching at the ENA and affiliated to LREM, recommends, in an article published in newspaper Liberation, 40 to 50%. The Generation S lists of Benoit Hamon, PC led by Ian Brossat and EELV of Yannick Jadot opt for 60%. Raphaël Glucksmann, head of the list Public Policy and PS wants 65% while Manon Aubry of LFI outbids with 75%.

The candidates did not seem to consider it useful to carry out simulations or perhaps they preferred demagogic simplification to the rigour of the figures. Indeed, instead of the desired increase in the standard of living and the targeted convergence, we could see, on the contrary, depending on the rate recommended, a decrease in half of the countries in minimum wages, some of which are already among the lowest in Europe or often an increase in the differential between minimum wages. Moreover, if we consider that public expenditure in the EU countries is on average close to 50% of GDP, a significant proportion of which is represented, depending on the structure and outsourcing of services, by the cost of public or private jobs, it appears that this measure could generate an increase in the public deficit in some countries and, moreover, would sometimes cause them to exceed the authorised limit of a 3% public deficit. The inflation risk that can be encountered when the minimum wage is raised is also not anticipated. However, there is no cause for concern as this project would probably never achieve the required unanimity within the EU and will be buried until the next European election, but the fanciful treatment of this major economic issue may be appalling.   

This idea of a European minimum wage, which appeared in the 1990s, brandished to promote the social Europe dear to its founding fathers, was not specifically theorized for the European Union by any distinguished researcher or by a group of elected officials, but simply borrowed from the International Labour Organisation. But at a time when the EU had only 12 to 15 Member States with broadly similar living standards and a reasonable rate of new accessions, the option was conceivable (France, West Germany, Italy, Belgium, Luxembourg and the Netherlands when the EEC was created in 1958, Denmark, Ireland and the United Kingdom in 1973, Greece in 1981, Spain and Portugal in 1986, East Germany in 1990, Austria, Finland and Sweden in 1995). However, the number of Member States doubled over the next two decades and the homogenisation of the European Union by this means now seems utopian. However, it is understandable that governments in lower-cost European countries, like their more distant competitors, are reluctant to raise wages and thus expose themselves to a reduction in their competitive advantage. This should be taken into account when developing a draft minimum wage.  

It is therefore essential, in the context of globalisation, to examine the subject of the minimum wage in Europe from a broader perspective. After 6 years of work and nearly a decade, if we include the related subjects that initiated this reflection, the "International Convention for a Global Minimum Wage" project, which could reintroduce balances upstream of international economic mechanisms, now benefits from a network of several thousand economists throughout the world, most of them experienced and holding a doctorate in economics. The concept integrates economic realities and is based on fundamental parameters (financial flows, budgetary capacity of States, nature of trade, industrial activity, etc.) to propose a consensual and pragmatic timetable. In this field, it could constitute today the only viable proposal likely to reduce inequalities but also the damage of consumerism on the environment at a time when the main current response seems to be the multiplication of "climate" taxes that are as unfair as they are inefficient but above all demanded by parties and NGOs for a political and ideological ecology. But the instrumentalization of the themes of minimum wages or ecology is counterproductive and is to the detriment of more objective economic approaches and rational solutions.

Francis JOURNOT International Convention for a Global Minimum Wage