Minimum wages 2024 – The tide is turning

By Christine Aumayr-Pintar

While the prospects for minimum wage workers in early 2023 looked gloomy – with rates in many EU Member States struggling to offset rising prices – the new year brings better news. National minimum wages were raised significantly in most countries, both in nominal and real terms, and also when examined in the context of the entire period since 2022, when inflation rates started to surge.

January is the time of year when wage setters in the Member States who have not yet done so settle on the new national minimum wage rates for the year. This article summarises the most recent minimum wage rates for the 22 Member States that have a national minimum wage. It shows their development in nominal terms and provides initial estimates of the real value of any increases when inflation is taken into account.

Minimum wages for 2024

At the beginning of 2023, the prospects for minimum wage workers in many countries were gloomy; while many Member States had raised minimum wage rates substantially in nominal terms and at an unprecedented pace, in many cases this was barely enough to compensate workers for the extraordinary rise in prices that started in late 2021. With inflation rates remaining high well into 2023 in a number of Member States – especially among the countries that joined the EU in 2004 and later – minimum wage workers saw a decline in their purchasing power throughout the year. However, 2024 is destined to bring change and a turning of the tide: substantial nominal increases are expected to outpace inflation in most countries with a national minimum wage.

Notes and downloadable background data available here.

This change is based on two factors. First, wage setters were often mindful of recent price trends, making this a priority on their agenda. Second, more substantial uprates were provided in several countries as an early impact of the directive on adequate minimum wages, which must be transposed by November 2024.

Variety of methods used to update rates

National minimum wages are subject to an automatic indexation mechanism only in Belgium, France and Luxembourg. This is activated when prices increase above certain thresholds. In 2023, therefore, the minimum wage in Belgium was increased in December; it was increased once in France in April and three times in Luxembourg. These mechanisms continue to be controversial, with employers (and in some cases governments) in favour of their abolition, while trade unions want to preserve the practice. In Poland a mid-year update was mandated by law.

In the absence of an automatic indexation mechanism, wage setters in Romania and Hungary decided to pre-empt the regular increase and arranged for the new rate for 2024 to come into effect in October and December 2023, respectively. In Lithuania the social partners agreed on the new rates within the framework of the tripartite council. In Slovenia the rate increase was decided, as usual, in late January by government, following consultation with the social partners. It represents the lowest possible increase, as the law stipulates that the minimum wage must increase by at least the year-on-year increase in national consumer prices in December of the previous year (4.2 %).

Some Member States have started to link the update of the minimum wage to a certain percentage of the actual average or median wage. This is in the spirit of the directive on adequate minimum wages, which suggests that adequacy could be established by such a link.

In Slovakia Act No. 294/2020 mandates linking the rate to 57% of the average wage, unless the social partners agree on a different value (which they ultimately did for 2024 by agreeing an increase that was slightly higher than the proposed increase). In Bulgaria a new legal provision was applied for the first time as of February 2023, equating the new statutory minimum wage rate to 50% of the average wage. In Czechia no agreement was reached among the social partners within the tripartite council – the government therefore opted for the lower of the two proposed increases. This was based on the valorisation mechanism that will come into effect next year and will establish a binding relationship between the minimum wage and the average wage. In Estonia the social partners signed a ‘goodwill’ agreement, which signals their intention to raise the minimum wage to 50% of the average wage by 2027. In Ireland the government has mandated the Low Pay Commission to recommend a rate to be set at 60% of the median wage by 2026.

New expert committees involving the social partners began their work in Cyprus and Malta. The process of uprating was addressed for the first time and recommendations were made. This practice also continued in other Member States, including Croatia, Germany and Ireland, as well as in France and Greece (where the committees consulted with the social partners). Controversial debates were reported among the members of Germany’s Minimum Wage Commission – they had to resort to a mediation procedure and the final decision was not supported by the trade union representatives.

In some countries, the new rate for 2024 was determined relatively automatically, without additional consultation with the social partners (Netherlands), or was based on previous agreements (Latvia and Portugal). The Netherlands switched from a monthly determination of the minimum wage rate (without fixed working hours being associated with that rate) to an hourly rate only. All employees on the minimum wage working above 36 hours will therefore see an increase in their wage bill. In Latvia the government set the new minimum wage level in line with a special norm dating from 2022, which obliged the Cabinet of Ministers to set the monthly minimum wage to not less than €700 from 1 January 2024 (the social partners had been consulted beforehand). In Portugal the increase for 2024 is based on a review of the Medium-Term Agreement of 2022. However, this was not supported by the largest trade union confederation or the largest employer organisation.

Spain and Poland were two other countries in which not all parties supported the rate that was ultimately set. In Spain the government tried to reach an agreement with the social partners. However, employer organisations aimed for a lower increase (3–4%) and the indexation of public procurement contracts to the minimum wage. The government did not accept the indexation and a final agreement was signed with the trade unions, establishing a 5% increase as of 1 January 2024. The situation in Poland was similar: the social partner representatives in the Social Dialogue Council did not come to an agreement, resulting in the continuation of the long-standing practice whereby the government sets the rate.

Higher increases for low-paid workers in countries with no national minimum wage

Generally speaking, collective bargaining in countries without a statutory or national minimum wage was not easy. In Sweden the 2023 negotiation rounds were predicted to be some of the most difficult in modern times (but ultimately negotiations were relatively calm in terms of industrial action). Norway experienced its first strike over wages alone in the private sector since World War II. In Austria a relatively high number of sectors recorded industrial action. In the case of the Nordic countries (Denmark, Finland, Norway and Sweden) and Austria, agreements were ultimately reached and often included higher increases for workers on lower wages than for those higher up the pay scale. In Austria the collective bargaining outcomes for 2024 mostly compensated for rolling inflation with a small top-up (especially for lower wage groups). In Denmark the Danish National Bank predicts that total wage increases in 2023 and 2024 will be 4.2% and 5.7%, respectively, totalling 9.9% for the two-year period. In Finland numerous sectors received a one-off payment of several hundred euro with their wage payments in 2023. In Sweden trade unions coordinated their pay demands and the resulting increase of 4.1% was close to their opening bid, albeit below inflation. In Norway an annual wage increase of 5.2% was ultimately agreed.

The situation in Italy is different, as the high inflation rate was not reflected in collective bargaining outcomes: with an inflation rate of 8.7%, salaries in Italy grew by only 2% during 2022. The contracts of 7.7 million workers in the private sector expired, leading to reductions in real wages. This has been a major concern for the unions, which are urgently calling for the renewal of contracts to increase the wages and, consequently, the purchasing power of workers.

Conclusion

Once again in 2023, when setting rates for 2024, wage setters decided in some cases to move towards one of the ‘indicative reference values’ mentioned in the directive. This partly explains some of the higher increases. The other push factor for nominal rates, however, was the higher level of inflation seen during 2022 and continuing – though often decreasing – throughout 2023. Combining these two factors meant that minimum wage workers in general received real increases in their earnings over the past two years, narrowing the gap vis-a-vis median or average earnings.

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