New Eurofound analysis shows large increases in EU minimum wages in 2022
The first overview of minimum wage setting for 2022 shows that, while some negotiations are still ongoing, virtually all EU Member States have increased their nominal statutory rates. Compared to last year, when most countries settled for cautious increases against a background of deep uncertainty caused by the pandemic, growth in statutory rates for 2022 was stronger, reflecting an easing of the situation. This was especially the case in central and eastern Member States, where some increases were in double digits.
Eurofound’s new analysis, published today, is the first of its kind to look at minimum wage increases in the EU between 2021 and 2022. It highlights that, while there was a marked increase in minimum wages over the past 12 months, inflation is an important factor and should be closely monitored in the coming period to get an insight into how the increases in nominal minimum wage rates translate into actual changes in the purchasing power of minimum wage earners.
Following the spread of COVID-19 across EU Member States in 2020, policymakers involved in minimum wage setting faced challenges in setting new rates. Faced with growing unemployment, huge economic uncertainty and the disruption of normal negotiation and consultation processes, most EU countries settled for cautious increases in their statutory minimum wages coming into effect in January 2021.
One year later, although the negative consequences of the pandemic are still visible, European economies and labour markets are recovering and a broad picture, characterised by more generalised and larger increases in statutory nominal rates, is emerging in the area of minimum wage setting. Statutory rates were raised across virtually all EU countries for 2022. While four countries (Belgium, Estonia, Greece and Spain) opted to freeze their statutory rates in early 2021, these rates were frozen for just one country (Latvia) between January 2021 and January 2022. Negotiations are ongoing in Bulgaria and Spain to set a new statutory rate for 2022 (and for further increases to it in Greece).
The largest increases in nominal statutory rates have occurred in seven central and eastern Member States. Hungary’s statutory rate was increased from HUF 167,400 to HUF 200,000 in January 2021, a significant hike of 19.5%. Statutory minimum wage rates increased by more than 10% in Lithuania, Estonia, Romania and Croatia, and by around 7% in Poland and Czechia. In Slovenia (5%) and Slovakia (3.7%) increases were more modest. Latvia was the only country where statutory rates remain frozen for 2022, but it should be noted that the non-taxable part of the wage increased, so the net wage received by minimum wage employees in the country continues to grow.
Eurofound’s analysis notes that progress in pre-enlargement EU Member States is generally more modest, with just a few countries recording notable increases. The Portuguese statutory rate continued its upward trend and registered a 6% increase for 2022. While the statutory rate was left unchanged in Belgium for most of 2021, it was increased by 4% in September 2021. The 3% increase in Ireland is around three times the increase of a year earlier.
Speaking on the publishing of the analysis, Eurofound Executive Director Ivailo Kalfin said, ‘These are significant first findings; in contrast to the rather cautious increases agreed for 2021, the minimum wage hikes negotiated for 2022 have been much more generous, with progress in central and eastern Member States particularly standing out. This positive outlook for nominal rates will ultimately become more nuanced once inflation data for 2022 and progress in real rates are taken into account, providing a fuller picture of the changes in the purchasing power of minimum wage earners.’
The analysis, including information on bargaining in EU Member States with no statutory minimum wage, is available here. A chart showing statutory minimum wage changes for 21 EU Member States can be accessed here. A full report Minimum wages in 2022: Annual review will be published in June, sign-up to receive it here.