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The EU minimum wage initiative in times of COVID-19 crisis

Sacha Garben
Permanent professor at the LAW Department of the College of Europe

A few months ago, the new European Commission boldly announced its plans to deliver an EU minimum wage legal measure within its first 100 days in office. The COVID-19 crisis is likely to affect not only the schedule of this high-profile initiative, but the very political appetite for it. Yet, the COVID-19 induced economic downturn presents a litmus test for Social Europe, and more specifically the European Pillar of Social Rights (EPSR), as well as – arguably – for the minimum wage initiative. 

Indeed, this unexpected pandemic will show whether we have learned from past mistakes made in the previous crisis, where the austerity measures rolled out across Europe created the social and democratic deficit that precisely the EPSR and the minimum wage initiative were meant to counteract.

We need to protect the most vulnerable groups – who are already likely to be hardest hit by the COVID-19 crisis in many different ways – beyond the idea that ‘any job will do for now’.

In times of profound uncertainty for employers and workers, the preservation of employment is logically everyone’s first priority. Not every sector of the economy is currently suffering from the containment measures, as for some the forced changes in consumer behaviour increases business and opportunities, but the majority certainly is. That raises the question whether we can ‘afford’ social protection in these challenging circumstances. But just as EC President Ursula von der Leyen rightly pointed out that this is not a ‘fair weather Union’, social and employment rights are not only for the good times – on the contrary, they should show their worth precisely in times of trouble.

Social and employment protections, especially at EU level, are set at a ‘minimum’ level, a level that we consider non-negotiable for normative, economic and practical reasons (and that we would like everyone to go well beyond). Economically vulnerable groups are already likely to be hardest hit by the COVID-19 crisis in many different ways. We need to protect them beyond the idea that ‘any job will do for now’. In recent years we were finally able to overcome the cynical approach to social protection that considers that anything that benefits businesses and growth will automatically also benefit workers through some trickle-down effect and the mere possibility for them to just have a job, no matter how precarious, uncertain, low-quality and low-paid it may be. We decided we were better than that. Europe’s citizens demanded the EU to do better than that. The result of that enlightenment was, first, the EPSR, and second, a range of new social initiatives at EU level – such as the one on minimum wage.

Already before the COVID-19 outbreak, the initiative proved contentious. One of the central points of uncertainty and debate revolve around the much-contested question of legal competence in this field. Under the principle of conferred powers, the EU only has the capacity to enact legislation where it has been attributed the power to do so by the Treaties. This means that the EU always needs to base itself on a specific authorising provision in the Treaties that grant it the power to act and describes the procedures and other conditions attached. This is called a legal basis. Some would argue that the EU does not have a legal basis to adopt a minimum wage Directive. 

“in order to promote its overall harmonious development, the Union shall develop and pursue its actions leading to the strengthening of its economic, social and territorial cohesion” (Article 174 TFEU )

This is because under Article 153 of the Treaty on the Functioning of the European Union (TFEU), the EU’s main social legal basis, the issue of ‘pay’ is “excluded from its provisions” (paragraph 5). Apparently, it seems to prevent the EU from adopting, on this particular legal basis, a binding EU measure that directly fixes the level of minimum wages in the Member States.

However, the current approach in EU law is that if there is insufficient ground for action on one legal basis, this does not preclude the use of another legal basis, as long as the conditions of that second provision are genuinely fulfilled. This is for instance how the EU was able to legitimately adopt a range of protective directives on tobacco products and their advertisement, even though the Treaty only authorises the EU to adopt incentive measures concerning tobacco that do not entail the harmonisation of Member States’ laws. The EU instead used the legal basis related to the internal market, and the Court of Justice ultimately gave it the green light to do so, as long as the conditions of the use of the internal market legal basis are fulfilled.

As such, under the current interpretation of EU law, it is very well possible to argue that the minimum wage measure could be adopted based on another Treaty provision. This alternative could potentially be found in the oft-overlooked social legal basis of Article 175 TFEU on economic, social and territorial cohesion. An important part of the rationale of introducing an EU minimum wage is to decrease the social and economic inequalities between different parts of the EU, to promote upward social and economic convergence and a more harmonious development of the Union. Economic and social cohesion is a so-called “shared competence”, which means that “the Union […] may legislate and adopt legally binding acts in that area” (Article 2(2) TFEU). More specifically, Article 174 TFEU states that “in order to promote its overall harmonious development, the Union shall develop and pursue its actions leading to the strengthening of its economic, social and territorial cohesion”. The following article (175) continues that “if specific actions prove necessary outside the Funds and without prejudice to the measures decided upon within the framework of the other Union policies, such actions may be adopted […] in accordance with the ordinary legislative procedure”. Thus, if Article 175 TFEU would be used, it would entail Qualified Majority Voting and, importantly for the European Parliament, co-decision.

A textual interpretation of Article 175 TFEU, in conjunction with Article 174 TFEU, does not in principle seem to oppose the adoption of a minimum wage directive, if it would be designed so as to significantly strengthen the Union’s economic and social cohesion and thus genuinely diminish disparities between Member States. It would be imperative that a rigorous and systematic impact assessment accompany the proposal. This assessment should, through data and reasoned projection, provide sufficient ground and reason for the Court of Justice of the European Union to accept, if the directive were to be challenged afterwards, that the way in which the directive sets minimum wages for the EU genuinely (and not incidentally or purely indirectly) contributes to social and/or economic cohesion and the Union’s harmonious development. The assessment should perhaps not just focus on the measure’s reduction of disparities but also on taking the sharp edges of wage-competition that has distorted the internal market as can be seen from the Posting-saga, as well as producing upward socio-economic convergence. The fact that such a measure would protect workers in all Member States does not necessarily seem to be a problem, as long as it can clearly be shown that in doing so, the measure significantly contributes to social and/or economic cohesion.

Thus, as I have argued recentlytogether with Ane Aranguiz, Article 175 TFEU may offer an alternative route to adopt a fully-fledged minimum wage directive to diminish the social and economic disparities that are hampering a harmonious development of the Union in both economic and societal terms.However, it seems that the formidable hurdle of legal competence is no longer the main challenge that the initiative faces, in the dramatically changed post-COVID-outbreak landscape. For the reasons outlined above, however, it is precisely now that we need to push for social standards and protection, so that we come out of this current crisis better (or at least less bad) than out of the previous one. This will be crucial for the social legitimacy of the Union and to contain EU scepticism and populism more generally.

Photo credit – Shutterstock

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