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Péter Ákos Bod: tax settlement may give the Hungarian government a lesson

An MTI news item caused a slight stir recently, prompting analysts to react (see “The Orbán government would be hurt by a single European minimum wage”). According to the news agency, the Hungarian minister of innovation and technology held talks with the Austrian labour minister in Porto, where an EU conference on the future of common social policy was held, and the two countries agreed that it would not be appropriate to regulate a uniform minimum wage in the EU from Brussels because of the differences between the two countries.

This is so-called minus news in the language of the press, as there was no real event of substance. However, the Hungarian public is following the news about the minimum wage with great interest, notwithstanding the fact that at our level of development (underdevelopment), economic structure and ethics, many people are living officially (and quite a few in reality) on the legal minimum wage. So it is bad news for many people in Hungary that the Hungarian government is not enthusiastic about a uniform European minimum wage, because they feel that the dream of a decent income is even further away.
Let’s put aside for the moment that ‘Brussels’ has been added to the MTI text again out of habit. If the Council, that is to say the body of the Member States’ top leaders, decides on something, it can be Brussels, but it can also be Porto, as now, Maastricht, Tartu or even Debrecen; the big decisions are taken in the Member States’ capitals. Even if the document on which the decision is based is drafted by the Commission (“Brussels”).

Nor is it newsworthy that the Austrian Minister of Labour is also sceptical, albeit for quite different reasons from the Hungarian Minister of Labour (if there were one – and there hasn’t been for some time, and there should be). Indeed, Austria is one of the member states that does not have a state minimum wage. Not because the Austrian social and labour system is underdeveloped. On the contrary. Where there is a strong trade union movement, a tradition of sectoral labour consultation, and a well-established system of negotiating wages and other labour market issues in the large employing professions, there they are doing well without a centralised state minimum wage.

Incidentally, I believe that when the long-drawn-out preparatory work reaches its final stage, both governments will adopt the EU recommendation. Because a document that provides a general framework on minimum wage issues at EU level, without imposing any constraints on Member States’ labour policies, will be a recommendation, nothing more.
It is an important issue because it is a significant cost item, so policy on wages is important both at national level and at the level of the integrated community. As an economic matter, the wage system does indeed need more harmonised and uniform regulation than at present, and it is understandable that, with the Council’s mandate, considerable technical work has been going on for a long time within the Commission. On the other hand, wages in general, and the bottom of the wage scale in particular, are also a social category. And we can see that internal social conditions do indeed vary considerably between the Member States.
This is because wages are both an economic and a social category. It is an economic issue because it is a major cost item, so wage policy is important both at national level and at the level of the integrated community. As an economic matter, the wage system does indeed need more harmonised and uniform regulation than at present, and it is understandable that, with the Council’s mandate, considerable technical work has been going on for a long time within the Commission. On the other hand, wages in general, and the bottom of the wage scale in particular, are also a social category. And we can see that internal social conditions do indeed vary considerably between the Member States.

Differences in social institutions, customs and traditions seem to be permanent and, as the Porto Council decision shows, a long-lasting, slow convergence is the most that can be envisaged at EU level.

For example, there is currently no single EU retirement age or poverty threshold; there are no EU directives on personal income taxation or family policy. If wages are a social issue, and they are, the common interest of Member States should not take precedence over the local, national level.

If there is a final agreement on the minimum wage, it will be partly about how to measure it according to the same concepts and yardsticks, and thus make the current diversity of wage practices more transparent. On the other hand, the recommendations could state how the minimum wage scale for full-time workers should relate to the average wage in the Member States (the modus or median, which is not the same thing) and how the minimum wage should relate to the living wage threshold in the country concerned. But no one can seriously believe that the EU will be able to eliminate the huge differences in wages (and labour productivity) between countries.

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