A recent paper by European Futures makes the case for collective bargaining as a solution to in-work poverty, as opposed to minimum wage laws: “Collective bargaining arrangements appear to be the best means of ending in-work poverty. Finland, Denmark, and Sweden do not have statutory minimum wages, yet they have some of the lowest levels of in-work poverty in the EU. Nine out of the eleven countries with the lowest rates of low pay (calculated as two-thirds of the national median wage) had more than 70% of workers covered by collective agreements. The extent of coverage for collective agreements is essential for creating a wage floor and protecting workers from low pay, which is recognised by the EU. Bargaining at the industry level (in contrast to the company level) is more effective at raising the wage structure overall. The Economic Policy Institute in the US found that collective bargaining also primarily benefits low-wage workers more than higher-wage workers, thereby reducing wage inequality. Collective bargaining is therefore capable of reducing wage inequality in addition to reducing in-work poverty. The Nordic countries are interesting and effective examples of collective bargaining, primarily achieved through voluntarism with limited government involvement. This is often referred to as an organised-decentralisation system of collective bargaining, whereby wages are set by sectoral (industry-level) bargaining, but negotiations also occur at the company level.”
Zero hours contracts
Most EU countries outlaw zero hours contracts, heavily restrict them, or don’t see them widely used. The UK is one of around half a dozen European countries (including several in Scandinavia) where zero hours contracts are both legal and fairly common. Sweden allows them, but it also has a unique ‘transition system’, a nationwide private welfare service for workers who have become recently unemployed due to redundancy. Companies pay into ‘job security councils’, which provide skilled coaches who pick you up, dust you down and match your skills and ambitions with the market. There are 16 of these organisations, each covering a different sector of the economy and tasked with finding new jobs for workers who have lost their jobs for economic reasons. As a result, Sweden has the best re-employment rates in the developed world – about 90% of laid-off workers are back in work within a year, according to the OECD.
The EU is trying to introduce a Pay Transparency Directive to strengthen the application of the principle of equal pay for work of equal value between men and women through pay transparency and enforcement mechanisms (one of the fundamental EU rights and principles, laid down in the Treaty of Rome). However, this has not yet been adopted, and doubts remain as to whether this legislation alone will tackle the gender pay gap, since they do not tackle the informal arrangements that maintain inequalities inside organisations.
Parental leave is more generous in many countries, including Scandinavia and Germany, than in the UK. For example, in Finland, parents are allowed 39 weeks of paid leave at 80% of salary; each parent gets 13 weeks off from work, and the remaining 13 weeks can be split between both parents or as they deem fit. Fathers generally use up 45% of the parental leave benefits.
The EU’s legislation to ensure fair competition in the single market does not apply equally to small businesses as to large multinationals, and there is a campaign underway to redress this, arguing that “illegal market practices, disproportionate compliance costs, unfair tax regimes and late payments prevent SMEs from innovating, growing and creating jobs… a level playing field allows businesses to prosper and grow and avoids disadvantages for SMEs compared to other stakeholders”.