58 Europe The Economist November 13th 2021
Minimumwage, maximumrage
E
veryone wantsto be a little bit Danish. Hygge, a sense of Nor
dic contentment attained via baking, candles and good compa
ny, became the philosophy du jourduring lockdown. Danish dra
mas win garlands, while its comedies contain jokes so enjoyably
dark that viewers may worry about finding themselves on a Euro
pol watch list. Even Danish semen has become a booming export,
thanks to the country’s combination of liberal rules for donors
and reputation as a small nation of tall hunks.
But it is the Danish labour system that attracts the most plau
dits. Leftists drool over a model that sees burger flippers in Mc
Donald’s paid the equivalent of $22 per hour. Those on the right
marvel that the country has no statutory minimum wage. Instead,
employers and stakeholders sit down together and hammer out
collective agreements that cover most workers. It is the same in
neighbouring Sweden. Employees benefit from wages and bene
fits that are among the most generous on the continent; employ
ers can hire or fire with ease during boom or bust. Denmark and its
Scandi neighbours manage to be both a worker’s paradise and a
capitalist’s dream.
Telling Scandinavians how to run a labour market is akin to
teaching the French how to bake baguettes. Yet this is the position
in which the Nordic countries have found themselves. Ursula von
der Leyen, the president of the European Commission, wants all
workers to be covered by a minimum wage, whether through na
tional law (as in most of the club) or through collective agree
ments (as in Scandinavia). Proposals that will see the topic of
minimum wages dragged into eulaw are being negotiated among
meps and national governments.
At first glance, Denmark and Sweden have little to worry about.
A common minimum wage is not on the table. Indeed, that would
be impossible for a club that includes Luxembourg, whose mini
mum wage is €2,202 per month ($2,550) and Bulgaria, where it is
€332. According to the eu’s own treaties, only national govern
ments can set a minimum wage. Indeed, the commission came to
praise the Scandinavian system, not to bury it. It would rather
everyone looked a bit more like Sweden or Denmark, with collec
tive agreements galore.
Instead, the commission wants to shape how national governmentsguaranteedecentwages, rather than to set their level. Un
der its proposals, countries would still be in charge of the details.
Those with statutory minimum wages would be forced to ensure
these are adequate when measured against average incomes. For
those without a minimum wage, a group which includes Italy,
Austria, Cyprus and Finland as well as the Scandinavian duo, the
commission wants at least 70% of workers to be covered by collec
tive agreements—a hurdle that the Scandinavians already meet.
Yet the Scandinavian duo are still fretting, and with some
cause. All legislation comes with unintended consequences, par
ticularly at the European level, where the European Court of Jus
tice is a player as much as a referee. In Sweden about 60% of col
lective agreements do not include a minimum wage, points out
German Bender, an analyst from Arena Idé, a Swedish thinktank.
With eulaw now encompassing minimumwage rules, legal chal
lenges would become possible. And peculiar things can happen. A
case in the 1960s involving an unpaid electricity bill worth a few li
ra ended up establishing the primacy of eulaw, which means eu
rules trump national ones if the two clash. The socalled “no bai
lout” clause in the eu’s treaties did little to stop a series of bail
outs. A single judgment might upend the Nordic labour model.
When proposals start rolling, they are tricky to stop. Employ
ment legislation gets agreed by a qualified majority of govern
ments, so vetoes do not apply. Usually, though, the euavoids top
ics that are sacred to national governments. Pleas that legislat
ing—rather than issuing suggestions—on minimum wages vio
lates the Scandinavian principle of no government interference in
wagesetting fell on deaf ears. Denmark and Sweden “yellowcard
ed” the proposal for a directive on minimum wages, a formal prot
est, but to no avail. In the eu’s ministerial council, where national
governments haggle over a position, the lawyers say it is perfectly
legal. The French government, which will shepherd negotiations
on the topic from January, is keen to get it done sharpish. Beyond the bare minimum
New rules on minimum wages are only the beginning of a wider
push on workers’ rights at the eulevel. Laws to make pay transpar
enthave been put forward by the commission. Proposals on how
countries must treat “platform workers”—such as Deliveroo riders
and Uber drivers—are in the works. For some it is a welcome shift
in eupolicy. During the austerity years governments were to be
lean and mean. Angela Merkel was fond of noting that the euwas
7% of the world’s population, a quarter of its economy, but about
half of all its welfare spending. Today, the tune has changed. Gene
rous welfare states and high worker protections were once held to
be the cause of the eu’s woes; now they are the solution.
For the Scandinavians, this shift is cause for concern. Their
system is not broken, yet the euinsists on fixing it. There is little
scope for dodging the legislation. Denmark has an optout on the
euro, as well as on European laws on justice and home affairs.
Sweden is in theory obliged to join the euro eventually, but uses a
loophole to cling on to its krona. Such derogations are a thing of
the past, however, and of no help in the present case. Europe is no
longer à la carte. Systems that work well, such as those of Denmark
and Sweden, may have to change in order to help systems that
work less well, such as those of Cyprus or Italy. “United in diversi
ty” is the eu’s slogan. But unity increasingly trumps diversity as
the eudelves ever furtherinto the lives of its citizens. Everyone
wants to be a bit like Denmark. But Denmark may soon start to re
semble everywhere else.nCharlemagne
A fight about worker pay pits a Scandinavian duo against the rest of the European Union