Chapter 7:

Minimum wages chase inflation

Takeaways

Member States across the EU increased their statutory minimum wages substantially for 2023 to try to keep pace with inflation. The biggest relative increases were set by central and eastern European Member States for the most part.

In real terms, minimum wages grew substantially only in Belgium and Germany, while they fell in nine Member States.

From a longer-term perspective, progress in raising real wages is most marked in the Member States that joined the EU in 2004 or later. Except for Malta and Slovenia, real minimum wages grew by between 45% and 195% in the period 2012–2023 in these countries.

Statutory minimum wages rose substantially across the EU in January 2023. The increases ranged from just over 5% in Malta to 24% in Latvia (Figure 21). The median increase (calculated in national currencies) was 11%, compared with 5% for 2022.

Figure 21: Minimum wage increases, EU Member States, 2023 (%)

Note: Chart shows Member States with statutory minimum wages in 2022. Converted values used for non-euro-zone Member States.
Source: Network of Eurofound Correspondents and Eurofound calculations

Most of the large increases were set by the central and eastern European Member States. Of the 13 countries with the biggest hikes, 10 joined the EU after 2004, evidence that they are continuing to catch up with the countries with longer membership. Gains were more modest in the pre-2004 Member States, with some exceptions: Germany increased its minimum wage by 22%, Belgium by 16% and the Netherlands by 12%.

These exceptional increases were cut down to size by inflation. Latvia’s striking 24% hike, for instance, translated into a 2% increase in real terms. Only the large rises in Belgium and Germany resulted in a substantial boost to workers’ earnings (Figure 22). In general, however, the increments were sufficient for minimum wages to broadly keep pace with inflation in half of the Member States. For 15 out of 21 Member States, real wages (adjusted for inflation) either rose by 3% or fell by 3% compared with January 2022. Real wages grew modestly in Romania, the Netherlands, Latvia, Spain, Slovenia and Bulgaria, deteriorated modestly in Malta and Lithuania, and were mostly unchanged in Greece, Ireland, Poland, Luxembourg, Croatia, France and Portugal.

Figure 22: Change in real minimum wages, EU Member States, 2022–2023 (%)

Source: Eurofound, Network of Eurofound Correspondents and Eurostat (for harmonised index of consumer prices (HICP) data)

The most substantial falls in real wages occurred in Czechia and Hungary (and Estonia and Slovakia to a lesser extent), despite increases in the nominal levels.

These findings represent the situation in January 2023, but further inflation over the year led to a deterioration once again in the purchasing power of minimum wages. Governments continued to implement additional measures to alleviate the difficult financial situation faced by minimum wage earners and other low-paid groups. The most common approach has been to increase income from work – by raising various types of benefits or allowances or by implementing preferential tax treatments or tax reductions, for instance. Other interventions include the provision of more support for housing and commuting and measures to reduce household energy bills and fuel prices, but these have often been implemented across the board rather than being targeted at low-wage earners specifically.

While nominal minimum wages in the central and eastern European Member States rose by significant amounts in 2023, they continue to be much lower than in the pre-2004 Member States. This becomes clear if we look at the differences in terms of the hourly wage (Figure 23). Minimum wages are highest in Luxembourg, Germany, Belgium, Ireland, France and the Netherlands, ranging from €11 to almost €14. Of the 12 Member States with hourly amounts below €5, 11 joined the EU in 2004 or later.

Figure 23: Hourly nominal minimum wages, EU Member States, January 2023 (€)

Note: For Member States in which minimum wages are not set in terms of hourly rate, the hourly rate has been inferred by means of statistical approximation.
Sources: Network of Eurofound Correspondents, Eurostat and Eurofound calculations

While increases in minimum wages since the pandemic have not fully offset the impact of inflation, the purchasing power of these wages has increased in the longer term. Since 2012, nominal wages have generally been set above inflation, which has enabled real wages to keep pace. Progress in raising real wages is most marked in the countries that joined the EU in 2004 or later. Except for Malta and Slovenia, real minimum wages grew by between 45% and 195% during 2012–2023 in these countries.

Increments in Portugal, Slovenia and Spain in recent years have also led to gains in purchasing power among minimum wage earners. Growth in real terms has been much more muted in France, the Benelux countries, Ireland and Germany, while it has been negative in Malta, although by a negligible degree.

Greece is the only Member State where real minimum wages have fallen significantly since 2012, owing to the financial turmoil the country experienced during the economic crisis, which resulted in a large reduction in its nominal statutory rate in 2012.