Why Collective Bargaining Beats the Minimum Wage

Many are pushing for minimum wage and, with the 22 September 2022 directive, Europe is doing the same to the member states that have yet to adopt it including Italy, Denmark, Cyprus, Austria, Finland and Sweden. But what exactly is minimum wage, and why do so many oppose it? Maurizio Del Conte, Full Professor of Labor Law at Bocconi University and President of Afol Metropolitana, explains why in this interview.

What exactly does minimum wage mean in the context of the European Parliament directive that was approved last September?
Minimum wage is the lowest salary threshold permitted by law. It is generally determined equally for all professions, therefore not taking into account the "value" in each individual job. It adheres more to the concept of a dignified living wage and prevails over negotiation, in case the latter provides for a lower wage. Depending on where it was adopted, minimum wage generally tends to be around half of the average salary and goes from 6 or 7 euros per hour in Spain, 12 in Germany and up to 13 in Luxembourg.

In Italy, where collective bargaining should at least in theory be extended to 90% of workers, it was decided to not adopt minimum wage. Why was it not considered an appropriate measure?
The main problem in Italy is that the average salaries are too low. In the last 20 years, salaries in Germany have climbed by 30% and in France by 20%, while for us they have stalled. Paradoxically, the minimum wage would risk producing a race to the bottom because, if one were to hypothesize the value of half of the average employee's wage (which is approximately 11 euros per hour here), one would have a minimum wage of 5 or 6 euros per hour. This would displace collective bargaining because, at that point, companies might be tempted to ditch it (it is not obligatory in Italy) for the minimum wage. However, if a higher value were set, say at 9 euros, there would be the risk of sectors leaving the market that currently have lower hourly wages, but perhaps make up for it with elements of remuneration and corporate welfare measures that would still ultimately produce a decent monthly wage. In addition, if a minimum wage deemed too high is imposed on a company, they could decide to cut back on other things, such as welfare and other contractual benefits. In any case, it must be said that the European directive leaves ample room for adjustment according to the characteristics of the individual states.

So which would be the most effective measures to adopt in our country?
First of all, the issue of undeclared work-which is still too widespread here-must be tackled. But another problem is the so-called "pirate contracts", that is, those signed by shell or otherwise unrepresentative trade unions that are obviously very unfavorable to workers. We need to extend the effectiveness of collective bargaining agreements signed by truly representative unions, and introduce reliable mechanisms for verifying representativeness.

The Unitary Union is opposed to the minimum wage. Why? And, more importantly, is it the same in other countries?
In Italy, the adoption of a minimum wage would take away space for collective bargaining and therefore, the union. In this case, however-and I am specifically thinking of France and Germany-wages are higher and companies must adopt collective bargaining by law. Unions have appeared more supportive because, in reality, their role remains crucial. As far as Germany is concerned, I remind you that employee representatives of large companies have the right to sit on governance bodies.

Reading the European directive more closely, however, there is a reference to collective bargaining agreements. Is this the actual goal?
Certainly. The ultimate goal of the directive is to extend the protection of collective bargaining agreements, taking into account the characteristics of each individual country, as mentioned earlier. So for Italy, the goal should be to guarantee generalized contractual coverage, making sure that these are agreements made by truly representative unions. This will not reduce wages or jeopardize the comprehensive system of contractual protections, which today also ensure new forms of supplementary welfare. To raise salaries, there needs to be more negotiation and worker participation, with the goal of improving the productivity of our enterprises and increasing the value of work.