“The Brussels Diary With Yana Toom”: European Minimum Wage


It is already clear that Europe cannot take refuge from the coronavirus tsunami. This is bad news for the economy, which also means bad news for the poor who receive minimum wage or slightly higher. Coincidentally, in one week, the European Commission will present its draft on the European minimum wage – and I hope that it will propose what has been talked about for a long time: a median-wage indexed minimum wage.

This topic is very close to my heart, but the views of the residents of Estonia were not clear. My office commissioned a survey on the topic of minimum wage. The results were paradoxical.

Three quarters of respondents support the idea of linking minimum wage to median wage. A quick recap on what is median wage. Just imagine that all workers have to line up by the size of their wage from the smallest to the biggest. The median wage is received by the person who is standing exactly in the middle of the line. Our median wage is 1,170 euros. Half of employees received less and half more than this amount.

How poor we are can be illustrated by the relationship of median wage to average wage. Average wage is like a temperature in hospital: in critical care forty, in the morgue zero, but the average is thirty-six. Our average wage is almost 1,500 euros. So, much more than the median wage. This means that those who are richer compared to the person in the middle, receive much more than those who are poorer. There is a problem here, and it is the minimum wage.

Two third of respondents believe that trade unions and employers should agree upon a minimum wage. In principle, what they believe is right. There are countries in Europe, such as Finland, Sweden and Denmark, where there is no minimum wage, but wages are high because there are many trade unions and they are strong. In Estonia, the situation is opposite. The largest trade union unites less than 5 percent of workers and the number of employees who have collective agreements is unknown; however, it is clear that it’s no more than 20 percent. In Denmark, it is over 80 percent, in Sweden 90 percent. Trade unions fight for their rights in these countries. In Estonia, trade union is almost like a swear word from the Soviet time, and I do not think that it will change in the near future.

Estonia is not alone; all the Eastern European and Balkan countries are like us. Therefore, the European Commission decided to do something about it. Let us say that it is decided that minimum wage is 60 percent of median wage. Currently, the minimum wage is 584 euros; this change would increase it to 702 euros. The difference is 118 euros, which those less off could find a use for. In fact, it would not hurt businesses either, because this additional money would not be saved up and invested in stocks; instead, it would be spent in shops, cafes, at hairdressers, etc. The economy wins.

You know what is interesting: almost half of respondents believe that minimum wage is the internal affair of a country and Brussels should not interfere. It seems that our people still do not trust Europe. To some extent, it is understandable: the EC do not advertise their work; they just work. I truly hope that everything works out with the European minimum wage and that the mistrust in Europe softens.

Next week, we are organising a web conference on the European minimum wage. The participants include our and European politicians, trade unions and employers. Follow the news.