The Economics behind the Directive on Adequate Minimum Wages in the EU: Why Differentiated Integration is a Better Option

The European Union’s Directive on minimum wages aims to ensure an adequate minimum wage for all workers in the Union and thereby counteract poverty among the low paid. This chapter examines the underlying economic analysis on which the Directive is based, mainly from a Nordic point of view. One of the identified challenges is that the Directive ignores evidence pointing to significant job losses for low-skilled workers in the Nordic countries, which, unlike other Member States, have long since achieved the higher minimum wage levels proposed in the Directive in collective agreements. Furthermore, the reduction in poverty is likely to be exaggerated. It is therefore concluded that the EU should have considered other and more differentiated policy measures, leaving more room of manoeuvre to the Member States.