European employment indicators may seem optimistic, but poor wages contribute to financial distress for many families across the continent
The European labour market is flourishing, with record-high employment rates and a decline in the overall unemployment rate, including a decrease in youth unemployment.
However, beneath this veneer of prosperity, a troubling reality persists—many families are grappling with financial difficulties due to inadequate wages.
The struggle of poor wages in Europe
The recent surge in inflation has taken a toll on the purchasing power of families across Europe; with companies unwilling to adjust wages to keep up with the rising cost of living, the per capita income has declined, affecting even lower-income households. Shockingly, within just one year, the number of families facing financial stress has increased by 13 per cent.
Moreover, soaring energy prices during winter have left nearly one in ten Europeans struggling to keep their homes warm, exacerbating the challenges of poor wages.
Market imbalance and effect on wages
One might expect wages to rise in a labour market with high demand and low supply. However, the situation is quite the opposite. The key to understanding this paradox lies in the findings of a report by the OECD, which reveals that labour markets in many European countries are malfunctioning due to excessive corporate power.
Workers with specialised skills often have limited choices when choosing their employer, leaving them at the mercy of companies that can keep wages low without repercussions.
This unfortunate situation affects approximately 16 per cent of the European workforce, with certain occupations, such as printing workers and health professionals, particularly affected.
Non-compete agreements further compound the issue, restricting workers from seeking employment with competing companies even after leaving their current employer.
Advocating for the regulation of wages
The glaring need to address the issue of poor wages in Europe demands solutions beyond mere reliance on market forces. The EU and the OECD advocate for the regulation of wages through social dialogue and negotiations.
To achieve this, collective bargaining agreements should be established between employers and trade unions within each sector.
Such contracts would provide a framework for fair wages and improved working conditions, effectively transforming the current labour market into a path of social progress rather than collective impoverishment.
The EU has taken the right direction by passing a directive on adequate minimum wages. This directive aims to strengthen collective bargaining, setting a target for 80 per cent of workers to benefit from negotiated conditions across all member states. This ambitious goal holds promise for elevating labour standards.
In light of the inflation crisis and its consequent financial distress for European families, it is now more imperative than ever for EU member states to seriously address the issue of poor wages.
Emphasising social dialogue and regulation can pave the way towards a brighter and more equitable future, ensuring that employment is a genuine shield against poverty for all Europeans.
