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Romanians still have to wait for the implementation of the European minimum wage. And this is at a time when, recently, after the entry into force of the Directive regulating the European minimum wage, many countries in the European Union have taken significant steps. The regulation of the European minimum wage is aimed at providing workers in the EU countries with an adequate income to ensure a decent living.
The government in Bucharest has had two years to prepare the implementation of the European minimum wage, but so far no legislation to meet EU requirements has been adopted by the Romanian legislature. The Ministry of Labour has not yet finalised the transposition of the latest directive in this field, which provides for the regulation of an adequate minimum wage, the “fair minimum wage”.
Romanians are expecting to feel the rise in average wages in their pockets in the second half of the year, as promised by the government. For the time being, however, it is not very clear – from the contradictory messages sent by its representatives in recent months – whether there will be an increase and if so, what it will consist of. Even after successive increases in recent years, Romanians are at the bottom of the European league table when it comes to workers’ incomes.
Romania, with a minimum wage of around €600, among the last countries in the EU
According to a study cited by the ombudsman in 2022, the government would – at that time – have to add another 1,184 lei (just over €200) to the minimum wage for an adult to survive decently. At present, Romania, with a minimum wage of around €600, ranks among the last countries in the European Union, 20th out of 22. Behind Romania are Hungary and Bulgaria – the last in the ranking, which has a minimum wage below €400. This is despite the fact that Luxembourg tops the league table – with over €2,800, while in most Western countries the figure is well over €1,000.
The introduction of the European minimum wage is intended to reduce these discrepancies, as the need to ensure adequate incomes for all workers in the European Union is at the root of the latest legislation. The aim is to ensure a decent living and protect vulnerable groups. Far from seeking to equalise incomes on the basis of a single minimum wage, the European Union has sought, through the legislation adopted in this area, to ensure that the minimum income can be determined transparently and predictably by each Member State, in line with income. To make it easier for Member States, the EU also comes up with two possible calculation formulas.
Three calculation options for the implementation of the guaranteed minimum wage in Romania
According to specialists quoted by the RTV television channel, who have made calculations based on the two options proposed to Member States by the European Commission, the minimum wage in Romania could increase by 800 or even 1,300 lei from next year. Thus, in a first variant, in which the minimum income would be determined according to the daily consumption basket for a decent living, the guaranteed minimum net income in Romania should be at least 800 lei higher, according to calculations made by specialists. If the second option suggested by the EU – to be calculated on the equivalent of 50% of the average gross earnings in the economy – estimated at 7,600 lei in 2024 – were adopted, the minimum guaranteed income in Romania would have to increase by about 1,300 lei. However, the Ministry of Labour in Bucharest is also considering a third formula proposed by the National Institute of Statistics. It requires the gross minimum wage to be adjusted in line with inflation. If this formula were used, at the current 7% inflation rate in Romania, the minimum wage would rise by around 200 lei (€50) this year. The result of the latter calculation is a far cry from the first two, and clearly does not solve the problem of how much money is needed to cover Romanians’ daily basket.
The Ministry of Labour has recently said it is working on the calculation formula and promises to finalise a draft law by the end of the year.
“It comes with three formulas and in consultation with the social partners we are going to choose one of the formulas to be introduced in a law so that the directive can be transposed by the end of this year (…) Most likely we will go for the variant of 50% of the average salary, but the three variants we are working on at the moment are much more complex and take into account other indicators,” said Cristian Vasilcoiu, secretary of state in the Labour Ministry, quoted by Euronews.
Last October, Social Democrat Prime Minister Marcel Ciolacu spoke out in favour of introducing a differentiated minimum wage and gave assurances that he had discussed this hypothesis with trade unions and employers.
“The dialogue I had with employers and unions was not about an increase, everyone believes that the minimum wage should be increased. The discussion was whether to come up with a differentiated minimum wage anyway. And, I repeat, I think that this is the right approach and these dialogues with the social partners will follow,” Prime Minister Marcel Ciolacu said.
The preferred way of working at that time was to differentiate the minimum wage in construction and in the food and agriculture industries. However, when the state budget for 2024 was adopted in December, the Prime Minister announced that the government was planning to abandon the differentiation of the minimum wage for employees in agriculture and the food industry and to raise the minimum wage to 3,700 lei. However, a different level of 4,582 lei has been left for employees in the construction sector. The increase would apply after the European parliamentary elections on the 1st of July, “to ensure six months of predictability for the business environment,” the prime minister said. “Until then, we keep the 200 lei tax-free facility from the gross minimum wage,” he added. On the other side, employers suggested an increase to only 3500 lei in July 2024, with the amount of 3700 lei to be reached only in January 2025. A final decision has not yet been taken. Even within the ruling coalition, the issue has not been settled between the PSD and its PNL partners.
Six EU Member States have not regulated the minimum wage
Of the 27 Member States, only six have not regulated the minimum wage. The legislative text, agreed in July 2022 by the Council and the European Parliament, lays down binding rules for the 21 EU countries where minimum wages already exist. In these cases, it will make it more transparent how minimum wages are set and make it easier to raise them. The six EU countries where minimum wages are not regulated, as income levels are determined by collective bargaining – Austria, Cyprus, Denmark, Finland, Italy and Sweden – are not obliged to introduce this legal provision.
The minimum wage debate has divided Member States. West supports, East opposes
The debate on the European minimum wage has divided Member States into two camps from the outset. On the one hand, the western countries – France, Germany and Italy – have from the outset supported the adoption of this type of wage, which aims to ensure equality for all employees in the EU. On the other hand, the eastern countries, particularly those that have not yet joined the eurozone – Poland, Bulgaria and Romania – have opposed this proposal because of the major imbalance it would create in social and economic policies.
Directive 2041/2022 on an adequate minimum wage in the EU was adopted in 2022 by the European Parliament and Member States have had two years from its entry into force (October 2022) to transpose its provisions into local law. Setting the minimum wage remains the prerogative of national states, but they must ensure that employees’ incomes – which depend on the minimum wage – allow workers to make a decent living, taking into account price levels.
More than 1.5 million Romanians earn the minimum wage, according to official data. And the number has remained constant over the past two decades. This income doesn’t even cover 70% of the real consumption needs of a family with two children where both spouses earn the minimum wage, according to studies carried out in recent years.