The Economics behind the Directive on Adequate Minimum Wages in the EU: A Critical Assessment

The European Commission’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 article examines the underlying economic analysis on which the Directive is based. The conclusion is that job losses associated with sharply raised minimum wages are underestimated while the reduction in poverty is exaggerated, which is why the Commission should have considered other and more effective policy measures. Furthermore, wage developments for low-paid workers in the Union do not seem to be as adverse as suggested by the Commission.