A Eurostat table published last week shows that while Malta is in the middle of the second group of EU countries when minimum wages are compared, it moves up a notch when purchasing power parities are considered.
Other countries, such as Estonia, Lithuania, Poland and Portugal, move up by two positions while the US, which is also considered for comparison’s sake, moves up to the top group of countries.
In July 2013, Eurostat explained, 21 of the EU’s 28 member states (Belgium, Bulgaria, Czech Republic, Estonia, Ireland, Greece, Spain, France, Latvia, Lithuania, Luxembourg, Hungary, Malta, The Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia, the United Kingdom and Croatia) and Turkey had national legislation setting a minimum wage by statute or by national intersectoral agreement.
Monthly minimum wages varied widely, from €159 in Bulgaria to €1,874 in Luxembourg. When adjusted for price differentials across countries, the disparities between the member states are reduced from a range of one to 12 (in EUR) to a range of one to five in purchasing power standard (PPS). At the opposite ends of the scale were Romania (313 PPS) and Luxembourg (1 539 PPS per month).
The 21 member states concerned, together with Turkey and the United States, can be divided into three groups based on the level of minimum wage on 1 July this year.
The first group includes the 11 countries with the lowest minimum wages, between €100 and €500 a month: Bulgaria, Romania, Latvia, Lithuania, the Czech Republic, Estonia, Hungary, Slovakia, Poland, Croatia and Turkey.
The second group comprises five member states (Portugal, Greece, Malta, Spain and Slovenia) and the United States with an intermediate level of minimum wages, from over €500 to just below €1 000 a month. Malta is estimated at around €700 a month.
The third group comprises six member states (the United Kingdom, France, Ireland, The Netherlands, Belgium and Luxembourg) in which the minimum wage was above €1,200 per month.
But when one compares minimum wages, taking into account differences in price levels across countries by applying purchasing power parities (PPPs) for household final consumption expenditure, among the member states, the gross minimum wage expressed in PPS ranged from 313 (Romania) to 1,539 (Luxembourg).
As one would expect, adjusting for differences in price levels reduces the variation between countries: while the minimum wage in euro ranged from €159 to €1,874 in July 2013 (a factor of about 1:12), the minimum wage in PPS (Figure 2) ranged from 313 to 1,539 (a factor of about 1:5).
The countries in Group 1 with relatively lower minimum wages in euro also have lower price levels and therefore higher minimum wages when expressed in PPS. On the other hand, countries in Group 3 with higher minimum wages in euro have higher price levels, and their minimum wages in PPS are relatively lower. In addition, as a consequence, the breaks between the three groups are partly smoothed out when looking at minimum wages expressed in PPS.
Comparing the ranking of the monthly minimum wages in euro with those in PPS, the most remarkable changes are for Estonia, Lithuania, Poland and Portugal, all moving by two positions.
Several other countries change their position, but only by one rank (Bulgaria, Romania, Hungary, Slovakia, Croatia, Turkey, Malta, Spain, France and Ireland). The monthly minimum wages expressed in PPS group the countries in the same class as when expressed in euro with the exception of Hungary, Poland Croatia and Turkey, moving from Group 1 (lower wages) to Group 2 (medium wages) and the United States moving from Group 2 (medium wages) to Group 3 (higher wages).