Council of Europe Decency Threshold

Background

As long-term supporters, our partners within the NGO sector, and the wider labour movement know, the Unit has for some time promoted the Council of Europe Decency Threshold as both a mechanism for broadening the parameters of the minimum wage debate, and as an aspiration for all those who strive to see a statutory floor for wages that is truly worthy of those working in the world’s fourth largest economy.

The original Decency Threshold was established in Europe’s Social Charter, first drawn up in 1994, and we have been proud to maintain our support for a touchstone that charged all EU Member States to work towards a minimum remuneration level that would drop no lower than 68 per cent of their citizens’ average earnings. In the main, our support sprang from the Council’s recognition that modern industrial economies are not static, and that all citizens should benefit from any general rise in earnings. This recognition, and the desire to ensure that those working in the lower deciles of Europe’s labour markets should not be forgotten as more fortunate citizens enjoyed the benefits of steady economic growth, lay at the heart of a simple but robust calculation that provided both a goal and a tool of analysis for ordinary people and dedicated campaigners alike.

However, although the main articles of the Social Charter remain unchanged, the definitions of some of its main tenets have been revised. And in this case it is the Charter’s definition of ‘fair remuneration’ – as laid out in Article 4, paragraph 1 – that has forced the Unit to reluctantly abandon its association with the Decency Threshold.

Original definition

Under the original Charter, ‘fair remuneration’ was defined as 68 per cent of average earnings within each signatory’s national economy. More recently, however, the ‘Committee of Experts’ who examine and seek to update any definition that they feel has become outdated because of economic or social developments, have altered the definition of ‘fair remuneration’ with these developments apparently in mind.

New definition

The main alteration, and main problem, of the definition is that it is now set at 60 per cent of net earnings.

The Unit believes that this re-definition has served to obscure both the general effectiveness of the Decency Threshold as a means for poorer European citizens to hold their governments to account, and has buried its value as a tool of analysis with unnecessary complications that only the statisticians in the service of the Member States can hope to unravel.

Why the change was made

The Committee of Experts argue that the original definition has become outdated because it was set under a ‘male breadwinner’ framework, and so has become unwittingly biased against the growing number of European women now working as individuals or contributing to their family’s income – or indeed now being their family’s main breadwinner themselves. However, the Committee does not address the sad reality that women workers across Europe still earn less than male counterparts and do not explain why their efforts for greater gender balance have contributed to their decision to set the new definition as a net earnings figure.

What the Committee does state in respect of a net figure is that the new definition should reflect the proposed enlargement of the EU and the increasing diversity in the wage structures and dispersion within the growing number of Member States – with particular reference in this regard to the new democracies of Central and Eastern Europe. The Committee’s qualification in respect of the Decency Threshold as a target if not a strict requirement at this moment in time, appears in the statement that they would expect every Member State to set its minimum wage at a level that ensures a ‘decent standard of living in real terms for a worker’ – that is, it must be clearly above the poverty line for a given country.

Problems of the new definition

The Committee also seek to anticipate criticism that their revised definition lowers the required standards for the advanced economies of existing Member States by emphasising that they do not consider different models of a minimum guaranteed income to be valid claims that the revised decency threshold is being met. That is, no Member States’ minimum guaranteed income model (in short, in-work benefits) are linked to the wage of a full-time worker so as to increase the level of the minimum wage specifically, and so are not relevant to the assessment of conformity under Article 4 paragraph 1.

Crucially, however, where the Committee’s revised definition becomes distinctly opaque and where its value is significantly undermined, is found in its explanation of ‘the net value’:

… i.e., after deduction of social security contributions and taxes, of the total wages, in principle both monetary and in kind, paid regularly by an employer to a worker for work carried out. Account shall where applicable be taken of bonuses and gratuities not paid regularly with each pay packet.

Indeed, the inherent complexity of this short designation renders any attempt to discern the ‘net value’ fraught with difficulties. Member States’ official statisticians will have access to data that can produce an estimated monetary value of what 60 per cent of average net earnings actually is, but payments in kind are notoriously difficult to track and collate – even more so if seeking to estimate a mean value for all such payments.

In the case of Britain, this would require attaching a valid monetary value applicable to all 28 million British workers, as well as accurately accounting for all those who do not receive bonuses or payments in kind – something familiar to most low-paid workers especially. For NGOs and other analysts, attempts to calculate this net value will be very difficult, not least because in Britain the government do not release adjusted net values of annual earnings for scrutiny. One could apply an estimation of average tax deductions, taking account of the different earnings bands, but any figures presented would require such complex qualification and explanation that the effectiveness of the Decency Threshold as a valid measure would too easily become lost in arguments over how the calculation was made, the reliability of data, and so on.

Of course, according to the requirements of the revised Social Charter, individual Member States should include the 60 per cent of average net earnings figure as part of their reports to the Council of Ministers. The UK government as not, as yet, supplied its 2001/2002 report to the Council but the Unit will examine it once it is available.

The future

The Unit is also working with European NGO partners to produce a ‘league table’ of EU minimum wages in order to determine what each Member States’ national minimum wage is as proportion of its average wage. We hope to publish our findings early in 2003.

However, it is with regret that considering the Committee of Experts decisions in relation to the Decency Threshold, and the ratification of these alterations by the Member States, that the Unit must reluctantly abandon the use of the Decency Threshold figure as a campaigning and research tool.