1. Unlivable Wages? An analysis of minimum wages in Eastern and Western Europe from a Living Wage Perspective Brian Fabo Central European University, Budapest Centre for European Policy Studies, Brussels Sharon S. Belli Central European University, Budapest

2. Labor Market Effects of MW (possible) Job loss/wage increase for those who stay employed Two ways of looking at it:

3. Not just minimum wages all wages are low! Point made by Pogatsa in Visegrad review – even the middle class in CEE suffers from low wages We do not argue that MWs in CEE are unfair, but rather unlivable.

4. Why do we care about living Wage? The Universal Declaration of Human Rights “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.” Guarantee even the worst – off a dignified life in exchange of their work

5. Moral Justification : Justice as fairness (John Rawls) Each human being has the same claim to equal basic liberties, which are compatible with liberties for all Social and economic inequalities have to satisfy the conditions of fair opportunity and difference principle. Difference Principle –social institutions are arranged to reduce inequalities of wealth and income work to the advantages to the worst- off –financial inequalities are justified just if the outcome is the advantage of the worst – off.

6. What is living wage ? Definition: Living as aimed to reflect the local cost of living and the real cost of life, designed to re-balance the moral economy, setting an ethical minimum that reflects and supports the real costs of living (Wills and Linneker, 2013) Living wage and minimum wage have been comparable until minimum wages start to lose buying power over time and falling under the rational definition of poverty (Schenk, 2011)

7. Economic Justification Why workers should earn a living wage adequate to the standard of their community? ( Stabile, 2009) –Sustainability –Capability of the labour force –Externality of not ensuring sustainability and capability (Stabile, 2009) –Living wage intervening in the pre- distribution of wealth reduce the power and engagement of trade unions or wage- setting mechanism established by many governments. (Will and Linneker, 2013)

8. Long – Running Movements and Settlement Living Wage Foundation (UK) Harvard Living Wage Campaign (US) Asia Floor Wage (Asia) Complexity of the settlement of a living wage Form of payment ( by hour, by week, by month) Implementation and Enforcement Need for strong battle

9. Minimum wages Comparison 2 clusters – about € 500 in CEE, € 1500 in the West. Clear relation with GDP, CEE minimum wages more generous in relation to average wage than in the West

10. Subsistence minimum comparison Set by government typically according to the cost of a basked of goods needed to maintain basic living standard Less clustered but basic dynamic the same

11. However, the governments themselves set a different LW for foreigners Case of Slovakia, a foreigner needs according to the law per day: – € 30 For Accommodation – € 4 For Breakfast – € 7.5 For Lunch – € 7.5 For Dinner – € 7 Spending Money. Altogether € 1680 per month. SM = € 200, MW = € 405 Government claims a Slovak citizen can sustain herself for 8 times less money compared to a foreigner!!!

12. Indeed, such dual SMs are common across CEE

13. WageIndicator International Living Wage Calculated based on an online survey of cost in line with Anker (2005) Consisting of: –Food 2100 calories per day, local consumption patterns used –Housing – 1 room apartment outside of the city centre –Transport – A monthly pass to get around in the city or to the nearest city if respondent lives in the countryside –10 % additional expenses Calculated as a range 25 th percentile - median

14. National rates vs. WI rate WI Living Wage as a % Subsistence minimum WI Living Wage as a % of minimum Wage Belgium140-18060-70 Bulgaria220-250150-180 Czechia570-690120-150 France80-11050-70 Greece110-13070-80 Hungary140-180110-140 Netherlands70-9050-60 Poland390-460110-120 Portugal100-14080-100 Romania460-620100-130 Slovakia230-270110-130 Spain90-110 United Kingdom80-10050-60

15. Implications In Visegrad countries, subsistence minimum is not sufficient to ensure dignified standard of life Even Minimum Wages in V4 are 10-50 % below living wage. Including taxation in the equation, MWs are likely to decrease further. –e.g. Hungary taxes low incomes heavily Substantially, our results give us reason to believe that increase of MWs in the region is desirable. Because MW < LW, additional money will certainly go into local consumption, increasing effective demand.

16. THANK YOU!