European Minimum Wage Directive and Strengthening Collective Bargaining Coverage

This figure is not binding in its implementa-tion. However, EU Member States not reaching the target are obliged to submit a National Action Plan. This plan needs to contain measures aimed at strengthening collective bargaining coverage. It remains legally contested whether the adoption of such measures constitutes a binding obligation. The Directive accords primacy to sectoral or cross-sectoral wage negotiations. A target of 80 per cent is arbitrary and cannot be convincingly justified on either empirical or theoretical grounds. Equally, no sufficient empirical evidence can be found to support the prioritisation of sectoral or cross-sectoral collective bargaining systems. The EU Minimum Wage Directive pursues exclusively distributional policy objectives. Allocative policy objectives, such as the promotion of employment, are mentioned only in passing in the Directive. In doing so, the Directive follows the narrative that only collective agreements guarantee fair and adequate wage-setting, without addressing the possible negative externalities of higher collective bargaining coverage. Such effects may include higher unemployment or higher prices.