The Council of the European Union has given its final green light to a directive on adequate minimum wages within the EU.1 The directive establishes procedures for statutory minimum wages and aims to enhance effective access to minimum wage protection for those workers who are entitled to a minimum wage under national law. More than anything, the new directive perfectly illustrates how the road to both hell and further EU centralisation is paved with good intentions.

The basis of the new law is to help improve working and living conditions for employees in Europe by guaranteeing certain rights, i.e., “fair wages” that provide for a decent standard of living. At the same time, one of the goals of the directive is to increase the number of workers covered by collective bargaining on wage setting. You might think that in a heavily unionized, socially democratic country like Denmark, union bosses and representatives of the left would be nothing but supportive of the legislation, but they were not the only ones.

Surprisingly, both the Danish political left and right have found rare common ground in the case of EU statutory minimum wages. If implemented fully, the directive could have major, if not fatal, consequences for the existing, and highly well-functioning, informal organization of collective bargaining and agreements of the Danish labour market, the so-called “Danish Model.”

Historically, the Danish Model traces its roots to the “September Compromise” of 1899 which acted as the first basic agreement regulating Danish industrial relations. After a series of unionised worker strikes and employer lockouts during the late 1890s, the Danish Employers' Organization and the Danish Confederation of Trade Unions settled on a consensus compromise, where both the employers and the workers recognized each other as the main negotiators in regards to labour market disputes.

As a consequence of the compromise, collective bargaining was centralised between market actors, and a national system of dispute resolution was introduced, all without state interference. As of now, over a 100 years later, the main principles of the agreement are still valid and act as the basis for negotiating labour market disputes well into the 21st century.

In a turn of events, the new EU law could potentially render the age-old Danish “September Compromise” compromised. While the directive does not directly prescribe a specific minimum wage level that EU member states have to reach, it does indirectly meddle with the degree of labour market organisation within member states since member states with collective bargaining coverage below 80% will have to establish a so-called action plan to promote collective bargaining. The 80% requirement is a demand that almost no EU countries will be able to meet and is a level which Denmark only barely meets, where the coverage stood at 82% in the most recent census from 2020, and may have dropped since.2

As the proposal for the minimum wage was put forward by the EU Commission in 2020, it met already particularly strong opposition from the Danish government and MEPs. All the while, the president of the European Commission, Ursula von der Leyen, has stated that the implementation of the directive “will be done in full respect of national traditions and competences as well as the autonomy of social partners."3

Despite von der Leyen’s promises, Danish leftwing MEPs in particular have been vocal in their distrust of a European minimum wage,4 since neither the European Commissioner for Jobs and Social Rights, Nicolas Smidt, nor von der Leyen have provided any real-world guarantees for a continuation of the Danish labour market model.

The Danish Minister for Employment, Peter Hummelgaard, together with a total of nine countries, is behind a position paper in which they express concern about the proposal for a directive for a minimum wage in the EU. A Danish MEP, Marianne Vind (S&D), proposed to file a lawsuit against the EU if the directive ends up infringing on the autonomy of the Danish labour market.5

What might seem even more bizarre is that the European Commission itself has highlighted the Danish Model as a good example, among other things, because it guarantees the employees the best wages and working conditions. Regardless of how the directive will be implemented in practice, one should question the EU politicization and the centralization of entire policy areas, such as the labor market, where local national actors have historically, for more than 100 years, proven themselves to establish stable and long-standing agreements, without government interference, and solely on market terms.

This article was written by Henrik Mogensen Nielsen. Henrik is a Danish writer studying for a master’s degree in international and global history at Aarhus University. Henrik works at the Center for Political Studies (CEPOS), Denmark's only libertarian think tank. He is currently also undertaking an internship with the European Policy Information Center (Epicenter).

1 European Council of the European Union (n.d.). Adequate minimum wages in the EU.
2 DA (2020). In Denmark, most are covered by collective agreement.
3 European Commission (2022). Commission welcomes political agreement on adequate minimum wages for workers in the EU.
4 The Unit List (2022). EU minimum wage: Why is it really so bad?
5 Fagbladet3f (2022). EU-aftale om mindsteløn er på plads.