Luxembourg raises the minimum wage to 2,200 euros per month despite the rejection of employers | Economy

Passersby in the Luxembourg capital, last year.
Passersby in the Luxembourg capital, last year.© Delmi Alvarez

After the legion of bankers, consultants, auditors and lawyers that flood their offices, there is a Luxembourg that takes accounts at the end of the month. And the authorities of the Grand Duchy, an example of a rich country, traditional dominator of European statistics of per capita income – close to 100,000 euros per inhabitant – seem not to want to leave them behind. Parliament on Wednesday gave its unanimous approval to raise the minimum wage by 2.8% as of January 1. That will mean that no full-time worker will earn less than 2,201.93 euros gross per month, 2,642 euros in the case of skilled jobs, an increase of 60 and 72 euros respectively.

The measure will benefit more than 60,000 workers, 14.6% of all wage earners excluding civil servants, especially catering, commercial and industrial employees, but it has not satisfied everyone. The invoice for the companies is estimated at 54.3 million euros. And the employers’ associations and chambers of commerce have raised their voices in the face of what they consider a coup in the midst of a pandemic, with bars and restaurants closed and a curfew in effect until January 15. To compensate them, the Executive has promised to pay the firms most affected by the health crisis – tourism, leisure and catering – an aid of 500 euros per month in the first half of 2021 for each worker with minimum wage, but employers insist on asking the abolition of the wage increase.

“The poorest and the weakest are also the most vulnerable during a crisis,” said the Minister of Family and Integration, Corinne Cahen, during the parliamentary process. “We must not forget that if those who earn a little less have a little more money to spend, that will also imply a little more money in the small merchants’ box,” he argued to appease criticism from businessmen.

The movement of the Liberal Government Xavier Bettel, who shares a political group in the European Parliament with Citizens, does not cause great surprise if the precedents are observed. The minimum wage in Luxembourg is the highest in the European Union, and has risen ten times in a decade, during which time it has appreciated 444 euros, 533 euros in the case of skilled workers.

The figure may seem excessive if you look at the levels to the East or South of the continent. It is almost double the Spanish minimum wage – of 950 euros, but with 14 payments – and multiplies by seven that of Bulgaria –312 euros – although to get a more real idea about its impact on purchasing power you have to look at the statistics adjusted to prices, much higher in the Grand Duchy. There, Luxembourg continues to lead the EU, although less loosely, followed by Germany, the Netherlands, Belgium, France, Ireland and Spain.

In the second smallest country in the EU both in terms of population – 626,000 inhabitants – and in area – similar to the province of Álava – the average gross annual salary exceeded 65,800 euros in 2018 – half of the payrolls exceeded 49,548 euros. But this well-being, also favored by an advantageous tax regime for companies, does not penetrate all layers of the population. And the Government seeks to correct the enormous inequalities it harbors, for which it has also approved measures such as free public transport.

“The number one problem is accommodation. Renting a flat is almost impossible with the minimum wage, ”says Mohamed Esch, a Spaniard of Moroccan origin living in Luxembourg, who earns the minimum wage working as a taxi driver behind the wheel of a vehicle that is not his. Esch pays 1,530 euros for his apartment, including water and electricity, an expense that he could not afford alone, without the social benefits received by his unemployed wife.

“It is very difficult to live decently with the minimum wage, because by dedicating half to accommodation expenses, everything becomes complicated for the unforeseen minor,” agrees David Wagner, deputy for La Izquierda. The high percentage of the salary swallowed up by housing has caused it to be common for many workers, the so-called cross-border, to choose to settle in Germany, France or Belgium to save, which every day generates infernal traffic jams to enter the capital. In fact, only 33,600 of the 60,500 people who earn the minimum wage live in Luxembourg. For business organizations, the blame is on the runaway real estate prices, and it is naive to think that raising the minimum wage will solve the market mismatch.

The new mattress approved by the Executive will be launched despite the complaints, and will inflate 708 gross euros into the domestic economy of those who earn the minimum wage, and 864 to those who are in that band but perform skilled jobs. The change may have secondary effects of height: the poverty line in Luxembourg stands at 1,804 euros per month, and it is estimated that 17.5% of the population is at risk of falling into it, above the average for the EU, with young people, foreigners, unemployed and single-parent families as the most vulnerable, so that the increases in the minimum wage sponsored by the Government can ward off the ghosts in many homes.