Advertisement

Working in Austria For Members

ANALYSIS: Is it time Austria introduced a minimum wage?

Stefan Haderer
Stefan Haderer - [email protected]
ANALYSIS: Is it time Austria introduced a minimum wage?
Moving back to the UK won't get you out of doing one last Austrian tax return. Photo: Pixabay.

Austrian salaries have historically been set by "collective agreements" between workers and employers in each sector. Does the country need a minimum wage and what would happen if Austria did introduce one?

Advertisement

The still high inflation rates and the critical competition for the presidency in Austria’s Social Democratic Party (SPÖ) have fuelled a fresh debate on introducing a national minimum wage in Austria.

But how likely is Austria’s traditional system of collective agreements to be challenged and replaced by a minimum wage (as it already exists in 22 EU member states)? The Local talked to Martin Müller, an expert at the Austrian Trade Union Federation (ÖGB), to understand more about the minimum wage debate in Austria.

Why is there no minimum wage in Austria?

Since 1947, Austrian salaries have been determined and based on so-called collective agreements (“Kollektivverträge”), inter-company agreements between bodies representing workers and employers, respectively. 

About 98 percent of all employees in the country are covered by this system which only exists in a few other European countries (such as Italy and Switzerland). While the Chamber of Labour (AK) represent workers and employees, the employers are represented by the Austrian Economic Chamber (WKÖ). 

READ ALSO: REVEALED: What are the best paying jobs in Austria?

Besides that, doctors and lawyers in Austria have their own chambers that can conclude collective agreements. 

Both employers and employees cannot choose whether or not they'll be a member of these chambers as there is automatic membership and a levy (“Kammerumlage”) to finance the interest groups.

Advertisement

With salaries being negotiated directly between workers and employers in each sector, Austria has never had a federal and universal minimum wage.

Germany’s labour market situation 'historically totally different' 

Despite being in force for several decades, two incidents have sparked fresh debate over replacing collective agreements with a national minimum wage in Austria: First, in 2015, the CDU-SPD coalition in Germany introduced an hourly minimum wage of €8.50, which as of 1st October 2022 was increased to €12 per hour

Second, Burgenland’s governor Hans Peter Doskozil – one of the three competitors in the ongoing race for the SPÖ presidency in Austria – has openly questioned the system of collective agreements and demands a national minimum wage of €2,000 for all full-time jobs. In contrast, Pamela Rendi-Wagner, leader of the Social Democratic Party, opposes a federal minimum wage. She considers it “a risk for the employees because they (minimum wages) can be dropped at any time by simple majority votes.” 

READ ALSO: How sick leave pay in Austria compares to other countries in Europe

Rendi-Wagner refuted a recent statement by Austria’s Minister of Labour Martin Kocher (ÖVP), according to whom collective agreements are a “stumbling block” in the fight against unemployment and for older employees in particular. 

Advertisement

Could collective agreements be soon replaced in Austria? 

"The situation in Germany is historically totally different from Austria,” Martin Müller, head of the Department for Legal and Collective Agreement Policies at the ÖGB told The Local. 

Martin Müller, an expert at the Austrian Trade Union Federation (ÖGB)((c)Elisabeth Mandl)

“Until the reunification, Germany’s tariff agreement system, similar to Austria’s collective agreements, was working fairly well," he said.

"However, as the so-called new states became part of the federal republic, wages sometimes dropped to less than €3 per hour. German trade unions weren’t able to prevent that downward trend and therefore supported a national minimum wage.”

READ ALSO: Six things you need to know about salaries in Austria

Since the Corona crisis, Austria has been suffering from a massive labour shortage, especially in the hospitality and healthcare sectors. At a recent press conference, Labour Minister Martin Kocher (ÖVP) and WKÖ President Harald Mahrer stated that to maintain prosperity in Austria, the country will need more than 10,000 skilled workers from third countries. 

However, ÖGB's Müller doesn’t believe a national minimum wage could be a pull factor. “When employers complain about the labour shortage, they should think of how to make working conditions more attractive. Nobody prevents a company from paying salaries above the rates determined by collective agreements," he said.

Advertisement

Müller added that a national minimum wage also wouldn't be a solution for reducing the number of working poor. Instead, he blames other negative factors such as “false self-employment” and “involuntary part-time employment” due to lower demand for full-time jobs in specific industries or different life circumstances.

When asked why there’s still a problem with attracting a highly skilled labour force to Austria, Müller stresses that language barriers and the lack of top universities and educational facilities could be a reason. “A minimum wage of €12 an hour isn’t going to attract an aerospace engineer,” he added.

Austria's Trade Union building with a sign that says 'prices down!'. (Photo: Stefan Haderer)

Could minimum wages close the gender pay gap?

Austria still has a significant gender pay gap. With women earning almost 12.7 percent less than men (as of December 2022), the rate is much higher than in some other EU countries like Sweden or Denmark. This means that women need to work 46 days a year without actually getting paid. Moreover, the income gap is much broader in less urbanised areas and provinces such as Vorarlberg due to a shortage of childcare facilities. 

According to a survey by the Austrian “Momentum Institut”, more than 305,000 employees currently work part-time and full-time jobs for a salary far lower than Germany’s minimum wage. Therefore, experts from the institute are convinced that a minimum wage would help employees, especially women in low-paying jobs, break free from their precarious situation.

Advertisement

The ÖGB's Martin Müller agrees that women in the low-income sectors are affected by this problem. “The question is how high a minimum wage can really be,” he said. “The Austrian Trade Union Federation is doing its best to increase lower incomes even in industries with higher average salaries.”

READ ALSO: The ‘easiest’ entry jobs to get in Austria if you don’t speak German

'Control functions will always be needed'

The ÖGB expert doesn’t see any correlation or positive effects of introducing a national minimum wage to fight inflation, which is still surprisingly high in Austria and now also impacts the leisure industry. 

Müller believes that the current system of collective agreements has turned out to be crisis-proof. 

READ ALSO: Austria climbs to ‘fourth most expensive country’ in the eurozone

“Only if we were facing a scenario like in Germany, with weakening trade unions and soaring low-income rates, introducing a minimum wage in Austria would be an option. And even if this were the case,” Müller pointed out, “the control function of trade unions will always be needed when it comes to labour negotiations and contracts.”

Stefan Haderer is the author of the book “Perspektivenwechsel: Beobachtungen im Jahrzehnt des Wandels 2011-2022” (KPD 2023), a compilation of his political analyses published in the Austrian daily “Wiener Zeitung”.

More

Comments

Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.

Please log in to leave a comment.

See Also