Low wages and unemployment in Europe, 2010

by OID

1 January 2013

Low wages and unemployment in Europe, 2010.

Eurostat has just released information about low-wage earners in Europe, 2010. The main finding was that one out of six employees in the EU area got a low-wage. We are examining this new data in threefold steps: 1) low-wage thresholds for each Euro’s country in 2010, 2) low-wage earners by sex, and 3) relationship between the low-wage threshold and unemployment.

1) In figure 1 can be seen that low-wage threshold is not homogenous for all Euro area. Bulgaria had the lowest wage, 1 euro per hour; whereas, Denmark got the highest, 16.6. In addition to this, in the figure 1, all the countries were split in 4 equal parts according to the their level of low-wage. Red points represented low wages from 1 Euro to 2.65, in this category were Turkey, Slovakia, Romania, Poland, Lithuania, Latvia, Hungary, and Bulgary. At the top of low-wages thresholds were countries such as Switzerland, Norway, Luxemburg, Ireland, Finland, Denmark, and Belgium.

Figure 1. Low-wage threshold, in Euros per hour.

2) In figure 2 is shown the proportiion of low-wages earners by sex. Red-dots for females and green ones for males. It is easy to appreciate that there is large differences between men and women. In half out of total countries, the proportion of employed women that earn a minimum wage is 21.2, where for men is 14 percent. In some particular cases this is even more dramatic like in Austria where 8.2 percent of the employees composed by men earn a minimum wage, but the number is 24.5 if it is a female.

Figure 2. Proportion of low-wage earners by sex, Europe 2010

3) Lastly, low-wage thresholds do not lead to low unemployment as it is can be seen in figure 3. There are countries with high low wages and low unemployment such as Norway and Denmark. Conversely, there are cases with low wages and high unemployment such as Bulgaria, Poland, Estonia, and Spain. Then, the relatioship between wages and unemployment looks like a hyperbola, where in bringing down unemployment rate, the rise of minimum wages is necessary.

Figure 3. Low-wage threshold and Unemployment in Europe, 2010.