The launch of the euro appears to create a kind of transparency about relative value around Europe as far as pay is concerned. The trouble is, it isnt quite as revealing as it might seem. Headline pay rates vary partly because they take account of the different social charges levied on employers. These tend to be lower as a proportion of total labour costs in the UK than in most other EU member states. Differences in non-wage labour costs (including social charges such as healthcare and pensions) are wider than in direct wage costs.
The varying cost of living also has to be taken into account. Over time there may be some convergence of price levels around the continent.
The different structure of jobs means that they are rewarded differently; and varying levels of productivity will also lead to varying rewards. Wage rates may look quite good in the UK at the moment by comparison with the rest of Europe, but that may have something to do with the high level of the pound. Again, this apparent transparency could be misleading.
Lionel Fulton, secretary, Labour Research
The introduction of a single currency has wide implications for trade unions in the countries involved, and they have been discussing this for some time. One key issue has been the potential impact on collective bargaining, where there are two main areas of concern the pressure on pay claims and the wide pay differences across a region with the same currency.
The first issue is that there may be growing pressure on national unions to keep pay claims down, and that this will spread from one country to another so-called wage dumping. This has been hotly debated, perhaps because it is of great interest to employees in richer countries.
Unions fear that they will have to moderate their pay claims and have tried to counter this by agreeing common collective bargaining guidelines across Europe. The European TUC has established the aim to encourage an upward convergence of living standards in Europe. There are huge differences in pay in the euro zone. It is certainly true that, with a common currency, comparisons between countries become easier and workers at the bottom may need convincing that the current differences are justified.
Jim Crawley, manager of performance and reward practice, Towers Perrin
I think the euro is going to be one for the long haul, rather than changing the reward map overnight. We have yet to see a flurry of wage claims based on increasing transparency. It is likely that negotiations will still be conducted on national issues.
There are a few specific areas worth mentioning. In banking and financial services there are obvious union concerns about extra workload and compensation for it. Another question is whether retail companies will adapt their pricing policy and thus push prices up. But if anything, inflation looks as though it will continue to head downwards across Europe.
The arrival of the euro is bound to see some upward pressure from the lower paid, and some downward pressure on the higher paid. But national situations will remain very different for some time to come. Our clients are not having to alter their pay structures across Europe yet. Transparency may lead to change, but only over the long term.
