New minimum wage regulations cause conflict between European road freight companies

The barriers to trade between the different economies of Europe remain substantial and the market for road freight is no exception. An example is the recent problems Germany and France have encountered attempting to introduce minimum wage legislation.

Both countries have been overhauling their minimum wage levels recently and in both countries it is having an impact on the road freight market. Germany, has applied its first national minimum wage to all truck drivers passing through its territory, including those not off-loading or picking-up loads in the country.

Unsurprisingly this caused annoyance for drivers from neighbouring economies. Trucks were being stopped by German officials in-order to check that the drivers were being paid at least the German minimum wage, even though they were only transiting through the country.

After complaints from Poland, the Czech Republic and other Central European states, Germany modified its policy, announcing three weeks ago that it would not apply the minimum wage to drivers who were not stopping in the country. However apparently it will still apply to trucks on ‘cabotage’ work and drivers employed by German trucking companies operating within Germany.

Last week France followed Germany’s lead and introduced new minimum wage regulations that will also apply to foreign truck drivers operating in the country. At present it appears that such rules will apply both to drivers on domestic routes in France and to those non-French drivers undertaking cabotage there.

In both Germany and France it appears governments have been lobbied by various domestic interest groups to apply higher costs to Central European drivers and trucking companies. In the case of France there has long been resistance to the concept of cabotage. Aggrieved French trade unions and road hauliers associations see minimum wage regulations as a means of suppressing the activity of central European truck drivers in France.

Of course the demand for drivers benefits the economies of Central Europe in particular. Poland may have been protesting loudly at the German proposals but most of the Central European states as well as Romania, Bulgaria and to a lesser extent Lithuania, benefit from the demand for drivers. Many of these work temporarily in France or Germany for French or German trucking companies.

It is not just the drivers that benefit. As much as 80% of services by major road freight providers are sub-contracted to smaller trucking firms based in Central Europe.

The effect is that trucking companies in Western Europe are being squeezed out of business or are having to bring in drivers from Central Europe. This is only increasing the shortage of drivers in Western European economies as their wages are forced lower than they otherwise might-be, particularly on longer-distance routes. The response is to use minimum wage regulations to as a means to reduce the flow of drivers and trucks from Central Europe.