According to a report published by the Federation of European Employers (FedEE) the pay gap across Europe is narrowing.

FedEE point to a number of contributory reasons:

• EU members are increasingly developing a more coherent labour market as people are enabled to move and work in different countries more easily.
• Western European countries are struggling to restrain their labour costs in the face of competition from Eastern Europe, India and the Far East.
• Poorer countries are reaping the benefit of inward investment, and governments in countries such as Belarus and Moldova are increasing salary levels to stave off social unrest.
• The decline of trade union power and the grip of collective bargaining is allowing 'ability to pay' factors to take a more central role in wage determination.

The example of Denmark and Belarus present the case for this narrowing gap.

In 2001, hourly pay in Denmark was 88 times greater than in Belarus, but by the start of February this year the gap had narrowed to just 34 times. The reason for this is that during the period 2001-5, hourly pay in Denmark has risen by only 18%, whilst in Belarus it has risen by 207%.

A huge divide, however, remains between established EU countries such as Germany, Italy and the UK and the emergent accession states such as Poland and Hungary.

The Secretary-General of FedEE, Robin Chater commented: "Thirty-three of the 48 countries covered by our report operate legal pay minima, and the list is likely to grow over the next five years – especially if Germany eventually decides to adopt this approach to supplement its ailing collective bargaining system."

He also pointed out that the smaller countries appeared to have generally higher pay levels. "It is certainly an advantage to work in a small country or in an island economy," he said. "This may be due to the dominance of financial services businesses in many states such as Liechtenstein, Luxembourg or the Isle of Man. However, even in the Faroe Isles where the principal industry is fishing, pay levels are relatively high."

The FedEE pay league table for 2005 can be viewed at www.fedee.com