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Germans to get ‘amputated’ minimum wage

8144409_sThe German parliament this week approved the country’s first minimum wage but unions and critics on the Left are not much impressed. The wage – backed by a vote in the Bundestag on Thursday – will be set at €8.50 (£6.80) per hour, which is higher than the equivalent in the US and UK.

Angela Merkel’s Christian Democrats approved the new policy as part of a power-sharing deal with the Social Democratic Party (SPD). Germany has previously left it to trade unions and business groups to fix minimum pay instead. The country is currently one of seven in the 28-nation EU without a minimum wage level.

The minimum wage has been the subject of much controversy in Germany, despite the fact that the country has the highest inequality of wealth in the currency bloc with, on average, a board member in one of Germany’s top 30 DAX-listed companies earning 3.2 million euros a year.

Many have been angered over a watering down of the original proposals, including a two-year grace period for some employers to phase in the policy. Additionally, the wage does not cover minors, interns, trainees or long-term unemployed people for their first six months at work.

Reactions on the Left

The Greens and Left Party voiced the most criticism over the exception for people under 18 years-of-age and long-term unemployed people during the first six months after re-employment.

Labour market expert Klaus Ernst from the Left Party said his party has fought for years to implement a wage floor in Germany. “But why do they make the minimum wage as abysmal as it is in this law?” he asked.

It is not right that a 17-year-old cashier must work for five or six euros per hour while an older colleague receives €8.50, he said.

Green politician Brigitte Pothmer agrees with Ernst, arguing that the coalition is unnecessarily lumping together productive and weak long-term unemployed. With the exception from the minimum wage, Pothmer said, this group of people has been “sacrificed on the altar” to keep the peace within the coalition.

Union dismay

No-one wage recipient should be left worse off due to age, gender, social origin or societal situation, the DGB union has argued.

With the high number of exemptions, the coalition has brutally amputated the minimum wage,” said the head of the powerful Verdi labor union, Frank Bsirske.

A big part of Germany’s apparent economic miracle has been down to cuts in wages driven through under the ‘flexible’ labour reforms of the social democratic Government of Gerhard Schroder in the early noughties. This kicked off a disastrous process of beggar-thy-neighbour deflationary wages cuts across Eurozone that continues to today.

German unions – encouraged by their counterparts in southern Europe – have been trying to reverse this, arguing that the workers across Europe, from north to south, need substantial pay rises to drag their economies back onto a path of sustainable growth.

Corporate lobbying

Corporate lobbyists in the region’s great power have been warning that a minimum wage would result in fewer jobs, or force companies to move production facilities to other countries, where labour is cheaper.  They have also claimed that the policy would make Germany less competitive.

Such claims about the damage to the German economy should be taken with the same seriousness as the claims by fat cat bosses in Britain ahead of the introduction of a minimum wage in 1999 – it turned out that the opposite happened.

Regardless of the outcome of Thursday’s vote, the policy will still need to be passed by Germany’s upper house, the Bundesrat.

This article first appeared at Revolting Europe

Image Copyright: reddz / 123RF Stock Photo

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