Minimum wages: step back or forward?
Introduction of national minimum wages by new German government has caused controversy
By Aliya Iskenderova
BERLIN – For decades the German wage labour system has been a place with no strings attached for employers as well as for workers. But last week the German Bundestag agreed on the introduction of a national minimum wage of €8.50 per hour by January 2017 that will apply to all sectors of the country’s economy.
Until now, wages were set by collective bargaining agreements between associations. Nevertheless, the topic was always a cause for intensive debates. The previous government introduced schemes, which were almost like minimum wages in some branches of economy, particularly the construction industry.
The new labour law, which extends salary regulations to all of Germany’s labour market, was a condition set by the centre-left Social Democratic Party of Germany (SPD) for creating a “grand coalition” with the conservative Christian Democratic Union (CDU) after last autumn’s federal elections.
The campaign for statutory minimum wage was also supported by the Green Party and Die Linke.
“The idea of national minimum wages belongs to us. We started to promote it ten years ago,” says Andrej Hunko, Member of the German Bundestag from Die Linke party. “It is a shame on the country that people still work for €3 or €4 per hour. Countries like France or Belgium have minimum wages around €10. Germany with its powerful economy could establish a level of remuneration more than €8.50. It is not enough to wipe out poverty but we believe it can be the first step.”
There are some categories of people for whom the law has exceptions. One of them is people who have been unemployed for half year or longer. Their employers are allowed to stay under the statutory minimum, but after six months they still have to increase it to at least €8.50. Another exceptional category is people under 18. “We do not want to encourage young people to get a job which is better paid instead of spending time for professional education because in the long run it does not do any good for anyone. But if they have this education they can get the minimum salary,” explains Katarina Barley, Member of the Bundestag from the SPD party.
Opponents of the reform claim that introducing the measure will increase unemployment. One argument is that less qualified workers such as young people will experience more difficulties finding part-time work.
Rainer Erkens, head of the Alternative für Deutschland’s European election campaign, believes young people won’t be the only ones left outside the labour market. “Students just want to earn some extra money to go abroad on vacations,” he said. “Old people want some extra money to buy a new TV set. Housewives or parents with children have a few hours per day or week when they can throw themselves into work.”
“For many of these people it is much more important to have flexible schedule, an opportunity to work whenever they have time then to have fixed wage, which means a fixed schedule.”
The report carried out in 2008 by University of Bochum (Ruhr-Universität Bochum) professors Thomas K. Bauer, Jochen Kluve, Sandra Schaffner, and Christoph M. Schmidt says that Germany shouldn’t introduce minimum wages, because they are associated with job losses and don’t reduce poverty.
According to Antije Gerstein, managing director of the Bundesvereinigung der Deutschen Arbeitgeberverbänd (BDA), an umbrella organisation of employer’s associations across Germany, says: “the move can harm Germany’s credibility on the European level.”
“The country has been a top performer with regards to last years’ reforms and now Germany is stepping back,” says Gerstein. “But at the same time we ask in particular the crisis states to reform their economic systems.”
According to Dr. Horst Tomann, a professor at the Free University of Berlin (Freie Universität Berlin), the lack of minimum wage has been exploited by many German employers to reduce wages for those seeking work. Because the German government pays workers social assistance if their income is too low, employers reduce market wages and advise their employees to apply for social benefits.
“We had a huge resistance towards minimum wages but finally big parties accepted it as an instrument to combat this wage pressures,” says Tomann. “Because till now ordinary German taxpayers have paid instead of employers.”