A victory for the left as Germany adopts minimum wage

On July 3, Germany moved towards introducing a legally binding national minimum wage set at €8.5 an hour.

The German minimum wage will benefit more than five million workers and will be phased in between January 1 2015 and 2017

On July 3, Germany moved towards introducing a legally binding national minimum wage set at 8.5 an hour.

The move, following a vote of 535 out of 601 in the Bundestag’s lower house of parliament, was hailed as a victory by unions and Social Democrats in Angela Merkel’s coalition government.

With shades of the opposition mounted by Conservative politicians in the UK prior to Labour introducing the National Minimum Wage, the president of the Bundesbank, Jens Weidmann, warned that the German minimum wage threatened employment for low skilled workers, stating that it polluted “employment dynamics”.

Angela Merkel had also long opposed the minimum wage, warning that small and medium sized enterprises would have to lay off workers. She said she favoured voluntary deals based on industrial sectors and regions.

Other groups opposed to the minimum wage said it would destroy jobs, especially in the former East Germany where wages are lower.

The right-wing Welt newspaper said the government was sinking the market economy and that unions were already “eyeing a 10-euro hourly wage”.

But after tough bargaining on forming a ‘grand coalition’ with the Social Democrats, who had promised steps to narrow a growing pay gap in Germany’s 42 million strong labour market, Merkel eventually gave in.

The base pay of 8.50 an hour will eventually benefit more than five million workers and will be phased in between January 1 2015 and 2017.

“What we’re deciding today is of outstanding significance for millions of this country’s employees, who finally will receive a fair wage,” said Labour minister Andrea Nahles.

Introducing a universal minimum wage brings Europe’s biggest economy in line with 21 of the EU’s 28 member states.

The Confederation of German Trade Unions (DGB) also welcomed the move after a long struggle:

“The minimum wage won’t be a job killer,” said the DGB’s new head Reiner Hoffmann. “This has been confirmed by serious studies and the experience of our European neighbours and the United States.”

The exemptions agreed by the social democrats are for those aged under 18-year-old, and are designed to ensure that young people take on training or an apprenticeship rather than a better paid job.

Another exception is for people who re-enter the employment market after 12 months or more out of work, and the introduction of the minimum wage will also be phased in more slowly for ‘newspaper delivery workers’ and seasonal fruit pickers, to help keep those sectors viable.

However the EU’s employment commissioner, Laszlo Andor, criticised the exceptions, saying that the minimum pay must apply to all “so that people do not fall into poverty despite having work”.

Spiegel Online also said:

“Horror scenarios have been used to illustrate how many jobs will be lost. As if 8.50 Euros were an exorbitantly high hourly wage. We’re talking about a monthly income of just 1,400 Euros.”

The starting level, set to be reviewed every two years, is in line with those in other major developed economies: slightly less than France’s 9.53 Euros, but above Britain’s £6.31 (7.91 Euros).

6 Responses to “A victory for the left as Germany adopts minimum wage”

  1. Leon Wolfeson

    There’s now a dynamic where it benefits the right to have a pool of long-term unemployed to hire, though. Not good.

  2. robertcp

    It is encouraging that progressive legislation can result from a coalition with a centre-right party.

  3. PoundInYourPocket

    Doesn’t it always benefit the right to have a pool of long-term unemployed. How does the introduction of the min wage affect this ? Is it the exemption for “people who re-enter the employment market after 12 months or more out of work” that you think will cause the problem ? That does seem an eccentric clause to have found its way into the legislation.

  4. Leon Wolfeson

    It gives them a pool of cheaper workers, which is far more than the standard incentive….I mean the right in general, not just the fat cats.

  5. swatnan

    Haven’t they heard of the Living Wage yet? Do please keep up Allemande.
    Did you know that the German Energy Market comprises of around 50% of Cooperative Enterprises, ie Community generated Energy, windfarms etc, We could learn from them.

  6. Leon Wolfeson

    What, that our energy prices are *far, far* too low?

    Most sector-set minimum wages in Germany are a living wage, incidentally.

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