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Germany to approve new minimum wage

A man holds a placard during a labour union protest in support of a nationwide minimum wage in front of the Chancellery in Berlin June 30, 2014. The placard reads, "I am not a exception. No wage below 8.50 Euro per hour". REUTERS/Thomas Peter (GERMANY - Tags: CIVIL UNREST BUSINESS EMPLOYMENT POLITICS)

By Annika Breidthardt

Germany’s lower house of parliament is set to approve a controversial nationwide minimum wage on Thursday despite last-minute disputes over whether the Social Democrats’ (SPD) flagship labour market project goes too far or not far enough.

After weeks of negotiations, Chancellor Angela Merkel’s conservatives and their SPD coalition partners agreed last week on the outline of the 8.50 euro-per-hour blanket minimum.

While the reform now looks set to happen – pending approval by parliament – more exemptions will probably be granted from the new rules than previously thought.

That has prompted outrage from labour unions, who say the exceptions – which the SPD terms “transition arrangements” – will hurt the most vulnerable people in the labour market.

“With the high number of exceptions, the coalition has brutally amputated the minimum wage,” said Frank Bsirske, head of the influential Ver.di labour union.

Some sectors will be allowed to delay introducing it for two years to help them adjust, and certain groups – including short-term interns, under-18s, trainees and the long-term unemployed – can be paid less under certain conditions.

The minimum wage has split Germany’ political and business establishment into two opposing camps: those who say it will create a fairer labour market and boost private consumption and those who say it will cost jobs.

GROWING DIVIDE

“The minimum wage was long due,” said Carsten Brzeski, chief economist at ING, citing a growing divide between rich and poor.

“In the short term, the minimum wage will further stimulate the economy, but in the long run it could become a problem for international competitiveness.”

Employer lobbies, backed by conservative groups, have argued against the reform on the grounds that they will be forced by rising labour costs to move production facilities abroad or push up prices.

The minimum wage is a flagship project for the SPD, who made their power-sharing deal with Merkel’s conservatives dependent on a commitment to introduce it from next year. Some 3.7 million people could benefit, according to estimates.

The SPD have already pushed through plans to lower the pension age for some and raise pension entitlements, moves which have also raised eyebrows on the right and in business.

Unlike most European Union countries, Germany has in the past resisted a minimum wage partly because it is seen as political interference in wage bargaining between unions and employers. It has relied instead on collective wage deals by sector and region.

But coverage by such agreements has decreased to 59 per cent of the workforce from more than 70 per cent in 1998, according to the Hans Boeckler Foundation, a think-tank close to the unions, and the low-pay sector has surged in the wake of reforms to loosen up the labour market.

The reform is expected to pass despite several lawmakers from Merkel’s coalition being expected to vote against it.

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