Merkel cabinet agrees on €8.50 minimum wage

Die Linke chair Katje Kipping. Dresden, 2010. [Die Linke/Flickr]

Almost all EU member states already have a legal minimum wage covering all sectors. After a decision in Merkel’s cabinet on Wednesday (2 April), the German government plans to join them, introducing an € 8.50 national wage floor. EURACTIV Germany reports.

“The minimum wage is the most complex, momentous law that we have signed off on for decades in Germany”, said German Labour Minister Andrea Nahles, after the draft law she tabled last week was agreed in the federal cabinet on Wednesday (2 April).

Starting on 1 January 2015, Germany will introduce a general minimum gross salary of €8.50 per hour. After Wednesday’s decision, everyone employed in Germany will have the right to demand this level of pay from their employer when the law comes into effect.

“The minimum wage is good news for people who work hard but cannot live off of it. All workers in all sectors will benefit from the minimum wage, in the east and in the west,” said Nahles, praising the measure.  Roughly 3.7 million people are expected to benefit from the law coming into effect in 2015.

The wage floor will be readjusted yearly, starting in 2018. A minimum wage committee consisting of employer and employee representatives will decide on the adjustments made. Researchers will advise the committee. The German government can make the adjustment binding by regulation for all employers and workers.

Almost all EU member states – 21 of the 28 – have a legal minimum wage covering all sectors. The exceptions – besides Germany for the time being – are Denmark, Finland, Italy, Austria, Sweden and Cyprus.

Exceptions will be the rule

But the minimum wage does not apply to long-term unemployed persons during the first six months that they are back on the job. Employees under the age of 18, who have not concluded vocational training and those employed through an internship are also not covered by the new wage requirements; neither does it apply to remuneration for trainees and voluntary workers.

Criticism from the opposition mostly concerns these exceptions. Already last week, the leader of Germany’s Left Party (Die Linke) Bernd Riexinger announced that his party would raise legal charges against any form of age restriction.

Read>>: Die Linke attacks minimum wage age limit

Following Wednesday’s cabinet decision, Die Linke chair Katja Kipping told “Mitteldeutsche Zeitung”: “In the Nahles minimum wage, the exception becomes the rule. This exception violates the principle of non-discrimination.” That does not comply with the German Basic Law, she said.

“At the very latest when those who are affected press charges, the unemployment discrimination will wobble just as the discrimination of young people. The German government would be well-advised not to wait on the ordinal gong from Karlsruhe”, Kipping said, referring to the German Constitutional Court.

But the German government claims the 18-year age restriction is necessary to avoid any disincentives for young people when choosing to complete vocational training before employment.

The exception for long-term unemployed persons is meant to “take into account the particular integration difficulties for people in this category”. An assessment is expected to be carried out by 1 January 2017 to determine whether this exception has led to better employment chances for long-term unemployed persons.

Long-term unemployed become “sacrificial pawns”

“The minimum wage is coming, that is the good news”, said Brigitte Pothmer, Green Party spokesperson for labour market policy.

 “The bad news is: it does not come for all but rather as a two-class system because Minister Nahles’ draft law presents clear deficiencies. There are significant gaps that threaten comprehensive protection for workers against wage dumping,” Pothmer said.

Exceptions for long-term unemployed persons from the minimum wage are an example of this, said the labour market spokesperson. “They are the sacrificial pawns in the minimum wage quarrel between the SPD (social democrats) and the CDU (Christian democrats). Long-term unemployed individuals can currently earn support through wage subsidies if their performance ability is limited. Instead of developing this proven model, over one million affected persons across the board will be stigmatised.”

“Starvation wages”

The services union ver.di was also very critical of the planned exceptions for young workers, and the long-term unemployed.

“It is wrong to fix placement obstacles for long-term unemployed person(s) to the wage level. Instead, when employment starts at a low wage, after six months, the obstacle will be even higher, at a jump to €8.50”, said ver.di chairman Frank Bsirske in Berlin on Wednesday (2 April).

Furthermore, the assumption that “starvation wages” put long-term unemployed persons to work has been clearly disproved, he said, despite a drastic expansion of the low-pay sector.

The exception for younger workers is also inappropriate, according to Bsirske. “Despite sector-specific minimum wage measures and rising rates of pay for unskilled employment,” the ver.di chairman explained, “there is no practical evidence so far that suggests young people decide against an apprenticeship to earn more money in the short-term”.

While Germany's grand coalition finally produced a draft agreement over introducing minimum wage, other EU member states have been calling for an EU-wide wage floor. French socialists, for example, believe Europe should be more uniform on labour policy and see the German measure as a step in the right direction.

>> Read: Minimum wage issue resurfaces in Paris election debate

The European labour market is confronted with a paradox: while there is record unemployment in many EU member states, millions of jobs remain unfilled in many sectors that are key to economic development.

Despite all efforts to bring down unemployment and match skills in the domestic labour force, Europe-based international companies and SMEs face huge problems hiring the people they need.

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