Wednesday

1st Jun 2016

Germany adopts minimum wage

  • Germany will have a minimum wage from 2015 on (Photo: EUobserver)

The German parliament on Thursday (3 July) approved the introduction of a minimum wage of €8.50 per hour from 2015 on, a policy shift that could boost growth elsewhere in Europe.

Of the 601 votes cast, 535 voted in favour of the law, five lawmakers voted against it and 61 abstained.

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About 3.7 million workers are estimated to benefit from higher wages, according to government projections, or about 9 percent of the workforce.

German Chancellor Angela Merkel and her business-friendly Christian Democrats last year had to agree to the minimum wage in order to be able to form a coalition government with the Social-Democrats.

Germany for a long time relied on negotiations between trade unions and employers where minimum wages were negotiated per sector - constructions, agriculture, services and other.

Trade unions criticised the new law for incorporating too many loopholes and exemptions which will de facto still keep some sectors of the economy below the €8.50 per hour, as they have transition periods for another two years.

In addition, short-term interns, trainees, long-term unemployed and people under the age of 18 can be paid less.

"These exemptions hit the most vulnerable in the labor market, of all people. Millions of people will continue to be exposed to the arbitrariness of starvation wages," said the head of the Ver.di trade union, Frank Bsirske.

The bill still has to be approved by the upper house, the Bundesrat, which has backed the minimum wage in the past.

Germany, which is the largest economy in Europe, was one of only seven in the 28-strong EU not to have a minimum wage. Its low wage policy combined with low consumption, combined with strong exports was criticised by the EU commission and the International Monetary Fund for being unhelpful for other countries in the eurozone which are struggling with recession and unemployment.

The adoption of the minimum wage, even with all its caveats, marks a shift in the austerity-driven policy of Angela Merkel which southern countries have long called for.

But business circles in Germany are less happy about the development.

Germany's Ifo economic institute has warned Germany might lose up to 900,000 jobs, many of them part-time, because businesses will no longer be able to afford these workers.

"In the short term, the minimum wage will stimulate the economy, but in the long run it could become a problem for international competitiveness," ING chief economist Carsten Brzeski said.

Finance ministers baulk at tax-avoidance rules

Member states will discuss again in June a proposed directive to outlaw practices used by large companies to avoid paying taxes. Meanwhile, the European Parliament makes progress on its probe of Panama Papers.

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