Germany’s plans for a national minimum wage took a major step forward Wednesday with the formal adoption of draft legislation by the government.
The German cabinet approved the plan to establish a fixed national minimum wage of 8.50 euros ($11.70) to be phased in from 2015 and fully in place from 2017.
“The minimum wage is coming. It’s been approved by the cabinet. It will create greater pay justice and will be good for social cohesion as a whole in Germany,” said Labour Minister Andrea Nahles, who drew up the draft legislation.
A fixed minimum wage was one of the toughest nuts to crack in the long and intense coalition negotiations between conservative Chancellor Angela Merkel and the centre-left Social Democrats (SPD).
During her first two terms, Merkel’s conservatives had always favoured separate pay deals by industrial sector and region, arguing that a national minimum wage would harm many small- and medium-sized businesses and could force them to lay off workers.
But the SPD was adamant: it would only enter into a power-sharing deal if the conservatives agreed to the introduction of a fixed minimum wage to help Germany’s growing army of working poor.
The measure must now go before the lower house of parliament, or Bundestag, where the left-right “grand coalition” has an overwhelming majority.
The labour ministry has yet to determine whether the measure would require approval from the upper house, or Bundesrat, as well.
But in both cases, it is expected to go through with no hiccups.
– Voters in favour –
The minimum wage will come into effect on January 1, 2015, but there will be a period of transition for those sectors where existing wage agreements are still valid.
Nevertheless, from 2017, it will apply to everyone, except under-18 year olds, apprentices and the long-term jobless during the first six months after finding new employment.
The idea appears to have voters’ backing — in polls in the run-up to the September election, more than 80 percent were in favour.
And a more recent survey found that 56 percent of voters believed the measure would actually strengthen the German economy, while 40 percent thought the contrary.
Given the scepticism of Merkel and her conservatives, employers, for one, are hoping to limit what they see as the nefarious effects of the measure on the economy.
They have been lobbying for a whole range of exceptions, not least in the formerly communist east of the country where, even 25 years after the fall of the Berlin Wall, wages are still below those in the west.
In the end however, Nahles, a Social Democrat, turned a deaf ear to most of the demands when she drew up the draft legislation that has now been approved by cabinet.
She opted for a wide application of the mechanism.
– No catastrophe for economy –
The DIW economic think-tank estimates that on January 1, 2015 when the minimum wage comes into effect, around 4.5 million people in Germany will stand to benefit.
Previously, opponents of the move had competed against each other to paint ever bleaker doomsday scenarios, warning that hundreds of thousands of jobs could be destroyed.
But even the head of the BDA employers’ federation, Ingo Kramer, said in an interview Tuesday that “the minimum wage is in no way a catastrophe” for the economy.
Many companies are already paying the level of the minimum wage, he argued.
It is primarily the interference of politicians in wage negotiations that is the source of the discontent, Kramer said.
Unions agreed, even if they have long supported the idea of a minimum wage.
The powerful metalworkers’ union IG Metall “has never said ‘let the state do it’. We’re convinced that the social partners should negotiate pay,” its chief Detlef Wetzel said in a recent interview with the weekly Die Zeit.
The minimum wage is “an emergency solution for sectors where the social partners are weak, nothing more. That’s why we’ve proposed a solution that keeps the state at arms’ length,” he said.
“And other unions are convinced by it, too.”