Germany will approve a national minimum wage for the first time in a vote due to be held today (Thursday). This will take the number of EU member states with a minimum wage statute to 22. It is believed that the German minimum will be set at €8.5 per hour which is above the comparable rates in both the UK and US.
In common with the UK and the USA, the idea of a minimum wage has proved controversial. Proponents claim that a legally enforceable minimum is an essential element in society to protect the interests of the most vulnerable, least paid, workers; opponents claim that market forces should determine pay rates and that establishing (or raising) a minimum earnings threshold will cost jobs, perhaps by driving production to low cost economies abroad. Given that many nations now have a minimum wage and their employment rates did not crash, it would seem this argument has been lost – but that will not stop it from recurring. In contrast, reckless and financially dubious investment vehicles did lead to a major reduction in global employment levels from which we are still to fully recover.
Chancellor Merkel’s Christian Democrat Party has agreed to the minimum wage legislation as a condition of its coalition with the Social Democratic Party. Nevertheless, there was a watering down of the accord such as granting employers a two-year period to phase in the change; exclusion of minors, interns trainees or (curiously) the long-term unemployed from the minimum wage for the first six months of their employment.
The legislation would need to be approved by the Bundesrat before becoming law and would take effect from next January. The minimum wage would be subject to an annual review from January 2018 onwards.