GERMANY ON ITS WAY TO A MINIMUM WAGE RATE

Minimum wage statistics, as published by Eurostat, refer to monthly national minimum wages. The national minimum wage usually applies to all employees, or at least to a large majority of employees in the country under consideration. Minimum wages are gross amounts, that is, before the deduction of income tax and social security contributions; these deductions vary from country to country. The national minimum wage is enforced by law, often after consultation with social partners, or directly by national intersectoral agreement.

As you can see on the map there are considerable differences in minimum wages between European countries. The highest established minimum wages you find in Luxemburg, France, Belgium and the Netherlands, all neighboring countries of Germany.The lowest minimum wages are in Eastern European countries where costs of living also are lower. In between those two groups are Spain, Portugal and Greece. Remarkable is the fact that Italy, Swiss and the Scandinavian countries with strong unions do not have such a minimum wage arrangement.

It looks that after years the Germans wil get their national minimumwage. The establishment of this minimumwage results from what is called in German “Die grosse Koalition”, the grand coalition. It refers to the coalition between the two big German parties the Christian democratic CDU/CSU and the social-democratic SPD. It was the SPD that supported the proposal of the German trade union confederation, the mighty DGB, to establish a minimum wage rate for all workers in Germany. Such a minimum wage rate should make an end to what is called 'wage dumping', which would lead to modern slavery. May be the word slavery is somewhat exaggerated but it is a fact that in the modern developed German economy people need to work 60 of more hours for having a decent standard of living.

Although the CDU/CSU from Gemany's prime minister Angela Merkel won the elections without any problem, it was not enough to govern alone. Because their preferred political partner, the liberal party FDP, lost the elections Angela Merkel had to look for another coalition partner. Based on only the election figures, it was possible to create a left wing coalition existing of the social democratic SPD, 'die Grünen' (the Greens) and 'die Linke' (the Left ) with a majority in the German Parliament. However, this was only theory. The political divisions between these parties are to big to make a stable political coalition for the next years. That is why the Christian Democrats and Social Democrats were sentenced to one another.

Because of the lack of a minimum wage rate, Germany has become a so called 'low-wage country' in Europe. Dutch and Danish companies are relocating to Germany, where, in particular Polish workers and Eastern Europeans do the heavy and dirty work in abattoirs, metalworking and cleaning companies. People work for 2 to 5 euros per hour while just on the other side of the border wages of 10 to 20 euros per hour are paid.

The lack of a fair minimum wage rate in Germany leads to a lack of fair European competition. Germany competes with other European economies by lower wages. German workers and especially the migrant workers, who are coming from all corners of the world, have to pay the price for a competive German economy by making long working days and weeks and having a lower standard of living.

The level of the minimum wage rate that is buzzing around in and outside Germany is an hourly wage rate of 8,50 Euro. Of course everybody who matters is discussing the question if this is good or bad for Germany. As an export directed economy Germany has succeeded the last years to keep production costs low, compared to other European countries with the result that German products are the best priced quality products on the European and international market. Compete with Germany does not only mean to produce high quality products but also low priced.

Some economists, some politicians and of course a lot of employers fear that an established minimum wage rate will be bad for Germany's export economy and therefore for the whole German economy. Less export means less employment, so at the end the unemployed will pay for the employment of the others. However, others believe that a guaranteed minimum wage rate will give an economic boost to Germany's internal market. Germans are by nature cautious consumers. Because of the financial and economic crisis the Germans are even more cautious by saving more than to spend.

The last months Germany is even critized by the US and the European Commission for not consuming enough. The Commission recently announced to start an investigation of Germany's internal market. The lack of demand of the internal German market would limit the exports for other European countries like for example Italy, Greece and Spain that are in desperate need for a growing export economy. It is seen as not fair that the Germans create wealth, without sharing it with other European economies. It is said that the minimum wage rate could be the correct pulse for the internal market that on its turn would help the other European economies to restore.