Government sets minimum wages for cleaning industry
On 9 March 2007, the coalition government agreed on the introduction of minimum wage provisions for the cleaning industry, in which around 850,000 people are currently employed. Minimum wages were set by the social partners in the sector at €7.87 per hour for workers in western Germany and at €6.36 for workers in eastern Germany. Both rates were declared as being generally binding by the Federal Ministry of Labour and Social Affairs.
The introduction of industry-specific minimum wages has been widely discussed by the Christian Democratic Party (Christlich Demokratische Union, CDU) and the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD), which together comprise the current federal government. With regard to industrial cleaning, the coalition government approved a draft bill to extend the Posted Workers Act (Arbeitnehmer-Entsendegesetz, AEntG) to the cleaning industry during the summer of 2006 (DE0609049I). Since the act has, until now, only been applied in construction-related industries, these recent developments in the cleaning sector have also been closely watched by the social partners in other sectors.
On 9 March 2007, the German parliament (Bundestag) agreed on the extension of the Posted Workers Act to the cleaning sector (in German), which is set to affect the estimated 850,000 employees who are currently working in Germany’s cleaning industry. Workers in western Germany will receive a minimum wage of €7.87 per hour, while their counterparts in eastern Germany will be paid a minimum of €6.36 per hour. The German parliament’s decision still has to be approved by the parliament’s upper house (Bundesrat) in order for it to become legally binding.
Until now, minimum wages have only existed at sectoral level in the construction, roofing, painting and demolition industries (DE0504101S, 85.5Kb MS Word doc). As the Posted Workers Act stipulates, minimum wages have to be agreed on independently by the social partners through collective wage agreements. Only until this has occurred can minimum wage provisions be declared as generally binding for the whole sector by the Ministry of Labour and Social Affairs (Bundesministerium für Arbeit und Soziales, BMAS) (Allgemeinverbindlichkeitserklärung).
As a consequence, all companies in the sector, regardless of their country of origin, have to pay at least the agreed minimum wage to their employees. Originally, foreign companies in the aforementioned sectors were allowed to pay wages that were in line with legislation in the company’s home country.
The federal government stated that this latter practice led to unfair competition in the cleaning industry, thereby endangering existing workplaces. Furthermore, it stressed that the extension of the act to the cleaning industry was an inevitable step that was necessary to eradicate unfair competition and to safeguard the interests of German citizens and foreign employees working in Germany.
Reaction of social partners
On 9 March 2007, the Trade Union for Building, Forestry, Agriculture and the Environment (Industriegewerkschaft Bauen-Agrar-Umwelt, IG Bau) warmly welcomed the decision of the grand coalition partners (in German). Frank Wynands, in his position as a member of the IG Bau board, argued that the new developments in the cleaning industry had paved the way for the introduction of minimum wages in other sectors.
On the same day, Johannes Bungart, Chair of the Association of Building Service Contractors (Bundesinnungsverband des Gebäudereiniger-Handwerks, BIV), stated in a press interview with Sueddeutsche Zeitung that competition between cleaning companies is mainly driven by ‘wage dumping’ and by the exploitation of workers. BIV strongly approves of the extension of the Posted Workers Act – and, hence, the introduction of minimum wages – to the cleaning industry.
The aforementioned development in the cleaning sector has been closely monitored by the social partners in other industries and areas of the economy, such as temporary work agencies and the waste management industry. Calls for the introduction of minimum wages at sectoral level have also been made in these industries. Although IG Bau and BIV both welcomed the introduction of minimum wages in their sector, it is worth noting that it is not just foreign companies which will be affected by the minimum wages in this sector: German companies that were not originally covered by the cleaning industry’s collective agreement will now also have to comply with the requirement to pay minimum wages, even though they might not necessarily have the financial resources to do so. This, in turn, could endanger the workplaces of employees paying everyday social security contributions.
Sandra Vogel, Cologne Institute for Economic Research, IW Köln