Debate on introduction of statutory minimum wage

In August 2004, the leader of Germany's governing Social Democratic Party (SPD), Franz Müntefering, launched a public debate on the introduction of a statutory minimum wage when he announced his intention to seek agreement with trade unions on this issue. The trade unions affiliated to the Confederation of German Trade Unions (DGB) are divided over the question, with views ranging from strong support for a national minimum wage to great scepticism. Both the Confederation of German Employers' Associations (BDA) and the Confederation of Germany Industries (BDI) reject any idea of a statutory minimum wage.

On 22 August 2004, Franz Müntefering, the leader of the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD), the larger party in the coalition government, launched a public debate on the introduction of a statutory minimum wage in Germany, when he announced his intention to seek agreement with the trade unions on this issue. In contrast to many other European countries (TN0208101S), there is no general statutory minimum wage in Germany (though companies which are covered by a collective agreement have de facto a collectively agreed minimum wage). Mr Müntefering said that his proposal must be seen against the background of the recently highly controversial 'Hartz IV' legislation (DE0409204N), which provides that unemployed people must accept every legal job offered to them by the employment office, even if it is not paid according to collectively agreed rates, or lose benefit entitlement. Trade unions have raised concerns that this will mean people having to accept poverty wages - which could in turn lead to a downward spiral of low pay. A statutory minimum wage, Mr Müntefering added, would in some respect be a limitation of collective bargaining autonomy as far as low pay was concerned. He said that his party had not yet agreed on a uniform position on the introduction of a minimum wage and that the discussion process was still under way.

Reactions of political parties

In a reaction to Mr Müntefering's statement , the Federal Minister of Economics and Labour, Wolfgang Clement, a member of the SPD, said that a general statutory minimum wage was not necessary, considering it desirable only in the construction industry. For this sector, a collectively agreed minimum wage has been extended to the whole sector by way of ministerial decree (DE0311204F) which in effect serves as a national minimum wage. Mr Clement was supported in his scepticism by some other SPD figures. For example, the Minister of Economics and Labour in the state government of North-Rhine-Westphalia and a former full-time official of the German Metalworkers Union (Industrie Gewerkschaft Metall, IG Metall), Harald Schartau, warned that a national minimum wage was likely to become a 'bureaucratic monster'. Other leading Social Democrats, however, were quoted as being supportive of Mr Müntefering’s proposition. Chancellor Gerhard Schröder declared that he had not yet reached a final decision on the issue.

The coalition partner of the SPD, Alliance 90/The Greens (Bündnis 90/Die Grünen) expressed differing views on the issue. The national speaker of the party, Reinhard Bütikhofer, said that he was supportive of the idea of a statutory minimum wage and favoured the idea of differing statutory minimum wages applying to different sectors of the economy. However, the speaker of the parliamentary party of Alliance 90/The Greens, Krista Sager, rejected any idea of a statutory minimum wage. She said that a low minimum wage would threaten the existing collectively agreed rates of pay, whereas a high minimum wage would lead to job losses.

Spokespersons for the main opposition parties, the Christian Democratic Union (Christlich Demokratische Union, CDU), the Christian Social Union (Christlich Soziale Union, CSU) and the Free Democratic Party (Freie Demokratische Partei, FDP), rejected the introduction of a statutory minimum wage. The Party of Democratic Socialism (Partei des Demokratischen Sozialismus, PDS), represented by only two members in the federal parliament, supports a statutory minimum wage.

Unions' reactions differ

The trade unions affiliated to the Confederation of German Trade Unions (Deutscher Gewerkschaftsbund, DGB) are divided about the introduction of a statutory minimum wage. The majority of unions are sceptical of such a measure rather than being in favour of it.

The longest-standing supporters of a statutory minimum wage are to be found in the ranks of the Trade Union of Food, Beverages, Tobacco, Hotel and Catering and Allied Trades (Gewerkschaft Nahrung-Genuss-Gaststätten, NGG). This trade union has been campaigning since the late 1990s in favour of a national minimum wage (DE9911221N). According to NGG, the existing system of pay determination is no longer sufficient to prevent the emergence of a growing low-wage sector in Germany. Its chair, Franz-Josef Möllenberg, therefore welcomed the SPD leader's initiative. Mr Möllenberg argued that currently 12.1% of all full-time employees in western Germany receive a so-called poverty wage, ie a wage which is less than 50% of the average monthly income of EUR 2,884. NGG therefore demands a minimum wage of about EUR 1,500 a month or EUR 8.70 an hour in order to prevent such poverty wages.

In addition to NGG , German's largest trade union, the United Services Union (Vereinte Dienstleistungsgewerkschaft, ver.di) supports a national statutory minimum wage. Its chair, Frank Bsirske, said that he would favour a statutory minimum wage of about EUR 7.50 per hour, which is a rate between the minimum wages in Luxembourg and those in the UK and France. The deputy chair of ver.di, Margret Mönig Raane, acknowledged that such a minimum wage would be well above some collectively agreed rates of pay. However, she argued that sectors with collectively agreed rates of pay fixed at EUR 3.86 an hours, which exist in eastern Germany, could not be taken as a standard.

The second largest union, IG Metall, is currently against a statutory minimum wage. One argument put forward by the union is that a statutory minimum wage would interfere with bargaining autonomy. Perhaps even more important, however, are fears within IG Metall that a low statutory minimum wage would put pressure on the collectively agreed rates of pay in the metalworking industry. Even the lowest rates here are well above the EUR 7.50 an hour demanded by ver.di. Instead of a statutory minimum wage, IG Metall is in favour of collectively agreed rates of pay being made binding within their respective industries by way of the statutory procedure of extension of collective agreements (Allgemeinverbindlichkeitserklärung, AVE) (TN0212102S).

On this issue IG Metall is in line with the Mining, Chemicals and Energy Industrial Union (IG Bergbau, Chemie, Energie, IG BCE). The IG BCE chair Hubertus Schmoldt, proposed that the legal requirements necessary to enable the extension of collective agreements be eased in order to allow a wider use of this procedure. With regard to the position of ver.di, Mr Schmoldt argued that many low-paid jobs, especially in eastern Germany, would be endangered if a minimum wage at a rate above currently paid wages were introduced.

The Trade Union for Building, Forestry, Agriculture and the Environment (Industriegewerkschaft Bauen-Agrar-Umwelt, IG BAU) also rejected the idea of statutory minimum wage and stated a preference for a collectively agreed minimum wage as it exists in the construction industry (DE0311204F).

The rail and transport workers' union, TRANSNET, shares the views of IG Metall, IG BCE and IG BAU and has stated that it is sceptical about the introduction of a statutory minimum wage.

Reactions of employers' associations

The employers' side is united in its rejection of any statutory minimum wage. The president of the Confederation of Germany Industries (Bundesvereinigung der Deutschen Industrie, BDI), Michael Rogowski, was quoted in the press as saying that he rejected in principle any statutory minimum wages, even at branch level, as this would make an already overregulated labour market even more inflexible. In his view, the level of social assistance already serves as a kind of minimum wage with the effect that a low-pay sector is prevented. A high minimum wage, however, would destroy workplaces for people with low qualifications. For Mr Rogowski, these people are not helped if they are financed by society but are without any prospect of getting work.

The president of the Confederation of German Employers' Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA), Dieter Hundt, said in an interview that a statutory minimum wage would turn the intention of the government's 'Agenda 2010' (DE0311101N) upside down. A statutory minimum wage would make it more difficult to create a low-wage sector to employ long-term unemployed people. Not a minimum wage but wider wage differentials are needed. Those who could not make a living from their work because of low wages should then receive additional payments from the state. Mr Hundt also rejected the idea of extending collective agreements by ministerial decree. He said that employers should have the right to opt out of a collective agreement if they deemed it necessary for their business. This would be part of bargaining autonomy.

The gender aspect

The gender aspect of minimum wages has so far been only a minor issue in the German public debate on the issue. NGG, however, has explicitly pointed to the fact that women are more often affected by low pay than men. This is in line with data from the Institute for Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI), which find that low pay is particularly widespread in those sectors where there are large numbers of female employees - ie private sector services (DE0404205F).

Commentary

Given the fact that both governing parties, the SPD and the Greens, are divided about the issue it is rather unlikely that the initiative of the SPD leader to discuss the introduction of a statutory minimum wage will result in any legislation soon. It does not come as a surprise that the conservative and liberal opposition parties attack the introduction of a minimum wage nor is it a surprise that the employers' side rejects any such proposal. This has been consistent with their views for a long time. The trade union side was apparently taken by surprise by Mr Müntefering’s initiative, which put the ball into the unions’ court. The trade unions, which have been highly critical of the consequences of the Hartz IV law, now face the challenge of having to find a joint position on a statutory minimum wage. This will be a precondition for any further discussion of the issue with the government. (Heiner Dribbusch, Institute for Economic and Social Research, WSI)

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