Minimum wages in postal services sector suspended

On 18 December 2008, the higher administrative court of the federal states of Berlin and Brandenburg suspended the introduction of minimum wages in the postal services sector. The United Services Union regrets the court’s decision and even called for the introduction of nationwide minimum wages. However, a new establishment survey by the German Chambers of Industry and Commerce shows that the introduction of minimum wages would lead to a decline in employment in many industry sectors.

After lengthy debates in 2007, minimum wages were introduced in the postal services sector with effect from 1 January 2008 (DE0711019I). The minimum wage in the postal sector was endorsed by the inclusion of mail delivery services in the Posted Workers Act (Arbeitnehmer-Entsendegesetz, AEntG). However, a new study by the Association of German Chambers of Industry and Commerce (Deutscher Industrie- und Handelkammertag, DIHK) shows that some companies in other sectors of the economy intend to reduce their staff if minimum wages are also introduced in their sector.

Study findings

The study, entitled Minimum wages reduce employment levels (Mindestlöhne verringern Beschäftigung (60Kb PDF)), analyses the answers of about 20,000 establishments that participated in DIHK’s 2008 autumn survey. The survey asked for the establishments’ assessment of their economic situation and their expectations for the future. It also included a question on the impact of minimum wages at the establishment level.

Of the 20,000 establishments surveyed, 45% indicated that they would be affected by the introduction of a minimum wage of €7.50 an hour. Every fifth affected establishment stated its intention to reduce employment if minimum wages were introduced. While only 17% of the affected establishments in industry feared that they would have to reduce employment, this ratio rose to 25% in retail trade and 27% in services.

Reasons for positive impact of minimum wages

The study concludes that minimum wages usually lead to a reduction in employment in the sectors mentioned. Where establishments indicate that they would benefit from a minimum wage of €7.50 an hour, this has to be attributed to one of the following scenarios.

  1. In the survey, 27% of the affected establishments in the construction sector indicated that such a minimum wage would lead them to employ more staff. However, this exception can be explained by the level of the proposed minimum wage of €7.50 an hour. This is well below the currently effective minimum wages in the construction sector, which range from €9 to €12.85 an hour, depending on the pay grade.
  2. Another possibility suggested by the study relates to the competitive edge that minimum wages grant to certain companies and establishments. For example, in the aftermath of the federal government’s decision to introduce minimum wages in the postal services sector, TNT Post announced the abandonment of its plans to extend its services to individual customers. The mail delivery operator PIN Group even announced plans to cut 1,000 out of a total of 9,000 jobs. Both companies emphasised that they could not afford to shoulder the higher wage costs resulting from the introduction of minimum wages (DE0712039I).

Current pay rates collectively agreed

The current minimum wages in the postal services sector range from €8 to €9.80 an hour and stem from a collective agreement negotiated between the United Services Union (Vereinte Dienstleistungsgewerkschaft, ver.di) and the Postal Services Employers’ Association (Arbeitgeberverband Postdienste e.V., AGV Postdienste), which is dominated by the market leader Deutsche Post AG. This agreement was declared generally binding for the whole postal services sector, a procedure that has now been suspended. On 18 December 2008, in a press release (in German) issued by the higher administrative court of Berlin-Brandenburg, this regulation was declared unlawful. The federal government in its press statement (in German) has already declared its intention to appeal against the court’s decision.

Position of social partners

The new developments in the postal services sector have rekindled the debate among the social partners on the introduction of minimum wages. In a statement to the press (in German) on 18 December 2008, ver.di regretted the decision of the administrative court. However, at the turn of the year, the trade union launched a campaign for the general introduction of minimum wages (Stimmen für den Mindestlohn).

In an article in the business daily Handelsblatt on 19 December 2008, the President of the Employers’ Association of the New Postal and Delivery Services (Arbeitgeberverband Neue Brief- und Zustelldienste, AGV NBZ), Florian Gerster, called on the Federal Minister of Labour and Social Affairs, Olaf Scholz, to draw the logical conclusion from the verdict and abolish the minimum wage in the postal services sector. He added that no one would want to see the loss of more jobs in the postal services sector.

Sandra Vogel, Cologne Institute for Economic Research (IW Köln)

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