Germany: Debate on minimum wage

A discussion on the merits of introducing a statutory minimum wage has been held over the past few weeks. Those in favour argue that new labour market rules obliging unemployed people to accept low-paid work must be countered by a statutory minimum rate. Those against do not want to change the current system of sectorally-agreed minima.

The issue came to the fore after Franz Münterfering, head of the SPD party, the senior political party in the government coalition, stated at the end of August that a debate should be held in Germany on the possibility of introducing a statutory national minimum wage. There is no statutory minimum in Germany, although sectoral collective agreements set minimum agreed rates of pay for their sector. Mr Münterfering stated that the main reason for wanting to look into this issue was the coming into force on 1 January 2005 of new rules governing unemployment benefits (see Reforms to boost labour market), under which unemployed people will be obliged to take any job offer deemed suitable, even if it pays below collectively agreed rates. Mr Münterfering maintains that the introduction of a national minimum would help to shore up collectively agreed standards.

However, his proposal encountered opposition from the finance minister Wolfgang Clement (a fellow SPD member). Chancellor Gerhard Schröder has stated that there is a need for a debate, while the SPD's deputy chair Kurt Beck and the national speaker of the green party (the SPD's coalition partner), Reinhard Bütikofer, have supported Mr Münterfering's initiative.

The political opposition is, with the exception of the socialist PDS, against the idea of a statutory minimum wage, as are the main employers' organisations.

Trade unions have spent the past few weeks putting together their positions on this issue. The German trade union confederation DGB has stated that the idea of sectorally-set binding minima in those sectors that want this would seem appropriate. DGB spokesperson Heinz Putzhammer maintained that: "If some unions want binding minimum rates in certain sectors, other unions will accept that." This view has been supported by all unions, even those against the idea of a minimum wage.

In the case of individual unions, the food, tourism and catering union NGG is in favour of a statutory national minimum wage and has been for many years. This is because many of the union's members are low-paid and would most likely benefit considerably from the introduction of a national minimum.

The service-sector union ver.di is also in favour and has even put a figure on it, suggesting an hourly wage of €7.50 for a 40-hour week (equivalent to €1,200 a month).

The chemical and energy workers' union IG BCE and the construction union IG Bau are both against the introduction of a statutory national minimum wage. IG BCE has stated that it could be made easier to extend agreements across sectors and IG Bau has expressed its view that the system used in the construction industry would be appropriate. Here, a special lower agreed rate is extended across the sector to make it binding on all employers in the sector.

The metalworking trade union IG Metall was initially against the introduction of a national minimum, fearing that this would undermine collective bargaining in its sector. However, it formally changed its position on this at the end of September, with IG Metall deputy chair Berthold Huber stating that in order to avoid the possibility of unemployed people being obliged to take up extremely low-paid jobs (so-called one-euro jobs), it should be possible to introduce a binding minimum rate in some way, on a sectoral rather than a national basis. He stated that this could be done either by extending an agreed sectoral minimum to make it binding on all employers across a sector (as is the case in the construction sector). In the metalworking industry, he has stated that the lowest collectively-agreed rate could be extended into a binding minimum. This is between €1,550 and €1,600 a month, depending on region.

Alternatively, it could be done by using an existing piece of legislation, the 1952 law on the setting of minimum working conditions, which has never been used. Under this law, the lowest levels of agreed pay and working conditions can be made legally binding in a sector, as determined by the labour ministry if there are no extended agreements already in the sector and there are no unions present which are capable of bargaining. It may therefore be possible to amend this law and begin using it, although Mr Huber admitted that this might be politically difficult as this would be subject to the approval of the upper house of parliament (Bundesrat), in which the CDU and CSU centre-right opposition parties have the majority. These parties are against the introduction of a statutory minimum wage. Mr Huber also said that there are a growing number of sectors not subject to collective-agreed minima. Here, he argues, the minimum rate for temporary workers as set out in the national agreement for the temporary work sector (EIRR 354) (currently €6.85 an hour) should be enforced. Further developments on this issue are expected in the coming weeks.