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Jul 3, 2014

German parliament approves minimum wage

National minimum wage set at equivalent of $12.36
By Annika Breidthardt/Reuters
    
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BERLIN (Reuters) — Germany's lower house of parliament approved the introduction of a nationwide minimum wage of 8.50 euros ($12.36 Cdn) per hour on Thursday, following a heated months-long debate between politicians and businesses who warned it would cost jobs.

The law is a flagship reform of the centre-left Social Democrats (SPD), who made it a condition for entering a "grand coalition" with Chancellor Angela Merkel's conservatives last year.

The SPD has argued that a formal minimum wage is necessary to stem a yawning social divide in employment that was spawned in part by the labour reforms of Merkel's predecessor, SPD chancellor Gerhard Schroeder. Opponents say it could force small firms, particularly those in the former communist East where wages are lower, to jettison workers.

"Hard-working, cheap and unprotected. That has been the reality for millions of employees in Germany. That's over now." SPD Labour Minister Andrea Nahles, who oversaw the drafting of the law, said in a speech in the Bundestag before the vote.

Unlike most European Union countries, Germany has in the past resisted a minimum wage partly because it is seen as political interference in wage bargaining between unions and employers. It has relied instead on collective wage deals by sector and region.

But coverage by such agreements has decreased to 59 percent of the workforce from more than 70 percent in 1998, according to the Hans Boeckler Foundation, a think-tank close to the unions, and the low-pay sector has surged in the wake of Schroeder's "Agenda 2010" reforms introduced a decade ago.

EXEMPTIONS

The new law will include more exemptions than initially envisaged, concessions which Nahles said were intended to enable a smooth transition.

Some sectors will be allowed to delay introducing the wage for two years to help them adjust, and certain groups - including short-term interns, under-18s, trainees and the long-term unemployed - can be paid less under certain conditions.

The exemptions have prompted outrage from labour unions, who say they will hurt the weakest people in thelabour market.

"With the high number of exceptions, the coalition has brutally amputated the minimum wage," Frank Bsirske, head of the influential Verdi labour union, said over the weekend.

Despite grumbling from some members of Merkel's party that the SPD has been shaping policy in her six-month-old government, there was overwhelming support for the law in parliament.

Of the 601 votes cast, 535 lawmakers voted in favour and only five against, while 61 abstained. The opposition Left party - which has 64 of the total 631 seats - had said before the vote that it would abstain.

The SPD have already pushed through plans to lower the pension age for long-time workers and raise pension entitlements, moves which have also raised eyebrows on the right and in business.

"The minimum wage was long due," said Carsten Brzeski, chief economist at ING, citing a growing divide between rich and poor.

"In the short term, the minimum wage will further stimulate the economy, but in the long run it could become a problem for international competitiveness."

The law still requires approval from the upper house, but this is considered a formality.

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