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The german minimum wage debate: lessons from an Eu comparison


A minimum wage is certain to emerge as a cornerstone policy of the next German government. The debate is under way, in the coalition negotiations between the CDU/CSU and SPD, but also in the media and academia, about its level, coverage and the mode by which it is to be implemented and determined over time.


A view often heard is that a minimum wage is „a good thing“ but it must not be „too high“. Indeed. To be too high is not a good thing. At some point when wages are raised from existing levels a price will be paid in terms of lost employment. But this begs the question: what is too high? Meanwhile conservatives and some business representatives are insisting that Tarifautonomie – the principle of collective bargaining between workers/unions and employers – should not be encroached upon. Social partners should negotiate regionally and/or sectorally differentiated minima.


A European comparison


An interesting new study by the European Foundation for Living and Working Conditions (a draft is available here) sheds, by way of a European comparison, some interesting light on these issues. There are a lot of interesting findings, but I will focus here on two of key relevance to the current German debate: the extent of wage inequality at the bottom of the labour market and the inadequacy of existing collectively agreed provisions.


The study examines, using detailed data on national wage structures, what the mechanical effects would be of introducing a minimum wage norm across Europe[1], according to which no worker is to be paid less than 60% of the national median[2]. A key finding (see pp. 23-34 of the study) is that, of all the countries in Europe, Germany would be the one whose wage structure would be most profoundly affected. This is for two reasons. First, the share of workers below the 60% of the median line is the highest in the entire EU, at 24.5%: virtually a quarter of German workers earn less than 60% of the national median.[3] In Finland the figure is 6.8%, in culturally similar Austria it is 14.6%, and even in the „neoliberal“ UK (where there is, however, a statutory minimum wage), it is substantially lower (18.9%). But that is not all. The distribution of wages in this segment of the working population also needs to be factored in. The authors of the report have calculated the average “distance” between the existing wages of low-paid workers and the 60%-of-median threshold. This, too, is (much) greater in Germany than in other countries.

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