German national minimum wage to rise in two-step process

0 Comment(s)Print E-mail Xinhua, June 27, 2018
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BERLIN, June 26 (Xinhua) -- The German official commission comprised of employer representatives, trade unionists and scientists presented a report to the federal government on Tuesday, recommending an increase in national minimum wage in two steps until 2020.

The report called for a rise in the lowest-possible hourly rate of remuneration from the current level of 8.84 euros to 9.19 euros by 2019 and to 9.35 euros by 2020.

The commission's proposed legislation is now pending approval from chancellor Angela Merkel's (CDU) fourth governing cabinet.

A national minimum wage was only in Germany introduced in 2015 and was raised for the first and only time from 8.50 euros to 8.84 euros in 2017. The federal government has usually followed the recommendations of the specially-established commission which takes the development of factors such as inflation, unemployment rates and collective wages into account in an official annual report.

Collective wages are widespread and legally binding in Germany as part of the country's "social partnership" model, a circumstance which has led some experts to question the need for a national minimum wage in the country. The collective bargaining arrangements form part of a post-war political settlement between employer- and employee representatives which granted workers significant rights with regards to their labor conditions and their role in the cooperative management of companies.

The German national minimum wage applies to most employees above the age of 18. Individuals who are completing traineeships or short-term internships, as well as those who have only recently obtained jobs again after a phase of long-term unemployment, are excluded from the provision.

Speaking to Xinhua on Tuesday, Reint E. Gropp, the president of the Leibniz Institute for Economic Research Halle (IWH) argued that the recommendations by the commission marked a significant but not unjustified rise in the national minimum wage.

"A rise of the minimum wage of over 5 percent is high but not entirely inappropriate given the strong wage growth which Germany has recently experienced in general," Gropp said.

However, the IWH president still criticized that the national minimum wage was unlikely to benefit the socio-economically deprived workers who needed it the most. Gropp highlighted that "companies have and will continue to reduce the number of hours worked to keep daily- and weekly wages constant."

Gropp further noted that the national minimum wage could even become counterproductive in the increasingly likely scenario of an economic slow-down in Germany. "We would expect unemployment in the low-wage tier to rise disproportionately during an economic downturn if minimum wages are too high" he warned. This development would adversely affect Germany's eastern regions in particular. Enditem

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