Who is Set to Gain From a Minimum Wage in Germany?

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Before the planned coalition negotiations between the Union and SPD a survey that was carried out has shown that Germans have a relatively clear idea of ​​what the major government projects should be. According this survey published by the ZDF “political barometer” 83% percent find the introduction of a nationwide minimum wage of 8.50€ good and 14%percent were against the SPD plans to carry out labour market reforms.

The SPD leader Sigmar Gabriel who spoke at the Trade Union Congress (IGBCE) in Hannover supports a uniform minimum wage in East and West Germany. Gabriel called for changes in labour law saying that the ongoing wage differences between East and West in more than 20 years after reunification should stop. He also said that there is a need to bring about uniformity of living conditions between the East and West and called for further changes in labour laws. The German Institute for Economic Research (DIW) has calculated that a minimum wage of 8.50€ per hour would affect 17% of the workforce, or six million workers who are currently earning less than 8.50€ per hour.

The study by DIW Berlin also shows that such a minimum wage would increase the gross hourly earnings of those affected (the 17% ) on average by 35% percent if they would remain in the same employment.

Workers who will benefit from the minimum wage are the unskilled workers in precarious employment (minijobs) or those who do not work in their trained profession, employed in small service firms and workers in East Germany. According to the DIW evaluation half of all low-income earners with gross hourly wages below 8.50€ are active in consumer-related services including both the retail and hospitality as well as workers in private households , health services and care-giving jobs. Also one-fifth of workers with low wages are engaged in manufacturing, primarily in smaller companies.

The report further says that workers with low wages are found mainly in those parts of the economy that are not available in the international competition mainly in industries with a market radius. The economists were in unanimous agreement that an introduction of a uniform minimum wage of 8.50€ although it wouldn’t mean that these workers would automatically benefit from a uniform minimum wage.

Due to the introduction of the minimum wage, new jobs would not be created in the low wage sector. A very big risk of the minimum wage is that workers could be even more crowded by a uniform minimum wage in precarious employment with an increase of illegal/ unregistered work and mini-jobs.

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