Minimum wage in Germany

Should a minimum wage be introduced in Germany, just as it is in most other countries in the European Union?

21 of the 27 EU-countries have already introduced a minimum wage. Should we follow these examples or are there legitimate concerns about it? According to a study of the German Federal Employment Office released this month approximately five percent of the full-time workforce is living below the poverty level. Despite laboring 40 hours a week or more the so-called “working poor“ can only survive by supplemental payments of social welfare programs. It seems that for a large group of people working is not profitable anymore! To prevent further wage dumping due to the increasingly tough competitiveness amongst businesses and a fierce price competition with workers from eastern Europe the introduction of a minimum wage in Germany is urgently required and could serve also as an effective instrument to secure social standards, reduce poverty and even stimulate our economy.

In the first place the fundamental goal of both, supporters and opponents of a minimum wage, is the maintenance of employment as a basic premise for economic wealth. I concede that there is a risk that domestic production is shifted to another country and that jobs whose productivity pays less than the minimum wage could be cut without substitution. However, under closer scrutiny of the matter it can be stated that the industries mainly affected by a minimum wage, namely the building industry and the service sector, are obviously not running the risk of being relocated or cut. Construction workers, hairdressers and waste collectors will still carry on doing their jobs in Germany.

Another common argument against a minimum wage is that the introduction could generate a commercial disadvantage of the production site Germany. Of course, at the present time  when big enterprises have to compete in a globalized economy, companies are always searching for the most favorable conditions. Thus it is very likely that they would be switching their production to other countries even if there were no minimum wage in Germany because there are other less expensive factors of production abroad besides labor such as buildings and land prices. The experience of the last decade on the other hand has also proven that governmental patronage of industry and a low cost of labor do not necessarily produce a prospering economy nor a lower unemployment rate but just higher profits for big businesses without benefits for the workforce. As a consequence passionate discussions about manager salaries and social injustice have emerged.

In the past, in fact, higher wages were the moving spirit for innovative product engineering and an improvement in quality. Characteristics which will be more and more important in the future in order to compete with growing markets like China or India. In the same way a minimum wage could encourage the employers to provide further training opportunities and motivate the employees to act in favor of their company. But the motivation and therefore the productivity of a worker is at stake if the payment for his work is insufficient to finance an autonomous life.

Some people may still argue that the subsistence level in Germany is secured through social welfare benefits and unemployment payments and should not be the responsibility of companies. On the contrary, relying on state aid and government assistance it is not a feasible solution for the growing segment of the population threatened by poverty, let alone the moral aspect of this attitude. Our social welfare provision which supports marginalized groups such as the poor, elderly, and disabled is having major problems because of financing difficulties, cutbacks in social spending and the aging of the working population. Therefore we need a minimum wage to increase the income for the lowest-paid which would consequently decrease public spending on welfare programs by replacing the subsidization of the „working poor“ and obtaining more taxes paid by workers. In addition to this, putting more money in the hands of persons earning a low-income who usually spend their entire paychecks on consumer goods would have a stimulatory effect on the economy thereby generating even more employment.

In conclusion, the call for a minimum wage is rooted in concern about the capability of markets to provide social justice and security and is at the same time absolutely essential in giving important incentives to improve quality and to make innovations without running the risk of a suffering economy. Apart from the argumentative chaos of the upcoming election campaigns 2009 this call seems more justified than ever nowadays and we should concede the considerable advantages of this measure as true by introducing a minimum wage without further delay.

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