German minimum wage approved

A German minimum wage of €8.50 ($11.75) per hour has been approved by Chancellor Angela Merkel – it will start in 2015. Out of the 28 nations in the European Union, just seven have no minimum wage.

Historically, Germany has differed from the other major economies by relying on business groups and trade unions to fix pay rather than using a minimum wage.

A German minimum wage was not thought up by Mrs. Merkel; it was something she had to cede in her power-sharing deal with the Social Democrats (SPD). The conservative CDU and CSU parties had wanted to carry on without a statutory minimum wage.

Minimum wage to be debated in parliament

For the German minimum wage to become law, it will first have to be debated in parliament, and then moved to the upper house for approval. If all goes smoothly the bill should become law during the autumn of 2014.

Economists and the Social Democrats have argued that a minimum wage would increase many people’s income, which in turn would push up consumer spending and boost the economy.

Katja Mast, spokesperson for the SPD (Sozialdemokratische Partei Deutschlands – Social Democratic Party of Germany) said “Labor has got its dignity back with a fair payment of 8.50 euros, whether in the East or West and with no industry exceptions.”

Labor Minister Andrea Nahles said:

“There are far too many people in Germany who have to work for inappropriately low wages and don’t participate sufficiently in the good economic situation. In future, there will be fair pay. From now on, work is no longer a sales good.”

The Labor Ministry predicts that a German minimum wage will increase the pay of approximately 3.7 million workers in January, 2015.

The German minimum wage does not cover:

  • Long-term unemployed people during their first six months at work.
  • Trainees.
  • Interns.
  • Minors.

Some sectors of the economy, such as employers of seasonal or temporary workers, will be given two-years’ grace to implement the new pay legislation.

Minimum wages around the world

Below is a list of the minimum wage in some of the world’s major economies at the time of publication:

  • Australia – $16.88
  • Brazil – $2.11
  • Canada – $9.95
  • China – $1.19
  • France – $12.22
  • Germany – $11.75 (if parliament approves)
  • India – $0.28
  • Japan – $8.32
  • Mexico – $0.61
  • Russia – $1.04
  • South Korea – $4.63
  • Spain – $5.57
  • Turkey – $3.05
  • UK – $10.02
  • USA – $7.25 (Top economists say the US minimum wage should be raised to $10.10)

Arguments for and against the minimum wage

A minimum wage usually refers to the minimum hourly remuneration employers may legally pay their workers, but it can also refer to daily, weekly or monthly pay.

Despite being used widely around the world, economists continue to argue about the benefits and disadvantages of a minimum wage.

Backers of the minimum wage say it raises workers’ standard of living, reduces poverty and inequality, boosts worker morale, and makes businesses strive to become more efficient.

Opponents say the minimum wage has a tendency to backfire – they argue it increases poverty, damages businesses and raises unemployment (especially among low-productivity workers).

According to Deutsche Welle, many business organizations across Germany have criticized the minimum wage deal, saying it will increase unemployment

The first countries to introduce a statutory minimum wage were New Zealand (1894) and the Australian colony of Victoria (1896).