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Germany: Parliament Passes Law on Minimum Wage

(Aug. 8, 2014) On July 3, 2014, the Bundestag (German parliament) approved by a large majority legislation introducing a minimum wage in Germany and ending a decade-long debate in the country on the subject. Starting in 2015, Germany will for the first time have a minimum wage, to be set at €8.50 (about US$11.40) per hour (Beschluss im Bundestag: Deutschland bekommt den Mindestlohn [Resolution in the Bundestag: Germany Is Introducing a Minimum Wage], SPIEGEL ONLINE (July 3, 2014).)

The only party opposing the bill was the party Die Linke (The Left), which filed motions for a minimum wage of €10 and for striking off the exceptions to the minimum wage. (Antrag [Motion for a Resolution] 18/590, DIP [Dokumentations- und Informationssystem für Parlamentarische Vorgänge, Documentation and Information System for Parliamentary Operations] (Feb. 19, 2014); Entschließungsantrag [Subsidiary Motion for a Resolution] 18/2020, DIP, (July 2, 2014).) However, the leading conservative party, the Christlich Demokratische Union Deutschlands (Christian Democratic Union Germany, or CDU), pressed for several exceptions to the minimum wage.

As a result, the minimum wage will not cover persons younger than 18 years or interns and trainees. Furthermore, several sectors of the economy have been granted a grace period of two years for implementing the new measure. Long-term unemployed persons will have to wait six months after being hired before they are covered by the minimum wage. Starting in 2016, there will be a commission of trade union and business representatives established to evaluate the minimum wage every two years. (Beschluss im Bundestag: Deutschland bekommt den Mindestlohn, supra.)

Business lobbyists and German economists have warned that the minimum wage could destroy hundreds of thousands of jobs in Germany. (Der flächendeckende Mindestlohn von 8,50 Euro gefährdet bis zu 900.000 Arbeitsplätze [National Minimum Wage of €8.50 Threatens 900.000 Jobs], Ifo-Insitute website (Mar. 19, 2014).) On the other hand, the Organisation for Economic Co-operation and Development (OECD) sees appropriately set minimum wages as an effective instrument to raise low incomes without large negative effects on job prospects. (John Martin & Herwig Immervoll, The Minimum Wage: Making It Pay, OECD OBSERVER, No. 261 (May 2007).)

With Germany introducing a minimum wage in 2015, there will only be six countries left in the 28-member European Union that do not have a national minimum wage. (EUROFOUND, PAY IN EUROPE IN THE 21ST CENTURY 84 (Publications Office of the European Union, 2014).) Other European countries have been adjusting their minimum wage policies as well. In March 2014, the Government of the United Kingdom announced an increase in the national minimum wage, bringing it to £6.50 (about US$11) per hour. (Germany Approves First-Ever National Minimum Wage, BBC NEWS ONLINE (July 3, 2014).)

On the other hand, in May 2014, the Swiss people rejected a popular initiative that would have introduced the highest minimum wage in the world with 76.3% of the votes cast in a referendum. (Vorläufige amtliche Endergebnisse [Provisional Official Results], Federal Chancellery website (May 18, 2014).) Under the plan, employers would have had to pay workers a minimum of 22 Swiss francs (about US$24.20) an hour. (Bundesbeschluss über die Volksinitiative ‘Für den Schutz fairer Löhne (Mindestlohn-Initiative)’ [Resolution on the Popular Initiative ‘For the Protection of Fair Wages (Minimum Wage-Initiative)’], BUNDESBLATT [FEDERAL GAZETTE] 9679 (2013) (Dec. 13, 2013).) To date, Switzerland is one of the few European countries that do not have a national minimum wage.

Prepared by Goran Seferovic, Scholar in Residence, under the supervision of Peter Roudik, Director of Legal Research.