Germany Considers Minimum Wage

By law, Germany does not have a minimum wage, however, through agreements between unions and workers, minimum wages are strictly established for most industries. The system has worked swimmingly for decades but, with the eastern expansion of the European Union, many migrants are willing to work for less than the recognized traditional wage minimums.

Having foreigners in Germany working for less than the going rate has angered the unions and political pressure is being applied to stop the practice. Since the entry of Poland, the Czech Republic, and the Baltic States into the European Union last year, wages in Germany have noticeably dropped with a resultant loss of tax revenue.

Consequently, Chancellor Gerhard Schroeder this week said, "We can't allow people to bring in workers from other European countries, let them work here for peanuts and thereby destroy healthy German businesses." Something is disingenuous about his statement since businesses customarily benefit by reducing their costs of production and a cheaper work force does just that.

Nonetheless,

[T]he cabinet decided to adopt a draft law by May that would allow minimum wages in all sectors of the German economy. Falling short of the introduction of a statutory minimum wage, the law would extend a law that applies only in the construction sector. Under this law, foreign employees must be paid the same rates as German workers under the collective bargaining deals reached by labor unions and employers.

Presumably, the law would remove the economic incentive to hire foreign workers because they would have to be paid the same as German workers.

A national minimum wage law would naturally please the socialist elements in the government, but it probably will have a negative effect on business and unemployment. For one thing, it's generally recognized that minimum wage laws cause jobs to disappear and, secondly, they provide ample encouragement for businesses to outsource. The systemic socialism that infects the German political system will be well served by a minimum wage law but businesses will be less competitive because of increased labor costs and the dismal 10+% unemployment rate will probably grow due to outsourcing.

In summary, the unionized German economy is struggling to compete with free market influences from neighboring countries. The ingrained socialist policies are in conflict with global capitalism. The Chairman of the Social Democratic Party, Franz Muentefering, said as much in a speech this week.

"The internationally imposed strategy of profit maximization poses a long-term threat to our democracy."

So, it doesn't really make much difference whether Germany tinkers with the minimum wage or not. If they impose a national wage standard, businesses will outsource jobs or possibly move entire factories. If they don't clamp down on wage minimums, businesses will hire cheaper foreign labor. Either way, the motive to maximize profit will be paramount.