Germany’s working poor put Merkel on the defensive
Growing low-wage economy sparks election minimum wage promises
A recent study by the Institute for Employment Research (IAB) confirmed what anecdotal evidence already made clear: Germany’s labour market is splitting in two, between traditional, permanent employment and precarious, contract employment.
The IAB research said that one in four German workers is on a low income, classified as less than two-thirds of the median. In a study of 17 EU countries, only Lithuania fared worse.
“The Hartz system is being abused by companies as an open-ended wage subsidy that distort the price of fair-paying work,” wrote the Germany’s federation of trades union (DGB) in a recent report. It warns that Germany is facing a time bomb as millions of low-wage mini-job employees face old-age without any pension contributions.
Germany’s three main opposition parties have launched an electoral attack on the government’s record of social cohesion and have promised to introduce a statutory minimum wage if elected. The Social Democrats (SPD) and Greens want €8.50, the far-left Linke want €10.
“We have the biggest low-wage sector in Europe: bigger than Cyprus, bigger than Greece, ” said Gregor Gysi, lead candidate for the Linke, in a televised election debate on Monday evening watched by 18 million people.
Rainer Brüderle, heading the campaign of the ruling Free Democrats (FDP), deflected the attack by saying that low-paid work was often a road back into the labour market.
His liberal FDP is vehemently opposed to state intervention in the labour market, arguing that employers and unions are best-placed to strike differentiated wage deals based on regional factors such as the cost of living.
But Green Party politician Jürgen Trittin countered that the free market was not working because employers were deliberately pitching their wages low to avail of “Aufstocker” top-up payments.
Last year Germany spent €4 billion in such welfare payments.
“Other countries like Britain and the Netherlands have minimum wages and in Germany we have hairdressers who cut hair for €4.50 an hour,” he said.
Vowed to intervene
The chancellor, sensing danger, has vowed to intervene and set a minimum wage floor in sectors where no tariff agreements exist.
At the end of the television discussion she promised Christel Pawelski, if re-elected, to set up a commission to examine Germany’s new working poor. Insisting it was not a campaign stunt, she said: “I’m not mad, I’m not going to make a promise before millions of witnesses and not keep it.”