Germans pay high price for political opposition to minimum wage


BERLIN LETTER:Five years after a radical pruning of Germany’s welfare system, poverty is spreading like an infectious disease, writes DEREK SCALLY

YOU’LL FIND Peggy at all the big events in Berlin. From concerts to football matches, she rarely misses one.

Until two years ago, the 58-year-old Berliner worked as a goldsmith. Then a serious illness knocked her off her feet. Unemployed since then, she watched herself slide to existing on a social welfare payment of €357 a month.

To supplement her income, she roams the streets of the capital collecting bottles and cans, and returns them for the deposit. Beer bottles bring eight cent, big plastic bottles up to 25 cent. Outside a busy concert venue, she can collect nearly €3 worth of bottles in an hour.

“It disgusts me just as much as it disgusts everyone else who has to watch,” she says as she reaches discreetly into an orange bin, retrieves a beer bottle and drops it with a clink into the tattered plastic bag at her side.

“If someone had told me two years ago that I’d be here, doing this, I simply wouldn’t have believed them.”

Five years after a radical pruning of Germany’s welfare system, poverty is spreading like an infectious disease.

It’s hard to overlook the signs – from hordes of bottle collectors to bustling soup kitchens – and impossible to ignore the statistics. More than 11 million Germans – 14 per cent of the population – are living in consistent poverty, up by a third in just 10 years.

That depressing figure, from the DIW economic institute, uses the European Commission standard that defines someone living on 60 per cent of Germany’s average median wage as at risk of poverty. This measure of poverty applies to a quarter of 19- to 25-year-old Germans, a fifth of families with three children and some 40 per cent of single-parent families.

For anyone who moves to Germany with notions that it is one of Europe’s wealthiest countries, it’s all a bit of a surprise. For Germans, it’s a shock.

It wasn’t supposed to be like this. Germany’s post-war political fathers anchored the idea of “social standing” in the constitution, obliging the state to ensure that all citizens – children in particular – had the means to ensure continued participation in everyday life.

In an era of tight public finances and an ageing population, Germany’s social standing ideal still holds in theory, but it is wobbling dangerously in practice.

Liberal politician Guido Westerwelle took aim last week, declaring that Germany’s welfare state, with its “promise of effortless affluence”, breeds “late Roman decadence”.

There was no incentive to work, he complained, if hard-earned wages were barely above the welfare line.

Widespread anger and derision followed, and critics asked whether the problem lay in too-high welfare payments or too-low salaries. Earnings have been stagnant in Germany for years, rising just 0.51 per cent between 2001 and 2007, according to the International Labour Organisation.

Compounding this problem is an increasing gap between normal salaries and a new low-wage sector made possible by recent labour market reforms.

Some 6.5 million Germans – 16 per cent of the workforce – now work for €9.62 an hour or less, according to a recent study.

Aiding this race to the bottom is political opposition to a statutory minimum wage, led by the decadent Westerwelle and his Free Democrats (FDP), junior partners in the federal government.

Though 80 per cent of Germans support a minimum wage, like that in 20 other EU member states, Germany has no industry-wide pay floor.

Instead, wage agreements are established on a sector-by-sector basis through collective bargaining. For anyone outside the collective bargaining net, it is not unusual to hear of hourly wages of about €5.00.

That was security guard Werner Moll’s pay rate for years. After a month of 55-hour weeks, he had a net take-home pay of about €850. “You’re there to protect a building and if someone comes along and decides to break in or steal something, you’re supposed to put your head over the parapet – for €5 an hour.”

For Germans on low wages – security guards, hairdressers, call-centre workers – the government an earnings top-up through social welfare.

“It’s madness,” says Moll. “Other countries have introduced minimum wages without any of the things happening that they worry about here.”

Berlin’s official line against a minimum wage is that it would decimate the labour market and lead employers to outsource jobs en masse to low-wage economies.

Just how jobs as security guards and hairdressers can be shifted abroad remains unclear.

And so, to prove its opposition to minimum wages, Germany’s cash-strapped federal government paid out over €8 billion in the first nine months of last year alone to subsidise the booming low-wage sector. Decadence has its price.