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Global Economy

With risks and side effects

Things should be fairer in Germany – that was the key campaign promise made by SPD chancellor candidate Olaf Scholz: "We need everyone to be protected from below. That means a statutory minimum wage of twelve euros. Which would mean that ten million citizens get a raise." Now the cabinet has approved the increase; it is supposed to start in October. The Bundestag still has to approve the project.

In the traffic light coalition, the FDP gives in

Ten million – so many earned so little, Scholz argued in the election campaign. Which is why the Greens and Die Linke called for a higher minimum wage at the time. The FDP waved it off and referred to the collective bargaining autonomy of employers and unions – and for the candidate for Chancellor of the Union, Armin Laschet, the whole minimum wage discussion went completely past the topic: "One says twelve, the left says 13, soon they will say AfD 15 euros – that actually distorts what it's about: preserving jobs and paying people fairly."

Laschet lost the election, the successful parties formed the traffic light coalition and wrote the increase in the minimum wage in their coalition agreement. From October 1 of this year, this is to increase to twelve euros per hour. The minimum wage is currently €9.82. "This is the biggest wage increase for many, many people they have ever experienced. These are people who work as cleaners or in warehouse logistics – and that is why it is important that it comes now," said Federal Labor Minister Hubertus Heil when he presented his bill weeks ago.

Criticism from business

Criticism comes from employers. Steffen Kampeter, general manager of the employers' association BDA, contemptuously calls the twelve euros a "state wage". So far, it has not been the legislature that has set the lower limit for paid work, but a commission with equal representation. In addition, employers find the jump from just under ten euros to twelve euros within a year to be quite daring: In less profitable sectors, such a jump in wage costs could promote the trend towards automation – i.e. accelerate the reduction in jobs.

The draft law by Labor Minister Hubertus Heil provides that after the increase in October, the commission for the minimum wage should again be responsible. The economist Michael Hüther, director of the employer-oriented Institute of German Business, has his doubts: "Politics will never get out of the number," he suspects. Because in the next election campaign, interest groups such as the unions could raise any number of demands, according to Hüther – according to the motto: "Well, let's go to 16 quickly," or whatever suits." In this respect, the current political determination justifies long-term misguided incentives.

Perverse incentive for marginal employment?

A false incentive of the higher minimum wage is already foreseeable: Since part-time employees – the so-called mini-jobbers – are allowed to work fewer hours with higher wages, Heil has to raise the earnings limit for mini-jobs at the same time. Also in October, it is set to increase from EUR 450 to EUR 520 per month.

This annoys the unions again: DGB board member Anja Piel considers the new upper limit to be a “huge mistake” because those in marginal employment have no entitlement to short-time work benefits, health protection or pensions. The chairman of the gastronomy union NGG even called mini-jobs "a part-time trap, especially for women". Extending marginal employment as well reinforces what the SPD actually wants to fight: poverty in old age.

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