German Cabinet approves national minimum wage starting next year

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BERLIN – Chancellor Angela Merkel’s Cabinet approved a national minimum wage for Germany on Wednesday, guaranteeing workers at least 8.50 euros per hour ($11.75) starting next year.

German wages had for decades been left to trade unions and business groups to establish for regions or employment sectors.

Merkel’s conservative bloc had been in favour of preserving this tradition, but agreed to go ahead with a national minimum wage as a concession to the left-leaning Social Democrats in order to seal a deal on forming a government together.

“Labour has gotten its dignity back with a fair payment of 8.50 euros, whether in the east or west and with no industry exceptions,” said the Social Democrat’s labour expert Katja Mast.

In the proposal adopted by the Cabinet, which is expected to get Parliamentary approval easily, the Social Democrats agreed to exempt the regulations from applying to long-term unemployed people for their first six months on the job. It also does not cover minors, interns or trainees.

Certain employers, like temp-worker companies and those using seasonal workers, will have two years to phase in the new minimum wage; otherwise the regulations go into effect Jan. 1 2015.

Federal Labor Minister Andrea Nahles said the minimum wage “will provide greater fairness” in Germany and result in better earnings for some four million people.

The Lower House of Parliament is due to debate the proposal this summer and is expected to sign off on it before breaking for holidays. It will then go to the Upper House for passage in September.

Once in effect, the minimum will be reviewed on an annual basis, starting on Jan. 1, 2018.

The minimum wage was approved a day after Germany’s 2.1 million public sector employees secured a sizeable wage hike that will see them earn 3 per cent more from March 1 and a further 2.4 per cent next year.

Economists hope that rising wages will help stimulate domestic spending in Europe’s biggest economy and thereby the continent as a whole.

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