Germany toys with minimum wage, wither EU?
It was a surprise to me to learn today that Germany has no minimum wage law. In fact it’s not the only country.
In the European Union, 18 of the 25 member states, including Greece, Spain, Great Britain and France have a minimum wage. It is more often referred to in terms of a minimum monthly wage than a per hour rate, and there is a massive descrepancies from one end of the spectrum to the other.
Last year’s monthly rate for Latvia was 116 euros ($150) compared to 1369 euros in Luxembourg. Advocates for the introduction of a minimum wage in Germany argue from a platform of social justice and existential security. But opponents to the plans say they would be counterproductive as jobs which pay less than the minimum wage would be cut, and unemployment would be pushed up even further. The counter argument, however, is that the subsistence level in Germany is secured through social welfare benefits and unemployment payments.
My initial reaction to this is total incredulousness. How Germany can be facing it’s highest uneployment rate since the thirties, and suggesting it be tackled by making it harder for companies to hire workers is just too bizarre. Anyone with a passing interest in economics understands that minimum wage laws benefit those with jobs at the expense of those without. Germany’s 12.6% unemplyment rate is not for a lack of such laws. Much better to reform those than make things worse you’d think.
Digging deeper, the issue becomes more complex, if not at all less unsettling. The higher pay rates are meant to discourage foreign companies and workers from providing cheap competition for German jobs. The idea is to discourage lower-cost work by those willing to work it, by eliminating this advantage. German firms, it is assumed will be able to better compete, and will hire the uber-skilled Volk over those pesky immigrants.
When one considers that German unemployment is so high, despite the influx of cheaper labour, the deeper problems with Germany’s labour laws seem to be even worse than one first expects.
It probably makes sense for the European economies to harmonize their laws to an extent, but it doesn’t seem sure that a minimum wage in Germany will actually decrease unemployment, which has been at crisis levels in Germany for well over 5 years. It does, however, suggest a dangerous slide towards protectionism, and and exploitation of xenophobic tendencies. Part of the EU’s promise was a single labour market, and the freedom for individuals to move freely through the “United States of Europe” as they do through Les Etats-Unis. Policies that try to address massive problems within a member country by attacking these values and citizens of other member states are detrimental to the very notion of the European Union.
With Britian, Northern Europe, and Eastern Europe concerned that the EU constitution is not liberal enough, and France and Germany concerned that it is too liberal, can the EU survive? The momentum is swinging in favor of non forces in France which will hold a referendum on the constitution on May 29th. Is it already too late for meaningful reform in economically stagnant old Europe to reverse this trend?