Viewpoint Paqué: “Minimum wages risk the accomplishments on the labor market”

There has indeed been a considerable increase in the amount of persons receiving top-up benefits since the introduction of the Hartz-IV reforms – while the unemployment and especially the long-term unemployment rate declined. Up to the present date the reasons for this development have not been completely resolved – it is probably partially due to the new rules and partially due to the general improvement of the employment situation in Germany.

An essential goal of the reform has been reached, however: Recipients of government aid were meant to be reactivated for the labor market in order to find their way back into the working world. This was due to an abundance of scientific studies that showed that especially this contact to the working world is extremely important in order to improve long-term employment opportunities. This is exactly what happened.

Now politicians apparently seem to believe that this has been enough and that employers should now assume the costs of this policy. In the course of this a number of unpublished studies are cited that allegedly prove that the minimum wages existing in Germany thus far have hardly cost any jobs. However, these studies focus on the sector-specific minimum wages which were issued in the context of the „Entsendegesetz“ (law on the posting of workers). For the low-pay sector these minimum wages are almost irrelevant since the sectors affected by the law, such as the main construction trades or the electrical-, roofer-, or painter trade usually pay a lot higher wages than the people receiving top-up benefits earn anyway.

The structure in the real low-pay sector looks a lot different: There we find a workforce with very different motives – right up to university students who try to earn a little extra money. It is completely uncertain how the market will react if, for example, a minimum wage for temporary employment becomes law: almost 8 euro in West and 7 euro in East Germany. This could mean that a lot of jobs in the catering or hairdresser trade will be lost or will become part of the hidden economy.
 

Completely inexplicable is the proposal that of all things the unions and management are supposed to determine this minimum wage – and not the state itself. If the former were to happen it would mean an invitation to a restriction on competition by the established producers who can afford higher wages. From a regulatory point of view this is more than hard to comprehend. With the determination of an absolute minimum wage it is about the construction principles of the welfare state and not about the sector-specific wage floor.

This has nothing to do with free collective bargaining. With this the social partner are meant to advise the state as usual. The decision, however, is up to the politicians. If not the negotiated wages in Germany will become entrapped in the pinch grip of a comprehensive general binding force of wage agreements that have nothing to do with the principles of the social market economy.