Can Minimum Wage Debate Pacify Protesters?

Although the government has made it abundantly clear that the planned social cuts will not be watered down any further, Germany’s ruling Social Democrats have a vested interest in keeping their popularity from slipping any further ahead of crucial regional elections next month.

The poll, in the eastern state of Brandenburg may leave the SPD with the unparalleled dilemma of trailing behind the leftist Party of Democratic Socialism which - while not offering any sound concepts of its own – is currently riding on a wave of voter disenchantment with the Social Democrats. Now, in an apparent bid to sweeten the harsh, but necessary social cuts ahead, SPD chief Franz Müntefering has launched a fresh debate on possible legislation governing the country's minimum wage.

No taboo

As it stands, there are no relevant state regulations in place, as wages are invariably defined tariff negotiations between management and trade unions. On Sunday, Müntefering said that the traditional tariff autonomy should not be treated as a taboo, but warned against jumping to conclusions.

“We’re currently debating this issue with the trade unions. Some unions are in favor of legislation on minimum wages, others aren’t. I myself have been hesitant in the past to push for minimum wages, as such a move amounts to an attack on the country’s tariff autonomy, if you choose to see it that way. But of course we also have to see the negative effects of wage dumping policies. So, my party is willing to debate this at length with the unions, and I’m optimistic that we’ll reach a consensus in the autumn,” he said.

Müntefering’s offer to debate this issue with the trade unions has drawn mixed reactions from policy-makers across the political spectrum. The opposition Liberal Democrats have rejected the idea outright, and Social Democratic Economics and Labor Minister Wolfgang Clement isn’t amused either. “I’m in favour of looking at the situation in various industries. I don’t think that legislation on minimum wages would make sense for all sectors. And whether the trade unions are willing to at least partly give up the decades-old principle of tariff autonomy remains to be seen,” Clement said.

Open to consideration

For their part, the trade unions have indicated their willingness to discuss the possibility of legislation in coming weeks. Margret Moehring-Rahne, deputy head of Germany’s powerful service sector union, ver.di believes that minimum wages would help to cushion the impact of the labor reforms, meaning the long-term unemployed could not be forced to accept a job if the payment were outside the agreed minimum wage bracket.

The question to be considered is whether minimum wages will really assist workers by helping to prevent the exploitation of the lowest paid, or harm them by pricing low-skilled workers out of the labor force altogether. Supporters of minimum wages argue that higher wages will create greater spending power, thus ultimately cranking up the demand for larger workforces.

That at least is the theory, and negotiations between the government and the trade unions in the coming weeks will show whether Germany gets a chance to put it to the test.