Germany: What Role for Minimum Wages on Low-wage Work?

Abstract

bargaining. In addition, employers' associations refused to ask the state for an extension of collective agreements. Finally, since the EU's eastward expansion, other industries, such as meat processing, have increasingly become destination industries for posted workers. The service and the food and restaurant unions were the first to start campaigning for a statutory minimum wage.The question of whether the expansion of low-wage work in Germany should be regarded as a problem or a welcome development is hotly debated in both political and academic circles. The advocates of further expansion of low-wage work are calling for a significant reduction of transfer payments in order to increase incentives for accepting low-paid work (Sachverständigenrat, 2004). However, political attitudes towards a minimum wage are shifting. According to recent polls, a large majority of Germans are in favour of a minimum wage. These polls persuaded the Social Democratic party (SPD), which promoted the growth of low-wage work through the Hartz laws in 2004, to come out in support of a minimum wage. Minimum wages became a contentious issue in the coalition negotiations between the SPD and the Christian Democratic parties (CDU/CSU). Due to pressure from the SPD, the resulting "grand coalition" agreed to reform the MiA and to include more industries in the law on the posting of workers (AEntG).This chapter begins with data analysis investigating the evolution of lowpaid employment, employment structure, income mobility and poverty. To enable us to draw up a detailed picture of those affected and of the dynamic and knock-on effects of the low-wage sector, we have evaluated data from the socio-economic panel (SOEP) and employee panel of the Federal Employment Service (Bundesagentur für Arbeit -BA). The SOEP offers the option of also including part-time workers and mini-jobs (currently available data up to 2006). 1 Owing to a lack of data on working hours, the BA employee panel allows only the wages of full-time employees to be evaluated. However, given its considerably larger number of cases, it makes it possible to analyse the trend in individual industries in a more differentiated fashion. Section 6.2 considers the change in income distribution overall. In Section 6.3, we draw up a differentiated picture of the low-wage sector: how it has evolved and who is particularly affected. In Section 6.4, we focus on the way in which low and average wages have evolved in accordance with enterprise characteristics. In Section 6.5, the income mobility of low-paid workers is analysed, while the link between poverty and low pay is the subject of Section 6.6. In 186The minimum wage revisited in the enlarged EU 1. Employees in mini-jobs fall below the earnings limit at which social insurance contributions come into play (less than €400 per month since 2003). They are not covered by the general obligation to pay social insurance contributions. Employers pay a flat-rate contribution of 30 per cent (13 per cent for health insurance, 15 per cent for old-ag...

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