The minimum wage in Germany: what brought the state in?

ABSTRACT

A statutory minimum wage has been introduced in Germany, in the face of business opposition but abetted by union support. The political coalition in favour of minimum wage regulation brought together the centre-left and the centre-right with the argument that regulation is needed to prevent disfunctional interaction between low wages and the social security system. Thus, the dualization which characterizes Germany’s inegalitarian form of co-ordinated capitalism has provoked a corrective political response. The contribution traces the long path to government intervention and assesses why employers were unable, or unwilling, to pre-empt intervention by maintaining the coverage of collective bargaining. It is argued that market liberalization has had a paradoxical effect on employer power: intense domestic as well as international competition has reduced employers’ capacity to act strategically to fend off regulation by the government.

KEYWORDS:

• Business power
• Germany
• minimum wage
• Tarifautonomie
• unions

Acknowledgements

I am very grateful for helpful comments from Peter Hall, Jette Steen Knudsen, Andrew Martin, Waltraud Schelkle, members of the Centre for European Studies (CES) visiting fellow seminar at Harvard University and panel participants at the EUSA conference in Boston in 2015. Thanks also to CES and the School of Politics and International Relations at the Australian National University for providing a hospitable environment for this research.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Deborah Mabbett is professor of public policy in the Department of Politics at Birkbeck, University of London.

ORCID

Deborah Mabbett http://orcid.org/0000-0001-7068-0812

Notes

1. Using 2011 data, Brenke and Müller (2013: Table 1) arrive at a figure of 17 per cent. This is hedged with a number of caveats about the quality as well as the timeliness of the data.

2. Die Zeit (‘Auf der Suche nach der armen Friseurin’, 10 July 2014) cited a survey by ARD-Deutschlandtrend which found more than 90 per cent of respondents favoured the introduction of the SMW. See http://www.zeit.de/wirtschaft/2014-07/friseur-mindestlohn-bezahlung (accessed 5 November 2015).

3. This calculation was rather approximate, as the social assistance level comprises a base amount and a rent allowance which varies from place to place.

4. The model seems to have originated in proposals from the Information und Forschung (IFO) Institute in 2002; it was then embraced by other parts of Germany's economic technocracy, including the Council of Economic Experts. See http://www.cesifo-group.de/ifoHome/facts/Aktuelles-Stichwort/Topical-Terms-Archive/Kombilohn.html (accessed 5 November 2015).

5. ‘Mini-jobs' have monthly earnings below the threshold for contributing to social insurance (currently €450).

6. See http://www.bmas.de/DE/Service/Presse/Pressemitteilungen/milo-kommission-erste-sitzung.html (accessed 5 November 2015).