Opposition parties in Germany are preparing to introduce a draft law on a minimum wage to the Bundesrat upper house. The Social Democrats, Green Party and socialist Left Party have agreed to propose a minimum wage of 8.50 euros an hour, raising the pressure on Chancellor Angela Merkel and her coalition.
Labour unions argue that the minimum wage would boost the economy by putting more money into the pockets of lower-income workers, who would be likely to spend it right away. But it will actually lead to a massive loss of jobs by forcing smaller businesses with limited payrolls to limit hiring or lay off workers in order to afford to pay higher wages to those who are lucky enough to keep their jobs. A review conducted by two US-economists concluded that 85 percent of credible economic studies on minimum wage from the last two decades point to job loss following the introduction of a minimum wage.
To see how the minimum wage affects employment and productivity, you just have to look across the German border: France, for example, has a minimum wage of 9 Euros per hour and has announced to raise it to 9.40 Euros by July, despite a joint European effort to implement austerity measures in the face of the recent economic crisis. And France is obviously worse off than Germany in terms of productivity and the unemployment rate.
Minimum wage policies do not do what economists say is needed for Europe’s recovery: increase productivity. That is why there shouldn’t be a federal minimum wage in Germany. In regions or sectors where a minimum wage is necessary to ensure competion and adequate payment of workers, labour unions and employers can agree on their own minimum wage in their agreement on tarrifs. It doesn’t need a law for that.