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Missed opportunity: Germany’s minimum wage won’t tackle growing inequality

Mark Bergfeld is a writer and activist based in Cologne, Germany and London, UK. He tweets @mdbergfeld

Published time: July 09, 2014 11:54
Reuters/Lee Jae-Won

​Last week, the German federal parliament voted for a minimum wage, and it attracted a lot of criticism.

The left has criticized the bill for its many loopholes and exemptions. The conservatives continue to argue that increased labor costs will force multinational companies to move to neighboring countries in the east.

Yet, no one dares to address the fact that Germany is the most unequal society in the Eurozone, where CEOs cream-off profits and add little value, while German workers’ wages have been stagnating since the 1990s.

A red herring

According to Labour Minister Andrea Nahles of the Social-Democrats (SPD), the introduction of a 8.50 euros minimum wage is supposed to boost the wages of 3.7 million workers. On closer inspection, the agreement hardly makes an iota of difference.

The agreement is a red herring. It excludes under 18-year olds, interns, trainees, and the long-time unemployed. Seasonal workers are excluded on the spurious grounds that they receive food and lodging. Yet this group of workers often survives on the savings they make during high season. Raising their wages would allow them to live decent lives once the tourist season is over.

The number of workers who will not receive the minimum wage amounts to 2.5 million, which is nearly nine percent of the total labor force. Even the EU Commission, usually not a friend of employees’ rights, has criticized the exceptions made in the new law. This should alarm those who profess that the minimum wage is the panacea to Germany’s growing low-wage economy.

The bill is a missed opportunity for those seeking social and economic justice in Europe’s powerhouse. The whole ordeal shows that the balance of power between capital and labor has not shifted in the slightest. The weak control mechanisms in place will favor employers, who make profits off the back of mostly low-skilled, female and immigrant workers.
SUB: Merkel’s success?

The current CDU-SPD coalition does not deserve the credit for the introduction of the minimum wage in Germany. Both parties have been historic opponents of the minimum wage, blocking any attempt to increase the wage level of the poorest sections of society since 2002. Chancellor Merkel has been hesitant to introduce the minimum wage for a number of years now. She believes the move will threaten Germany’s competitiveness. The SPD only came on board once public opinion could not be ignored.

Time again, both parties have used the social partnership and the voluntary wage agreements between employers and employees to blackmail trade unions to agree to low wages in return for job security. Continuously, politicians warned that large multinationals would move eastwards where labor costs were lower. However, the minimum wage has never posed a threat to Germany’s export economy. Office buildings need to be cleaned, hair needs to be cut, and supermarkets need to be stocked.

AFP Photo/Ronny Hartmann

And even so, it is beyond doubt that companies will find new ways to organize labor and their technologies to boost productivity rates to compensate for the rise in wages. KPMG raised the pay of 700 contractors to 25 percent above the minimum wage in the UK eight years ago. Through reorganizing shift patterns and lower staff turnover, they were able to buffer the effects without cutting into their profits.

This highlights that the minimum wage does not pose a threat to capitalism, let alone the social structure of exploitation and inequality.

The issue is inequality

German workers’ wage packages have stagnated despite continuous economic growth and rising productivity rates since the 1990s.

Today more than 25 percent of all workers are in low-wage employment while every fifth child lives in poverty. In no other country is a child’s educational success so dependent on their parents’ income as in Germany.

Meanwhile, a recent study by Oxfam concluded that 85 German billionaires control the same amount of wealth – 400 billion Euros - as half of Germany’s 80 million-large population. Siemens CEO Peter Lösch’s salary increased by 142 percent between 2006 and 2011. It is unlikely that Lösch’s productivity increased by that amount.

No one exemplifies the mushrooming of salaries at the top of society more than national team coach Joachim Löw, popularly referred to as Jogi. Coaching the football team for eight years now, Löw has not won a single title. His estimated annual salary of $3.6 million means that he earns 82 times more than the average German worker.

Maximum wage – a joke or a good plan?

While Löw’s salary might be dwarfed in comparison to the CEOs of German conglomerates such as Adidas, BMW, RWE, Siemens and others, it highlights the fact that the minimum wage will not tackle the problem of growing inequality in Germany. CEOs continue to accumulate riches while the rest of society falls behind. A maximum wage could change that.
This daring proposal seems utopian, but it is no less utopian than the demand for a minimum wage was back in 2006 when the trade union congress (DGB) officially endorsed the policy of a minimum wage. From then on, the trade unions and the Left Party (Die Linke) have tirelessly campaigned for this policy over the years. Today more than 80 percent of the German electorate support the minimum wage in the opinion polls. This powerful coalition could now move forward demanding maximum pay for CEOs.

Internationally, this idea has gained traction far beyond the left. US American talk show host Bill Maher floated the idea on his show earlier this year. British activist George Monbiot has argued for a 500,000-pound cap on CEO pay. Meanwhile Swiss activists even initiated a popular referendum in 2013 demanding a pay ratio of 1:12.

A maximum wage would not mean expropriation or a return to communism. These proposals are mainly aimed at launching a process of closing the gap between the rich and the poor, and there is a lot to discuss here. But as long as we only talk about raising the minimum wage, inequality will continue to fester.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.