As the federal minimum wage has become a big topic of debate — with President Obama calling to raise it to $9.00 an hour — German politicians are in their own heated dispute over whether to have a minimum wage at all.
Germany doesn’t have a national minimum wage. In fact, it’s one of the few countries in Europe that doesn’t. Instead, German trade unions have always negotiated their own basic pay, industry by industry. But many Germans are questioning the effectiveness of this old way of doing things.
Damian Grimshaw, an expert on minimum wages at Manchester Business School, says Germany might be the economic engine of Europe, but German wages have stagnated over the past decade. Some are paid as low as $3 to $4 an hour.
“It’s not a model of economic growth that’s brought steady improvements in real levels of income and earnings,” says Grimshaw. He notes that 20 percent of German workers earn what’s considered low pay. That is, two-thirds below the median wage in the country.
The idea of introducing a national minimum wage of over $11 has become a contentious issue ahead of elections in Germany later this year.
Waltraud Schelkle of the London School of Economics says doing so would help solve a long-standing problem. Germans aren’t big spenders because of their meager incomes.
“People on low wages, if you raise their wage a little bit, they’re so hard up against budget constraints, that they would be happy to spend all that,” says Schelkle. “So in that sense you could even stimulate the economy.”
As is it stands now, because employers pay very little, the German government picks up the tab in higher welfare benefits to help workers make ends meet. It’s a corporate subsidy Schelkle says Germany should do without.