German U-turn
Previously, German governments have insisted minimum wages weren't necessary because most workers' pay tracks nationwide agreements struck between unions and employers' groups.
But with elections next year, and the world's third-largest national economy stagnating, the government of Chancellor Gerhard Schroeder is changing course. Schroeder has pledged to protect German workers from what he has termed "wage dumping."
The proposal responds to a popular perception that Poland and the seven other ex-communist countries with lower living standards but faster growth rates are dragging down wages in Western Europe. Growing public ire has focused on Polish meatpackers and truck drivers working in Germany for a relative pittance.
A minimum wage could, however, exacerbate Germany's record unemployment, which now stands at over 12 percent. Economists warn that making wages less flexible would erase more jobs. "In a labor market as rigid as Germany's, making regulation even stronger is the worst thing you can do," Daniel Gros, director of the Centre for European Policy Studies in Brussels told Dow Jones Newswires. "Employers will move even more jobs abroad." When companies in Germany employ migrating Poles or Czechs, he said, at least business investment stays in the country, adding to overall economic activity.
Average wages in Germany are more than six times the wages paid in neighboring Poland, according to a survey released last week by Mercer Human Resources Consulting.
Fear of wage competition also led the German government last month to join with France in blocking an attempt by the European Commission to liberalize trade in services across Europe.
But with elections next year, and the world's third-largest national economy stagnating, the government of Chancellor Gerhard Schroeder is changing course. Schroeder has pledged to protect German workers from what he has termed "wage dumping."
The proposal responds to a popular perception that Poland and the seven other ex-communist countries with lower living standards but faster growth rates are dragging down wages in Western Europe. Growing public ire has focused on Polish meatpackers and truck drivers working in Germany for a relative pittance.
A minimum wage could, however, exacerbate Germany's record unemployment, which now stands at over 12 percent. Economists warn that making wages less flexible would erase more jobs. "In a labor market as rigid as Germany's, making regulation even stronger is the worst thing you can do," Daniel Gros, director of the Centre for European Policy Studies in Brussels told Dow Jones Newswires. "Employers will move even more jobs abroad." When companies in Germany employ migrating Poles or Czechs, he said, at least business investment stays in the country, adding to overall economic activity.
Average wages in Germany are more than six times the wages paid in neighboring Poland, according to a survey released last week by Mercer Human Resources Consulting.
Fear of wage competition also led the German government last month to join with France in blocking an attempt by the European Commission to liberalize trade in services across Europe.
