A minimum wage regulated by law or collective agreement is meant, above all, to prevent people from being poor although working (the working poor). In the last 10 years, according to a survey by the Institut Arbeit und Qualifikation, the percentage of low-income earners in Germany has increased from 15 to 22 %. That is around 6.5 millions of employees. That puts Germany on a top rank within Europe.
That unpleasant development, according to some experts, is fostered by the German legislation’s dropping of the compulsory minimum wage. While 20 of 27 European Union member states are practising a form of minimum wage, up to today, there is no regulation in the countries of Germany, Austria, Switzerland and the Scandinavian countries. However, in the Scandinavian countries and Austria, since Jan 1 2009, collective agreements covering nearly all employees are resulting in a quasi-minimum wage. In Germany, too, autonomy in wage bargaining was the only way, for a long time. Since trade unions lost a lot of their members, though, they suffered a weakening of their bargaining power, and could hardly achieve any minimum wages.
A minimum wage is supposed to guarantee employees a secure livelihood. This would mean that a full time worker no longer needs compensative government support, but instead can live on their earned money. What is being discussed is a minimum 1 hour’s wage of 5.00 to 8.00 Euros.
The main critique of a minimum wage introduced is that it will make manpower more expensive, that production facilities will move abroad, and that, in consequence, the unemployment rate will increase. The correctness of this reasoning is controversial, though. Some experts, on the contrary, assume that unemployment rate will de-crease after a minimum wage introduced. Even some self-employed and managers plead for a minimum wage, since it would constitute a barrier keeping off foreign competitors who pay dumping wages.
In Germany, there already are minimum wages in some branches, based on collective agreements. Besides, the re-designed law on positioning of workers (Arbeitnehmerentsendegesetz, AEntG) provides for enforcing minimum wages specific to a branch. For example, mail carriers have introduced their minimum wage based on that law, in 2007.
Alternatives to minimum wage are the combination wage and the payment of a basic income to each citizen which is being discussed in different forms.