‘The minimum wage is coming’: Merkel approves €8.50 policy

The Christian Democrats have approved the €8.50 minimum wage policy, having conceded the introduction of a wage floor as part of a coalition deal with the Liberal Democrats

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The SPD’s Labour Minister Andrea Nahles has a lot to be smiling about. As promised, Merkel has backed the minimum wage policy to form a coalition with the party. "With this pay package we will create more wage justice," Nahles said at a press conference

German Chancellor Angela Merkel made good on her promise to back the minimum wage on April 2, with the Christian Democrats (CDU) approving the change as part of a series of concessions made to the Social Democrat Party (SPD) on forming the coalition. The national minimum will take effect at the onset of 2015, and guarantees workers an hourly rate of at least €8.50 per hour.

Germany marks one of only seven nations in the 28-nation bloc who are to date without a minimum wage policy in place

“The minimum wage is coming,” said the SPD’s Labour Minister Andrea Nahles at a news conference shortly after the approval. “It is, above all, good news for people who work hard but get such low wages that they can’t live from them so I hope that with this pay package we will create more wage justice and that’s good for cohesion in Germany overall.”

Germany marks one of only seven nations in the 28-nation bloc who are to date without a minimum wage policy in place, with the national population’s pay previously being decided upon by trade unions and business groups. Merkel’s CDU party has long opposed the standard minimum, however, the party agreed to concede the policy as a key condition of forming a coalition with the SPD last September.

The measures, in theory, will see the five million German workers currently earning under €8.50 an hour – 14 percent of the country’s workforce – secure a much-needed rise. However, the introduction of a two-year transition period for existing wage deals means that only 3.7 million of the five million are expected to see a rise come January, with the rest to follow at a later date.

The prospect of a wage floor in Europe’s largest economy has so far received thumping support from the public, with more than 80 percent of the population in favour of the policy; however, economists have been rather more divided on the issue.

Whereas some believe higher wages could boost domestic spending, others claim that unemployment could spike as employers struggle to pay higher rates than they were doing previously. One report published by the Ifo Institute in March warns that the wage hike could put as many as 900,000 jobs at risk.