The statutory minimum wage and employee protection

Background and objectives

In January 2015 a general statutory minimum wage was introduced in Germany. In many sectors, the wage spread had widened downwards in the years before and the collective bargaining parties were no longer able to counter this trend. The statutory minimum wage is intended to prevent wage undercutting between companies and to protect employees from inappropriately low wages. Besides, subsidies to top up particularly low wages are to be reduced in order to limit the associated costs for the social security systems.

When the amount of the statutory minimum wage was first determined, the limit of exemption from seizure (Pfändungsfreigrenze) was a point of reference. Subsequent increases were based on the development of collectively agreed wages. In the meantime, there is increasing discussion as to whether the level of the minimum wage is appropriate and sufficient. One of the reasons for this is that even for single persons working full-time and living in larger cities with high rents, it seems questionable whether the minimum wage is sufficient to make a living without supplementary social benefits. This question is even more urgent for single parents. It is also argued that the minimum wage is often insufficient to feed a family or to claim a pension in old age above the level of the means-tested state benefits.

The study will first discuss possible criteria for an appropriate minimum wage level from the perspective of employee protection, such as the level of means-tested state benefits (Grundsicherung), the limit of exemption from seizure (Pfändungsfreigrenze), the resulting pension entitlements or, in an international context, the European Social Charter. Secondly, the level of minimum wages in other European countries and their adjustment mechanisms will be examined. Third, the appropriateness of a national minimum wage will be assessed with the focus solely on employee protection. In this step the concept of “Living Wages” will also be included. Finally, it will be shown what minimum wage levels result from the different criteria.

Approach

Essentially, the project is based on the evaluation of literature. These are on the one hand scientific studies, and on the other hand legal texts as well as case law on the level of basic state benefits and the implementation of the European Social Charter. In addition, we will present national country profiles of the respective minimum wage systems in selected European countries and carry out secondary evaluations of international comparative data and studies.