A minimum Wage Debate

Echoes of the statutory universal minimum wage legislation adopted by Germany’s governing grand coalition seem to reverberate beyond Berlin, in the European Union and across the Atlantic. Europe’s largest economy is to enforce a national minimum pay of •8.5 an hour from January. Such a guarantee would extend cover to the millions of workers — mainly in the eastern region — who remain outside the negotiated wage settlement that defined post-War Germany’s industrial model. Britain has had a national minimum wage law since 1998. But ahead of the 2015 general election, the opposition Labour Party, which was the architect of the legislation, wants changes so that those at the bottom of the workforce may share the fruits of the economic recovery. Neighbouring France codified a legal guarantee in 1950, amended since in 1970. But Paris has recently floated the idea of a minimum wage across the European Union, although a pan-European measure may not materialise any time soon given the legal prohibition in this area. The idea may well influence the remaining six EU states — foundermember Italy, Austria, Cyprus, and the three Nordic countries — to stipulate their respective basic floor. Although the Swiss rejected a proposal that would have given the country the world’s highest minimum pay, the plebiscite in May occasioned a lively debate. U.S. President Barack Obama’s bid to raise the federal minimum wage was blocked by Congress. But there is evidence of growing support among the Republicans, who are anxious not to antagonise voters.


The implications of a minimumwage floor on employment generation and growth continue to divide opinion. This is true equally of Germany which is set to introduce the new law in January, or Britain and the U.S. which have put forth proposals to effect an increase in the existing amount. But growing support on this contentious issue cutting across traditional party lines perhaps means there is greater recognition that minimum wages ought to keep pace with inflation, average wages and productivity growth. The imperative need to mitigate the impact of the 2007-08 economic meltdown on large sections of the population in the strengthened support. A legal minimum pay remains a vital tool for the workforce in mature democracies, even though these are already underpinned by vibrant trade unions and high levels of social protection measures. However, for the bulk of the wage-earners in the developing world that is outside the organised sector of the economy, a legal guarantee of a minimum subsistence pay seems morally nonnegotiable. This is true even from the standpoint of the physical and mental capacities that are paramount to enhance overall productivity.