German companies ′flouting minimum wage′ | Germany| News and in-depth reporting from Berlin and beyond | DW | 30.01.2017
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German companies 'flouting minimum wage'

Millions of Germans are being cheated out of their right to a minimum wage, a new study has shown. Trade unions say the authority for enforcing the 2015 law is chronically understaffed.

The German government has been called on to enforce its minimum wage law, after a new study showed that millions of people with "mini-jobs" were paid below the legal minimum wage in 2015, the year when Germany's 8.50 euros ($9.09) per hour rate was introduced (it has since been increased to 8.84 euros an hour).

The Institute of Economic and Social Research (WSI), a trade-union-linked NGO, found that around half of the 7.4 million people who work mini-jobs - that is, limited time or salaried work capped at 450 euros a month - received less than the hourly minimum wage in 2015. The majority of Germany's "mini-jobbers" work in the hotel, gastronomy and retail industries, or else cleaning companies.

"The findings, based on two different data sources, clearly leave no doubt that, with a significant number of mini-jobbers, companies have not adjusted their salaries according to the law," the WSI wrote in its study.

Examining the latest data from separate working panels that carried out a series of surveys - the Socio-Economic Panel (SOEP) and the Panel for the Labor Market and Social Security (PASS) - researchers found that the introduction of the minimum wage in 2015 had forced companies to raise wages for mini-jobbers - but only partially.

Bundeskongress des Deutschen Gewerkschaftsbundes (DGB) in Berlin (picture-alliance/dpa)

The DGB says 10,000 more officials are needed to enforce the minimum wage properly

In 2014, around 60 percent of mini-jobbers earned less than 8.50 euros an hour, a figure that sank to 50 percent in March 2015 and 44 percent in June the same year. The WSI's analysis also showed that 23 percent of contracts forced people to work so long that the 450-euro wage cap effectively meant they would be paid below the minimum wage from the start. One in five mini-jobbers received as little as 5.50 euros an hour, the study found.

Enforcing the law

The German Confederation of Trade Unions (DGB) said Germany's Central Customs Authority, which oversees labor regulation, desperately needed more personnel to ensure that companies are paying the minimum wage. Along with other trade unions, the DGB has repeatedly called for 10,000 more officials - at the moment, the authority currently has 7,000 controllers, with 1,600 more to be employed by 2022.

WSI tariff expert Reinhard Bispinck is convinced that the customs authority is short of the necessary staff. "The government promised that new positions would be created in the relatively short-term - that's only happened in a very limited way so far," he said. "And of course it's obvious that there are huge gaps in the oversight - especially in industries which are run on a small scale - like hotels and restaurants." (The customs authority itself declined to comment when contacted by DW.)

Mini-jobbers are also in a particularly difficult situation because very few have access to trade unions. "It's clear that mini-jobbers are particularly difficult to organize," Bispinck told DW. "The main problem is that they have to make individual legal complaints - they have no possibility of claiming a joint right to sue. And you can imagine that is pretty difficult."

GastRo Messe in Rostock (picture-alliance/dpa/D. Reinhardt)

Gastronomy businesses are notoriously difficult to control

Unfair mini-jobs

Mini-jobs were introduced in 2003 by Social Democrat Chancellor Gerhard Schröder as part of his "Hartz" concept to revitalize the German economy. Since mini-jobbers are often limited to short-term contracts or to 450 euros a month in salary, they are often still dependent on social security.

Though they are theoretically protected by Germany's labor laws, in practice, several studies have shown that employers like to bypass the law when it comes to mini-jobbers: "For example: vacations," said Bispinck. "Mini-jobbers have the right to a legal minimum vacation, and they also have the right to salary payment for the first six weeks in case of illness - but we know that in practice it makes no difference. Employers say it's a special work arrangement so you don't get it."

In an emailed statement to DW, a spokeswoman for the German Labor Ministry described the minimum wage as a "great success" that had improved working conditions for mini-jobbers, and suggested that surveys such as those the WSI study was based on were always prone to "measurement inaccuracies."

"At the same time, violations of the minimum wage law cannot be ruled out," she continued. "That's why an obligation to record working times ... expressly for mini-jobbers, across industries, was introduced. This has made enforcing [the law] much easier."

The spokeswoman added that enforcing the minimum wage was based on "risk analysis" - in other words, determining which industries and "employment structures" are more prone to violation - and that the WSI study could indeed be a valuable resource: "New detailed empirical insights, such as for example the WSI study, will be included in this risk analysis," she said.

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