German parliament approves controversial national minimum wage | Business | Economy and finance news from a German perspective | DW | 03.07.2014

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German parliament approves controversial national minimum wage

Germany's lower house of parliament, the Bundestag, has passed a hotly debated nationwide minimum wage deal. It has been a flagship project of the Social Democrats, who had to put up with many exemptions.

Watch video 04:29

German Labor Minister's fight for a minimum wage

Bundestag approval of national minimum wage legislation came Thursday after protracted negotiations between Chancellor Angela Merkel's Christian Democrats and their grand coalition partners, the Social Democrats.

The two sides finally reached an agreement for an 8.50 euro ($11.60) per-hour blanket minimum.

But the compromise deal includes far more exemptions than the Social Democrats had originally been willing to accept.

Some sectors will be allowed to delay introducing the agreement for two years with a view to helping them adjust, for instance. Additionally, certain groups of people, including short-term interns, trainees, the long-term unemployed and people under the age of 18, can be paid less.

Crippled accord

"With the high number of exemptions, the coalition has brutally amputated the minimum wage," said the head of the powerful Verdi labor union, Frank Bsirske.

Nonetheless, the deal has received praise from those who believe it will create a fairer labor market and reduce the number of jobs that pay unlivable wages. But others have argued a nationwide minimum wage will eventually cost jobs.

"In the short term, the minimum wage will stimulate the economy, but in the long run it could become a problem for international competitiveness," ING Chief Economist Carsten Brzeski argued, pointing to rising labor costs and the specter of companies moving production facilities abroad.

Germany has in the past stubbornly resisted a minimum wage so as not to interfere with wage bargaining between employers and unions while relying on collective wage deals in various sectors and regions. The new regulations will come into effect on 1 January, 2015. The wage will be reviewed annually from 2016.

hg/cjc (dpa, Reuters)

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