Germany became the last major European economy to introduce the national minimum wage with the lower house of the Parliament enacting the law with a majority of 535 votes for, 5 against and 61 abstentions. About 3.7 million workers will become entitled to a minimum hourly wage of €8.50, around $11.6 when the law takes effect in 2015.
The establishment of a minimum wage was the keystone of the coalition agreement between the conservative Christian Democratic Union party and the Social Democratic Party. The proposal faced a stiff opposition from supporters of the former party who argued that such a move would affect the economic development of areas that constituted former East Germany.
All major parties, except for far-left party Die Linke, supported the law. The Upper House of the Parliament, representing the 16 states of Germany, is expected to vote in favor of the enactment of the law.
The law covers workers of all industries except industries that have existing wage agreements with workers and trade unions. The law will apply to such industries from the year 2016. The law provides for establishment of a National Commission in 2017 for revision of the minimum wages payable with effect from 2018.
Germany’s apprenticeship system, popular for its effective functioning, has been exempted from the minimum wage law. Further, the law does not cover individuals who have been unemployed for a period of 12 months or more. Such exceptions have been provided to ensure businesses remain undeterred from having apprentices hiring unemployed individuals.
The Parliament also passed a law lowering the minimum age full pension retirement to 63 years. Such populist labor-friendly reforms may have a negative impact on the operations of businesses that will have to face higher labor costs and compliance with additional legal regulations.