German govt proposes minimum wage in each industry
(Agencies)
Updated: 2005-04-27 22:25

The ruling coalition of Social Democrats and Greens, seeking to protect German jobs from cheap foreign labour, on Wednesday agreed proposals to effectively introduce minimum wages in all sectors. Analysts said the move was partly an attempt by Chancellor Gerhard Schroeder's embattled government, badly lagging in opinion polls, to claw back support ahead of a key regional election next month.

Some of the Social Democrats' core voters have become disillusioned in recent months as Schroeder forced through a package of painful welfare cuts. Reports that some firms are hiring cheaper foreign workers instead of Germans have provoked widespread anger.

The proposal agreed in cabinet on Wednesday calls for a law introduced in the mid 1990s, known in Germany as the "Entsendegesetz", to be extended from the construction sector to all branches of industry.

All employers, including non-German companies, would then be obliged to pay the minimum wage agreed in negotiations between employers and labour unions in each industrial sector.

"To fight wage undercutting it's important that foreign employers can be obliged to pay their workers the minimum salary agreed in German wage talks," the Economy Ministry said.

"The government expects negotiators in the sectors affected by wage undercutting in their own interest to create the necessary nationwide structures," it added.

The minimum wage proposal would need approval in the opposition-controlled upper house of parliament, and therefore its chances of becoming law are slim.

The Social Democrats and Greens may lose power in Germany's most populous state, North Rhine-Westphalia, in a May 22 election according to opinion polls.

Schroeder has come under intense pressure from the SPD's left wing to back up the party's rhetoric opposing unbridled capitalism with concrete measures.

Wednesday's announcement on minimum wages was a victory for the left over Economy Minister Wolfgang Clement, who ironically announced the decision at a briefing in Berlin, and even over Schroeder himself, analysts said.

Eckart Tuchtfeld, an economist at Commerzbank in Frankfurt, said the government's proposal would likely have the opposite effect to the one intended.

"It would mean by-and-large higher wages which would probably lead to production being relocated abroad," he said. "We are afraid that this step will do nothing to protect domestic workers. Instead even more jobs could be lost."

Tuchtfeld said the proposal was the latest salvo in a broadside launched against industry in recent weeks by leading Social Democrats hoping to win back voters.

"The political climate that has been critical of corporations in general in Germany has even deteriorated in the past weeks so the government may be hoping to regain lost ground in the polls by such measures.

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