Germany to introduce minimum wage

http://www.thelocal.de/20131121/germany-to-introduce-minimum-wage

by lelf • 13 years ago

31 46 13 years ago

fleitz4• 13 years ago

As much as I'd love to talk about this it seems much more political than tech related, are there any issues of tech workers getting less than 8.50? What's the angle...

bananacurve2• 13 years ago

You don't seem to have a problem talking politics about the US. How do you explain that?

fleitz4• 13 years ago

It's mostly tech related tangentially on HN...

Personally, I love talking politics, whatever country. The article just didn't seem to have anything related to tech, and perhaps might not be appropriate, unless HN wants to become a place where we can talk politics whether its tech related or not.

mordae2• 13 years ago

Probably not.

On the other hand, our team of senior Linux administrators get 7 EUR per hour each in Prague, just 350km from Berlin. It's always interesting to hear about wages in other parts of the world. Puts things into perspective...

fleitz4• 13 years ago

Yeah, that's interesting to me as well. I thought you could only get away with paying people that much in China / India.

I tend to think somewhere like Prague would be an awesome place to do a startup.

auctiontheory• 13 years ago

our team of senior Linux administrators get 7 EUR per hour each in Prague

Wow. Just wow. Wikipedia says that they're making far less than the per-capita income for the Czech Republic. Presumably they speak English - why do they stay, rather than move elsewhere in the EU? (In Silicon Valley, the same job would pay multiples of the mean income.)

More selfishly, assuming you aren't there yourself, how do you go about finding Eastern European technical talent, which everyone speaks so highly about?

rayiner• 13 years ago

See: http://www.forbes.com/sites/leonardburman/2012/03/14/raising....

I don't think the minimum wage has been a great success anywhere it's been implemented, so I'm a bit surprised Germany would adopt it now instead of trying something more forward-looking. The conservatives in Germany could have preempted this I think by proposing some sort of minimum income like in Switzerland.

arrrg• 13 years ago

Minimum income is currently not a politically viable option. None of the major parties even considers it as a serious option, nor is there viable public support for it. Minimum wage has widespread support in the population and during the last years the conservative party never styled itself as fundamentally opposed to minimum wage (though always only minimum wage implemented independently from government through collective bargaining where available). As evidenced by the loss of parties who are actively campaigning for a minimum wage in the recent election it’s also obviously not an issue that wins elections (though probably also not one that loses elections).

About half of German employees are covered by those minimum wages through collective bargaining (which, of course, only exist because of the political and regulatory framework for collective bargaining in Germany). Garbage collection workers, for example, are at €8.68, lowly construction workers are at €10.25 (East Germany) and €11.05 (West Germany) and so on.

notahacker2• 13 years ago

I can't possibly imagine why a conservative party would consider giving away 25% of GDP as direct handouts in an unprecedented and essentially untested reform of the welfare system over a tweak to employment law which has had positive results in similar countries.

The article you linked to hardly leaves the average reader with the impression a minimum wage would be a disaster.

msandford4• 13 years ago

I wish we'd just get to the core of the problem, big big inflation via the Fed destroying the purchasing power of the dollar and various other central banks following suit in their own currencies.

If you get new dollars first when they're more valuable, life is TOTALLY RAD. You get to spend the new money before it works its way through the system. So you're spending post-inflation money but getting pre-inflation prices. Yum.

If you don't get the new dollars first then what tends to happen is that your costs go up before your income does. This is not a good situation for a business to be in and it's not good for an individual either.

Imagine that you are trying to make a startup work and every month your COGS goes up 10% but you can only increase the prices you charge on a 6-18 month lag. You might run out of cash covering your increased costs long before you can raise your prices and make up the difference.

This is roughly how household finances have been playing out for quite a few years now. At least ~40 or so years since Nixon closed the gold window, but maybe up to ~100 years since the founding of the Fed.

EDIT: If you want to downvote me could you at least tell me why? I'd like to be a good citizen on HN and downvotes without comment don't explain anything.

lolcraft• 13 years ago

Because this is a common misconception about economics that drives me nut. On second thought, I'm definitely too trigger happy. Let me explain:

Inflation has never been a problem since Paul Volcker in 1982. In fact, the moniker Great Moderation should be more properly called Great Moderation of Inflation -- since not much was moderate apart from that, as exemplified by the crashes of 1987 and 2008, and the bubbles; but I digress.

We had about 10, 20 years of the lowest level of inflation in history across the board, maybe 2% per annum or so. Everyone nowadays is obsessed with Zimbabwe, or the ex-Soviet Unions, or the Diocletian Roman Empire, but those are red herrings, minor blips in a sea of (excessive) financial restraint. Inflation is not a problem today.

In fact, deflation is a problem today. Large part of the German restructuring, so lauded everywhere, was helped by inflation in Spain and Italy. (Granted, it wasn't much, maybe 4% per year, but even so.) Now the ECB refuses to return the favor: the ECB won't let inflation go above 2%, twisting the knife in Southern Europe's rib-cage and pissing everyone off. Meanwhile, the US, as most of the West and Japan, remains eyeballs deep in a liquidity trap: you could print the equivalent of the Michigan Lake in one dollar bills, and the Consumer Price Index wouldn't register a blip.

If your start-up were a big bank, you could tomorrow borrow money from the government at a real negative rate. You could borrow a billion dollars, store it in a bank account, pay in 10 years the principal and profit handsomely with the interest. For nothing. That's how low inflation is, today. The Fed is (used to be) desperately trying to increase it, as we speak, with not much effect.

In economic terms, a moderate (actually very low, in historical terms) 4% rate across the board would in fact benefit the system. If you can profit decently by storing money, nobody wants to get their lazy asses from the couch and invest. And the guys who have money don't want to spend it, either -- they're winning money, why spend? Thus a crisis. You have to whip their asses with the printing press, so that they don't get cozy.

panarky• 13 years ago

Because on HN we prefer rational arguments based on evidence. We can debate the evidence, we can debate the logic, but let's start with a credible foundation.

Here are a few sources of evidence. Feel free to suggest your own. Inflation in the US is at depths not seen in 50 years [0]. Just this week, the monthly US inflation number was actually negative [1].

If you don't trust government numbers, try the billion prices project from MIT. It's an independent series with a different methodology, and it coincides (roughly) with BLS numbers [2].

[0] http://research.stlouisfed.org/fredgraph.png?g=oMN

[1] http://www.bls.gov/news.release/cpi.nr0.htm

[2] http://bpp.mit.edu/usa/

dragonwriter2• 13 years ago

minimum income like in Switzerland.

Switzerland has adopted a basic income, not a minimum income. They are two very different policies (minimum income pays the difference between the minimum and the actual outside income to those whose actual outside income is less than the minimum, basic income pays everyone the basic income, irrespective of outside income.)

jsnell• 13 years ago

Switzerland hasn't adopted basic income. There will be a referendum on it next year, but there are referendums on all kinds of things. Some of of them are unpopular enough to fail 25% to 75%, so even getting the referendum initiative passed says little.

jsnk2• 13 years ago

Wow, that's amazing that Germany never had minimum wage!

To be honest, this seems like a good example that not having minimum wage doesn't necessarily lead to pre-industrial age wage slavery that academics are always worried should minimum wage disappear.

jusob• 13 years ago

You mean this would not happen: http://www.reuters.com/article/2012/02/08/us-germany-jobs-id...

jsnk2• 13 years ago

Are you citing this as a problem comparable to nation wide wage slavery academics warn against? I think this problem in Germany is so marginal and rare that you are trivializing the magnitude of the problem. If this is the scale of problem caused by lack of minimum wage, I would say abolish minimum wage without any hesitation. Advantages of not having minimum wage is clearly order of magnitudes larger than this marginal problem.

elnate• 13 years ago

That was prevented only because of strong unions effectively setting a minimum wage for their industries. Hence why non union workers where getting shafted.

onli• 13 years ago

The history of early unions in Germany is btw quite interesting, especially in Weimar and before WW I, if I'm not mistaken. It is not so long ago that workers had to seriously strike to achieve any improvements of unimaginable horrible work conditions. And it is not so long ago that the german army was used to end those strikes using lethal force.

Especially the Ruhrgebiet has quite some stories of that regard. It shines an interesting light on the history of the german social democrats and their relationship to the communist party, given both their interest in the approval of the workers, and is a - mildly put - embarrassing comparison to the state of the modern SPD and its political vision (its Gestaltungswille).

Might be a bit OT for non-germans, but most countries - apart from the USA, afaik - should have a similar part of their history.

notahacker2• 13 years ago

That implies an interesting argument in favour of a standard minimum wage from a right-leaning perspective; not having it greatly strengthens trade union influence and consequentially results in worse distortion of market wages.

mjn3• 13 years ago

It's a few years old now, but Table 5 here is interesting from that perspective, showing percentage of workers in countries without minimum wages, who are instead covered by a union minimum wage: http://www.eurofound.europa.eu/eiro/2005/07/study/tn0507101s...

Countries like Denmark and Austria are sometimes touted as examples of how you can have no minimum wage and still good working conditions, but they really do have something very close to a minimum wage. It's negotiated through a corporatist labor framework rather than passed directly by a legislature, but the end result is that 98% of Austrian workers and about 85% of Danish workers are covered by a minimum wage (in Denmark it is 109 DKK, about €15/hr).

Germany by contrast has much lower rates of union coverage (69% as of 2003, and rapidly dropping), making that mechanism less effective. One solution could be to introduce a de jure minimum wage, as Germany now seems likely to do. Another solution could be to change Germany's labor framework so it's closer to the one that prevails in Denmark and Austria, countries that have systems that more or less guarantee that large workplaces are always unionized.

bowlofpetunias• 13 years ago

Actually, Germany is a good example that sooner or later wage slavery does set in.

The powerful and widespread unionization and the regulatory framework for collective bargaining has until now made mandatory minimum wages unnecessary, but that systems has been broken ever since the reunification, and has collapsed with the economic crisis.

If anything, the current situation in Germany makes the argument for having minimum wage stronger than ever.

_ak• 13 years ago

Yep. The fact that there are plenty of people in Germany who work 40 hours per week and still need to apply for benefits in order to be able to pay their rent and buy food is not only a big shame for this country, it also effectively shifts salaries from being paid by the employer to being paid by the taxpayer.

bentruyman• 13 years ago

How does Germany calculate "unemployment" differently from the United States?

http://www.wolframalpha.com/input/?i=germany+vs+united+state...

yk2• 13 years ago

You should use the unemployment rate, since the US are several times larger than Germany. Apart from that, I think that German unemployment is compiled by some government office, who use the actual numbers of people who get unemployment benefits, while in the US telephone surveys used.

http://www.wolframalpha.com/input/?i=germany+vs+united+state...

billyjobob• 13 years ago

I don't know about Germany, but in the UK the minimum wage is so low that it isn't enough to live on and the government have to make welfare benefit payments so that the people on minimum wage can survive. Businesses are only able to pay such low wages because the government effectively subsidizes them.

Also there are a lot of loopholes in the law, e.g. workers on the government 'work programme' can be paid less than the minimum wage. Interns are supposed to be paid minimum wage, but most are not paid anything at all and the only consequence is that the government writes a stern letter to their employers.

byoung22• 13 years ago

That is also true in many parts of the US. In California, it is currently $8/hr, which means if you are able to work 40 hours a week (likely across two employers), you make $16,640 per year. At that income, you couldn't afford to live alone in Los Angeles, where a studio apartment would cost $1200/month, which is already 86% of your income. You could, however, qualify for subsidized housing, which would pay 80% of your rent, nutrition assistance which would give you a few hundred dollars per month to buy groceries, and recently, subsidized health insurance that would give you a basic HMO plan for free. In effect, the government (federal, state, county, and city) is basically matching the employer dollar for dollar for many minimum wage employees.

forktheif• 13 years ago

UK minimum wage is £6.31 an hour which converts to $10.24, so slightly higher. Though maybe that conversion is too simplistic.

mathattack• 13 years ago

This concept is very strange to me, as Germany is generally considered to be a high-efficiency high-wage country. I wonder if this comes from social pressure of supporting so many high-social-welfare countries.

Vitaly• 13 years ago

Germany of all places? Thats the one economy in Europe that actually seems to work quite well. Why try to "fix" it?

Germany to introduce minimum wage

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