July 07 ,2014 | by Hari Sri

Germany introduces new national minimum wage

New national minimum wage

Germany has introduced a minimum wage for the first time in the country’s history.

Members of the German parliament approved plans to set the least amount of money a person can earn at €8.50 (£6.80) an hour. The Christian Democrats, led by chancellor Angela Merkel, will work alongside the Social Democratic Party (SPD) in a power-sharing deal to place this new policy in place.

Nations such as the UK and US already have a minimum wage in place but Germany’s €8.50 an hour rate is higher than both of these countries. The UK’s rate was revised in 2013 to £6.31 an hour while the US’ Federal government set the nation’s lowest minimum wage at $7.25 (£4.22) an hour. However, a large number of states including California, Florida and New York have a much higher rate.

 

Germany is currently one of seven countries within the European Union that does not have a minimum wage.

It has previously relied on trade unions and business groups to fix the pay level and the introduction of this new legislation has been a major talking point across the country.

There have been suggestions that it could weaken Germany’s competitive edge and that it could potentially see a downturn in job creation but there are mitigating circumstances surrounding the law. It will not come into effect until 1 January, 2015 giving companies time to phase one in the policy and it will not apply to minors, interns, trainees or long-term unemployed people for their six months at work.

 

While Germany has introduced a new minimum wage, Switzerland has overwhelmingly rejected a proposal. A referendum carried out in May was to decide whether the country should introduce the highest minimum wages in the world – 22 Swiss francs (approximately £15) an hour.

The results showed a 76 per cent vote against the proposal with critics stating that it would raise production costs and increase unemployment in the country.

Hari Sri

Hari is the LSBF Blog's News Editor. He manages the editorial content on the blog and writes about current affairs, SME, entrepreneurship, energy, education and emerging market news.

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