When Chancellor Angela Merkel proposed a statutory pay floor of €8.50 ($11.70) an hour last fall, economists warned it could put hundreds of thousands of Germans out of work. But as managers and business lobbyists review the details of the draft legislation that her cabinet is preparing to adopt April 2, many are saying they can live with the law—and may even benefit from it.
“There may be job losses in the low-wage sector, but those will be limited,” said Stephan Johannes Reinhold, managing director of the Munich plant of CeWe Stiftung & Co., a photo-printing company that employs about 3,300 people in 24 European countries.
Germany is one of only seven countries in the 28-member European Union without a national minimum wage. For decades, it has let business groups and trade unions set pay and working times in collective agreements.
But a growing number of German companies are shunning these deals, contributing to a decade of largely stagnant wages. Meanwhile, many of the new jobs that have contributed to Germany’s low unemployment rate in recent years have been low-paid service-sector positions. Just as rising wealth inequality in the U.S. prompted President Barack Obama recently to call for a higher minimum wage, a widening income gap in Germany has boosted support for a pay floor.
When Ms. Merkel’s new coalition proposed the minimum wage following elections last fall, more than 80% of Germans welcomed it. At least five million German workers now earn less than €8.50 an hour. Minimum-wage proponents say lifting low pay could help rebalance Germany’s economy, which has long relied on exports for growth while domestic demand barely budged.
Several prominent economists have voiced doubt. Deutsche Bank DBK.XE +0.30% said in November the proposal could endanger up to one million jobs. Germany’s Ifo economic institute warned of losing up to 900,000 jobs, many of them part-time, or the equivalent of roughly 340,000 full-time jobs. Former East Germany—where wages are lower, profit margins thinner, and unemployment higher—would be hardest hit, critics say.
But many employers say they aren’t preparing pink slips. Arnulf Piepenbrock, a managing partner at facilities-management firm Piepenbrock Unternehmensgruppe GmbH, said he doesn’t plan to lay off any of its 3,581 cleaning staff in eastern Germany, even though they currently earn less than €8.50 an hour.