Germany to Extend Minimum Pay to Cleaners
By Brian Parkin
Aug. 23 (Bloomberg) -- Chancellor Angela Merkel's cabinet today agreed to extend minimum-wage rules to industrial cleaners in a step aimed at rooting out unfair competition caused by companies that undercut pay levels agreed with unions.
The BIV cleaning industry group that lobbied for the change said companies caught paying less than the minimum will risk prosecution when the rule becomes law next year. The legislation sets minimum hourly pay rates for cleaners in western Germany at 7.87 euros ($10.09) and 6.36 euros in the eastern states.
The new law ``will help root out the black sheep as tariff busters will face fines,'' said Bonn-based BIV spokeswoman Christine Sudhop in an interview. BIV represents 850,000 cleaners in 2,600 companies.
Other employers groups criticized Merkel, saying Germany is heading toward introducing universal minimum wages that may drive service sector companies out of business. The minimum wage for cleaners is identical to pay set in the trade's current salary agreement, copying an arrangement introduced in the construction trade in 1996.
The U.S. and the U.K. have set national minimum hourly wage rates. The unemployment rates in both countries are lower than Germany's. Economists say that minimum wage rules would add burdens to Germany's already over-regulated labor market.
Employment Setback
Holger Schmieding, co-head of European economics at Bank of America in London in an Aug. 21 interview urged Merkel to think again before burdening the labor market with new strictures. ``In the medium-term, cutting unemployment will suffer a setback,'' he said.
``Minimum pay rules destroy jobs, especially in eastern Germany,'' said Mario Ohoven, president of the BVMW small and medium-sized companies group, in a faxed statement. Merkel risks introducing a national minimum wage ``through the back door,'' Ohoven said.
The jobless rate in Germany's six eastern states in July was 18.6 percent compared with 9.9 percent in the 10 western regions.
Lawmakers will next month discuss a so-called combined-wage plan that aims to get the long-term unemployed back to work in programs that link minimum pay with subsidies. The wage rule for cleaners is due to become law in May next year.
