SPD Expands Labor Demands as Merkel Accepts Minimum Wage

Germany’s Social Democrats stepped up demands to bolster workers’ pay in coalition talks with Chancellor Angela Merkel after she gave way on their call to establish a minimum wage, prompting industry fears that the country’s labor-market rules are being unraveled.

Speaking at an IG Metall union conference in Frankfurt yesterday, SPD Chairman Sigmar Gabriel said he wants Merkel’s Christian Democrats to agree to broader regulation of workers’ pay. Groups including the CDU’s industry wing and the BDA employers warned that the labor market may return to a sclerotic past.

“Naturally there won’t be a coalition contract without a legal national minimum wage of 8.50 euros ($11.50), but in honesty, that’s too little for me,” Gabriel said. With two days before a self-imposed coalition deal deadline, reforming the temporary work sector and closing union pay deal exemptions “must be central aspects” of talks with Merkel, Gabriel said.

He and other SPD leaders are pushing to leverage labor market policy concessions from Merkel’s bloc. The SPD will ballot its 470,000 members in December asking them to approve a coalition with the CDU and its Christian Social Union Bavarian affiliate, which Gabriel concedes is “unloved.”

A minimum hourly wage of 8.50 euros would bump up the pay of 17 percent of Germany’s 42 million employed people, the German parliament’s scientific panel said in a paper published Nov. 18 that cites a forecast of the DIW economic institute. Germany’s low-pay sector is “one of the largest in Europe,” the study said.

Time Available

Speaking at the same gathering of labor union representatives, Merkel today confirmed that the central SPD demand will be anchored in the coalition accord despite the misgivings in her party about possible job losses.

“There will be an across-the-board statutory minimum wage in the coalition agreement,” Merkel told the conference. “We’re still speaking about the modalities.”

A minimum-wage agreement must ensure that jobs are protected, “otherwise we wouldn’t be achieving what we want to achieve together, namely that people have good work,” Merkel said.

CSU Chairman and Bavarian Prime Minister Horst Seehofer said in Munich over the weekend that negotiations had shifted from whether the SPD wins its demand to who would be exempted and when the minimum wage would be implemented.

‘Alarm Footing’

The three-party courtship has dragged on for almost two months, leaving policy decisions such as one on Europe’s banking union and on youth unemployment in the euro area on the back burner. The CDU-CSU has defended its own red lines in talks that started shortly after the Sept. 22 national election by blocking moves to increase tax and federal debt.

The SPD must use time available to the Nov. 27 deadline to win approval of its election campaign vows, Gabriel said. About 30 percent of eastern German companies are exempt from pay accords brokered by unions and employers, he said. Companies are exploiting workers with temporary contracts, Gabriel added.

In a letter sent to Merkel last week, the CDU’s Economic Council, or industrial wing, said it was “on an alarm footing” as the coalition talks threatened to roll back labor-market reforms, Frankfurter Allgemeine Zeitung said today in an advance-release report.

Germany posted record unemployment of more than 5 million in 2005 before the tally dropped after an easing of rules on firing and cuts in unemployment benefits helped price workers back into jobs.

Leaders from Merkel’s bloc and the SPD are set for “difficult days” before the coalition talks close, Seehofer said.

Before it's here, it's on the Bloomberg Terminal.