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German Employers' Leader: Minimum Wage Would Harm Competitiveness

Ingo Kramer, the new elected chairman of the Confederation of German Employers' Association (BDA), makes a point during his speech at a gala dinner as part of an employers meeting in Berlin. Nov. 18, 2013.
Ingo Kramer, the new elected chairman of the Confederation of German Employers' Association (BDA), makes a point during his speech at a gala dinner as part of an employers meeting in Berlin. Nov. 18, 2013.
Reuters
The leader of Germany's employers' federation said on Tuesday the next government's welfare plans and the introduction of a minimum wage would endanger competitiveness.

A day after being elected head of the BDA, Ingo Kramer said Chancellor Angela Merkel's conservatives and the center-left Social Democrats [SPD] - in talks to form a coalition government - were not focussing on the right issues.

“When I look at the current topics of the coalition negotiations, I don't always get the impression that the emphasis is right,” said Kramer.

“Further benefits for pensions, care, family and healthcare  are being discussed. Minimum wages and new labor market regulations, higher public spending and higher contribution burdens are being discussed,” he said.

“But does that give us the right to put at risk the competitiveness that was won back after hard years by putting companies into a new corset of constricting rules?” he asked.

Merkel's conservatives emerged from September's election as the largest force, but fell short of a majority. Talks with the SPD are advancing and a coalition government is expected to be sworn in by Christmas.

The German economy has continued expanding during the eurozone crisis that has hit many of its trading partners hard.

The economy stagnated in the first quarter of 2013, and though it achieved growth of 0.7 percent in the second quarter, preliminary data shows it expanded by just 0.3 percent between July and September as exports weighed.

Minimum wage

Among plans being discussed in the coalition talks are a nationwide minimum wage, a hike in pensions for mothers with children born before 1992 and steps that would make it more attractive for people to stop working before they reach the statutory retirement age of 67.

Germany has faced criticism from abroad over its perennial trade surpluses and many have said stronger domestic demand, fueled by higher wages, is needed to counter imbalances that have put strains on the euro zone.

But Kramer said he was appalled by plans to introduce a minimum wage of 8.50 euros per hour, saying it would jeopardized the goal of full employment.

Merkel has signaled a readiness to accept the minimum wage. The SPD has said a failure to get this would be a deal-breaker.

“Nobody should be under any illusion: a long-term jobless person, who hasn't worked for many years and has no training, will get no entry into work in many branches and regions for a state-prescribed hourly wage of 8.50 euros,” said Kramer.

Labor and welfare reforms introduced by former SPD Chancellor Gerhard Schroeder in 2003 have been credited with boosting German competitiveness and shielding the economy from the worst of the global financial and the eurozone crises.

Merkel on Monday prepared the BDA for more labor market regulation, saying flexibility had led “in turn to abuse.”

Kramer said courts were able to pursue such abuses under current laws. He said companies were investing less than before the financial crisis and did not need new legal burdens.

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