Thursday, 3 July 2014

Germany becomes a minimum wage nation ... and immediately embarrases the UK's poverty wages

A little over a year ago we posted a popular piece on the national minimum wage and its relatively low level compared with that in other OECD nations (which the PCS union infographic below demonstrates).

At that point, Germany did not have a minimum wage, but today that changed with the news that one would be introduced from 1 January 2015 at a rate of €8.50 per hour.

By then the UK minimum wage will be have increased in October 2014 from its current £6.31 to £6.50. In a straight conversion the UK minimum wage is €7.95 now and will rise to €8.19 in October. So from January 2015, a low paid German worker will receive nearly 4% more than their UK counterpart.

Eurostat compiles data on EU nations' minimum wage rates (data here) and finds that Belgium, Ireland, France, Luxembourg, Netherlands all have nominally higher national minimum wage rates than the UK (as will Germany from January).

However, such a nominal comparison does not reflect differences in the cost of living, and differences taxation rates and additional social security available to workers in different countries.

The above infographic reflects the minimum wage relative to the average wage in each nation (and therefore as a marker for relative poverty).

But however you measure it, the UK minimum wage is low - which is why there is a  growing prevalence of in-work poverty - and so it's welcome that Ed Miliband stated today he wants to raise the minimum wage over the course of a parliament, in real terms.

As per Labour's already announced plans to increase and encourage the coverage of the living wage - including through incentives to companies - increasing the minimum wage in real terms would be partially offset by increased tax take and falling payments of tax credits and housing benefit.

The reality is that we are increasingly nationalising pay, because the private sector is failing to pay a liveable wage to workers. The best bulwark against this exploitation is not tax breaks or even welfare, but strong trade unions able to enforce collective bargaining rights. A big society solution underpinned by a legal framework that unshackles trade unions.

As Spirit Level authors Richard Wilkinson and Kate Pickett write in a new publication for Class, "strong unions are key to tackling inequality."


Anonymous said...

This is rubbish reporting. You show a graph with today's minimum wage for UK and next year's wage for Germany.

Andrew said...

Anonymous. No, I don't. I show a graph comparing minimum wages across nations (not including Germany).

Then, in the text, I compare what the UK minimum wage will be in January 2015 with what the German minimum wage will be when introduced in January 2015.

This approach is not without flaws, but it is not at all as you describe.