The making of the German minimum wage: a case study of institutional change

• DOI: http://doi.org/10.1111/irj.12200
• Published date: 01 January 2018
• Author: Gerhard Bosch
• Date: 01 January 2018

The making of the German minimum wage:

a case study of institutional change

Gerhard Bosch

ABSTRACT

In the more recent dualistic theories, Germany is cited as an example of a less solida-

ristic equilibrium, in which ‘producer coalitions’between core workforces supposedly

unaffected by deregulation and their employers prevented the introduction of a

minimum wage. The present article shows that such an equilibrium never existed.

Core workforces are being threatened by the outsourcing of jobs to the low-wage

sector. This threat created the breeding ground for a joint campaign by manufactur-

ing and service unions for a minimum wage, which made it possible to amalgamate

the unions’considerable resources at company level, their strength being derived from

the German system of codetermination. Under pressure from the manufacturing

unions in particular, the arrangements for the minimum wage follow, as far as

possible, the traditions of free collective bargaining. As a result, the social partners

in Germany have a considerably stronger influence on the minimum wage than those

in the UK.

1 INTRODUCTION

In January 2015, Germany introduced a national minimum wage, set at 8.50 euros

per hour. Up to this point, pay had been negotiated by the social partners acting

alone, and the state did not intervene directly in the wage-setting process.

Governments of all stripes long resisted any statutory intervention in wages policy,

as did the social partners, for fear of losing their positions of power in their core

business, namely, the negotiation of employment and working conditions. The new

German minimum wage is therefore not a ‘planned child’but was born out of

necessity. It was above all the trade unions that, observing the erosion of the

traditional collective bargaining system, were forced to acknowledge that, in many

industries, they had long since lost the power to negotiate on equal terms with the

employers. Indeed, from the mid-1990s onwards, Germany had seen the development

of one of the largest low-wage sectors in the EU, in which employers set wages unilat-

erally (Bosch and Kalina, 2008).

Although the share of low-wage workers in Germany is comparable with that in the

United States or the UK, for example, there are major differences in wage systems

between these two liberal market economies and Germany. In core areas of the

Germany economy, the traditional wage regime with its strong social partners and

❒Gerhard Bosch, Institut Arbeit und Qualifikation, Universität Duisburg-Essen, Lotharstrasse 65, 47057

Duisburg, Germany. Correspondence should be addressed to Gerhard Bosch, Institut Arbeit und

Qualifikation, Universität Duisburg-Essen, Lotharstrasse 65, 47057 Duisburg Germany; email: gerhard.

bosch@uni-due.de

Industrial Relations Journal 49:1, 19–33

ISSN 0019-8692

© 2018 Brian Towers (BRITOW) and John Wiley & Sons Ltd