Call for minimum wage as Germany and Austria open labour markets

GERMANY AND Austria became the final EU member states to open their labour markets to the 10 countries that joined the bloc in 2004. Since yesterday, May 1st, workers from Tallinn to Budapest are free to work in Germany and Austria without work permits – seven years after similar provisions came into effect in Britain, Ireland and Sweden.

At May Day rallies in Germany yesterday union leaders used the occasion to renew their calls for a statutory minimum wage of €8.50. Germany currently has minimum wages only in particular sectors, including office cleaning and security. “We are worried that [open labour markets] will lead to an increase in wage dumping in the temporary work sector,” said Detlef Wetzel, deputy head of the powerful IG Metall metalworkers’ union.

Their concerns were echoed by Germany’s opposition Left Party.

“If [an employer] says he’ll take the Polish employee because he is more diligent, more qualified and more reliable, then that is fine,” said Gregor Gysi, parliamentary head of the Left Party. “But if he says he’ll take him because he’s cheaper, then I have a problem.”

Mr Gysi warned that the labour market opening, after a seven-year “transition” period, could drive Germans in struggling areas to the far right.

German economists insist the opening of the labour market will not have a negative effect on wages as about 85 per cent of German companies operate under some sort of house agreement.

“We simulated the effect of migration to 2020 and saw wage levels would drop just 0.4 per cent [as a result] and unemployment would rise about 0.2 percentage points,” said labour market economist Prof Herbert Brücker. “Those are low-level effects at the fringes of statistical measurements.”

Anticipating public concerns, the German government promised yesterday to step up spot checks to prevent the spread of black-market work, particularly on building sites and in the catering industry. “The free movement of labour is a great chance for Germany and for Europe, but we’re not approaching it naively,” said finance minister Wolfgang Schäuble.

“Employers and employees can be sure that obeying the rules will be insisted upon.”

Seven years after Ireland opened its labour market, a study for Germany’s Friedrich Ebert Foundation showed that workers from Poland and other 2004 accession states who arrived in Ireland earned 18 per cent less than comparable Irish workers.

In a research paper, Gerard Hughes, a Trinity College Dublin visiting professor and former ESRI research professor, said immigration ensured that Irish wage growth was nearly 8 per cent below what it would have otherwise been. The study also said the so-called “EU10 nationals” “made less demand on the welfare system than Irish nationals when labour demand was strong”.

In Austria, the opening of the labour market was little cause for celebration. “The opening to the east is coming at our expense,” said Heinz-Christian Strache, head of the far-right Freedom Party. “If I’d been chancellor, I’d have extended the transition period indefinitely.”

Meanwhile, there was a tone of apathy and bitterness among Austria and Germany’s eastern neighbours. Czech newspaper Lidove Noviny noted that a “balloon has burst that poisoned the air for seven years”.

“Germany won’t get the workers it needs and they have only themselves to blame, for waiting until the last possible moment,” it commented.

Poland’s influential Gazeta Wyborcza marked the occasion with an editorial headlined “Berlin? No thanks”.

“Germany has little to offer as qualified staff already earn good money here. If German figures show a rise in Poles, it’ll be from illegal workers who can now switch to legal work.”