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Getting by with the minimum

It’s been over two months since the new government coalition between the CDU and the SPD formed. And 11 months from now we’re going to see one of the effects: an €8.50 minimum wage. But will the new law change anything? Particularly for expats?

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Photo by Tania Castellví

Under the new government, Germany is on track for getting a minimum wage of €8.50 per hour. But don’t go on that spending spree quite yet: even after the law goes into effect, many Berliners – including plenty of expats – will keep working for next to nothing.

Forming a new governing coalition is hard work. Angela Merkel from the CDU, Horst Seehofer from the CSU and Sigmar Gabriel from the SPD spent 17 hours putting the final touches on their agreement. It wasn’t until 5:30 in the morning of November 27 that the parties finished their discussions in the SPD headquarters in Kreuzberg and voted for the 185-page coalition contract. But at least all this work is well paid: Merkel, as Chancellor and head of her party, makes a monthly wage of €17,043 (plus a bonus month’s worth of wages every year). Gabriel as a member of parliament earns €10,864, while Seehofer, Bavaria’s prime minister, makes €15,431 every month.

Another difficult job is that of kitchen assistant. Miguel Sanz works in an Italian restaurant, washing dishes, cleaning floors and making pizzas from noon until 10pm. For these 10 hours a day, six days a week, Sanz – a 33-year-old from Seville who studied and worked in environmental protection in his home country – gets €1250 per month. That’s just €5 an hour – and perfectly legal in Germany.

On the surface, the decision by the newly formed coalition to implement a national minimum wage would seem like good news for Sanz. Yet the new law does not necessarily guarantee that he – or the 5.6 million other people in Germany working for less than €8.50 an hour right now – will be any better off than he is today.

Ten years of discussions

Germany’s lack of a minimum wage has been a topic for a decade. Since the Social-Democratic Chancellor Gerhard Schröder introduced the Agenda 2010 reforms in 2003, Germany has become a land of low wages. Twenty-four percent of workers in Germany are in the Niedriglohn­sektor, earning less than 60 percent of the median wage: the highest rate in the European Union. In the last elections, the SPD, the Greens and Die Linke called for wages of at least €8.50 per hour.

These three parties won a majority of seats in the Bundestag and could have passed a law on a minimum wage before any new government was formed. Instead, the SPD preferred to fight for it in their negotiations for a grand coalition with the CDU. Their results: there will be a minimum wage of €8.50 starting in January of 2015 – but critics already warn that by that time, inflation will mean that €8.50 is worth less than it is today. And even then, there will still be exceptions.

In sectors where the collective contract allows wages below €8.50, the minimum wage won’t be implemented until January 2017. Currently, hairdressers in Brandenburg and Saxony-Anhalt have a collective contract that allows them only €3.05 an hour – and this will still be legal for three more years.

Juice and kiosks

Even when the law goes into effect, businesses will still find ways to exploit workers, especially foreigners desperate for work and without a full knowledge of their rights. Carmela Negrete’s first job in Berlin was selling orange juice at a kebab shop for €5 an hour. “Eight hours, standing up in the cold, for €40,“ she remembers. By the fourth day, she had a terrible cold and couldn’t go to work – on sick days, of course, she got nothing at all.

So she took a job at a kiosk, working 30 hours a month for €6 an hour. Instead of a job contract, there was a list of rules taped to the counter. “If you arrived more than 10 minutes late, you would have to pay €10.” Wages were paid whenever funds were available, sometimes after weeks of delays. The 27-year-old from Huelva in Spain had no choice but to comply: a journalist by profession, she could not pay the bills in Berlin with reporting alone.

“At least we got to climb for free,” says Thorben Korfhage about his job at an indoor climbing hall in Wedding. Beyond that, they only received €7.50 an hour. If money was missing from the register, they had to pay the difference out of pocket. “One guy had to pay €30 in one month,“ he remembers, “because when it gets really full, anyone can give the wrong change.” Many of the workers refused to sacrifice part of their salaries, and the 27-year-old economics student called the trade union ver.di and was informed this was clearly illegal. After a petition from the staff, management agreed to pay 50 cents per hour extra to anyone working the register, and money missing from the register could only be taken out of this extra payment. Nonetheless, wages there remain below €8.50.

“A minimum wage would mean I would have more time for my studies,” Korfhage says. “I could work five hours less a week and make the same money.” Yet there is no indication that the shady activity at his and Negrete’s workplaces will stop once a minimum wage is in place. Experts estimate that 2000 additional work inspectors would be necessary to ensure that businesses respect the law, and no new positions are currently planned.

Worse than Spain

“The laws here are worse than in Spain,” explains Sanz. There, you can sue an employer for paying less than the wage defined by the collective bargaining agreement. Employers must also provide written contracts – in Germany, oral contracts are also allowed. More important are the trade unions: “In Spain, a cafe owner will be a bit afraid that we’ll organise a picket out on the street and customers will stay away.” Germany’s businesses, with the exception of a few pockets in the retail sector, don’t have to worry much about angry employees because so few low-wage workers are in trade unions. However, as Korfhage’s case shows, even a simple phone call to a union and a letter can bring about small improvements.

There are all kinds of legal exceptions to the labour laws already, many of them involving the state welfare system. Negrete went on welfare after nine months of combining a newspaper internship with a €400 mini-job. Since benefits can be cut for refusing a job offer, there is enormous pressure to take any work at all, no matter how poorly paid. “Hartz IV creates extreme control mechanisms,” says Negrete of her experience with the state unemployment subsidy, which forces recipients to follow Byzantine rules.

“At the same time, it forces people to get jobs off the books.” So-called Schwarzarbeit, whether collecting bottles or working in a shop, is the only way to earn a significant amount on top of benefits. “Without cheating, it’s impossible to survive,” she says. “With a minimum wage, they’ll agree to pay you €8.50 an hour, but then they’ll ask you to work for two.”

Getting off Hartz-IV, Negrete was told she would work three hours a day cleaning a three-storey elementary school. “It was me and a retired person,” she remembers. On the first day, it became clear that two people could not possibly finish the job in three hours. They would work five or six hours – and were promised they would get the overtime back later in the form of paid vacation days. The retiree disappeared soon, but Negrete was worried that quitting would mean a benefit cut from the Jobcenter.

She was then joined by women from Romania, a young refugee, and an endless cycle of people doing unpaid ‘trial’ work days. “They yelled at us, they insulted us, they told us we were good for nothing,” she remembers. And when she left after three months, there was no question of getting back wages for having worked almost twice as much as agreed. “The minimum wage won’t mean anything,” she reflects.

The real effects

Opponents of the minimum wage law have said it will destroy jobs. For Sanz, who has also been involved in trade union work, it’s simply not true. “Employers hire people not because they want to give away money, but because they require a concrete service.” One restaurant owner who didn’t want to be quoted said with a shrug that he would have to raise prices if he had to pay his employees €8.50. But there’s really no question of getting rid of waiters entirely. Korfhage, the economics student and climber, agrees that there’s no danger to employment: “It’s not like they could reduce personnel at the climbing hall. At most, they could pass on higher costs to consumers.”

However, the law could result in an increase in that breed of worker already found all over Berlin, especially among young English speakers: the freelancer. Some call centres already classify their phone bank employees as “independent contractors,” paying them €8.50 an hour but forcing them to ‘rent’ their workspace for €1. This kind of Scheinselbstständigkeit (fake self-employed status) will only get worse with the implementation of a minimum wage. If a law mandates that waiters must be paid €8.50 an hour, there may soon be ‘freelance’ waiters getting paid per table served, rather than per hour worked, and earning much less.

Miguel gets €1250 per month. That’s just €5 an hour – and is perfectly legal in Germany.

“It’s not all about bad capitalists trying to exploit people. The Berlin economy is notoriously bad. Taxes and social contributions are high – times are also tough on employers, and believe me, we’re trying our best,” says Silvia (name changed), owner of a digital publishing company. The reality is that many smaller independent companies in the Berlin creative sector have to rely on “atypische Beschäftigungsverhältnisse”, a bureaucratic term for anyone without a full-time contract and social insurance.

There are hordes of young people who want work in attractive fields such as media, journalism or design – and small companies that can provide work but can’t afford full-time salaries. Were they to pay €8.50 to everyone, some employees would simply have their hours cut. “Every bit of profit we make gets reinvested into people,” continues Silvia. “Often we give our employees the choice between a higher freelance fee or a smaller staff wage, which in reality costs us much more.”

High payroll taxes and social security contributions in Germany are often a deterrent to staff contracts. “Many prefer a freelance status and more cash in hand; some would rather be paid less, but have their social security costs covered… I guess everyone’s got to be flexible.” So, how much will the new law affect their company? “Frankly, I’m not quite sure…”

What is for sure is that even if €8.50 becomes the law of the land, Berlin will remain a capital of Hartz-IV and precarious employment. In the coming years, in this city’s cutthroat market, we are going to see endlessly creative means of getting around the minimum wage.

Originally published in issue #123, January 2014.