German Retail Fears Costly Blow In Upcoming Minimum Wage Decision
Merchants Urge Elimination of Compromise When Establishing Minimum Wage
In the face of the upcoming decision by the Minimum Wage Commission, German retail is bracing for a potential hit. Alexander von Preen, the president of the HDE industry association, has voiced concerns for the sector as it grapples with the impact of a third straight year of recession, tight margins, and dwindling reserves.
HDE's survey of around 550 retail companies revealed that two-thirds anticipate negative effects on employment, including layoffs, if the minimum wage significantly increases. Von Preen urges for a suspension of the minimum wage adjustment, calling for a zero round, despite union criticism.
Silke Zimmer, a member of the federal executive board of service union Verdi, condemned the demand for no increase, arguing that retail employees still need a raise in the face of past price hikes. Zimmer pointed out that many retail employees struggle to make ends meet with their current income, and that nearly 90% of the more than three million employees in retail are at risk of old-age poverty.
A minimum wage of €15 per hour by 2026, as outlined in the coalition agreement between Union and SPD, is the current goal.[1] However, the Minimum Wage Commission of trade unions and employers may announce its decision as early as June. The HDE president warned of the overall wage increases that would ensue due to the minimum wage increase, particularly in comparison to higher wage groups, and the potential need for increased conflicts in the workplace.
Political response to the decision remains mixed, with speculation of legislative action should the commission not reach the targeted wage of €15. However, the Association of German Wholesale, Foreign Trade, and Services (BGA) urged politics to stay out of the matter.
Amidst these developments, the retail sector prepares for potential increases in labor costs, price adjustments, and investment in efficiency to remain profitable while adhering to new wage requirements.
Background:
- The Minimum Wage Commission, comprised of trade unions and employers, sets the minimum wage in Germany.
- Minimum wage increases could have far-reaching effects on labor markets, including potentially increased consumer spending power, and increased costs for businesses, particularly in labor-intensive sectors such as retail.
- In an attempt to mitigate the financial burden on retail businesses, Alexander von Preen from the HDE industry association proposed suspending the minimum wage adjustment, citing the need for a zero round to maintain profitability, especially in light of the ongoing recession and dwindling reserves.
- The German retail sector, in preparation for potential increases in labor costs due to the minimum wage decision, is considering various strategies, including vocational training initiatives to enhance efficiency and productivity, ensuring business continuity while complying with the new wage requirements.
