German low-wage job sector expanding

Germany's low-wage sector is growing at an alarming rate, according to a labour market study of the world's third largest economy.

German low-wage job sector expanding
Photo: DPA

More than one German in five works in the “low wage” category, a higher proportion than in Britain but below that in the United States, a press report said on Friday.

The left-of-centre Frankfurter Rundschau quoted researcher Gerhard Bosch as saying the trend was a troubling development.

“The conclusions for Germany are worrying,” said Bosch, who is director of the IAQ institute at the university in Duisburg-Essen.

He participated in a study carried out in Britain, Denmark, France, Germany, the Netherlands and the United States.

In Germany, the number of people considered to be earning low wages increased from 15 percent to 22 percent over the past 10 years, reaching a total of 6.5 million people.

The rate for Britain was 21.7 percent while in the United States, 25 percent of workers were categorised by the study as low-wage earners. Denmark showed the lowest level at 8.5 percent.

The IAQ institute also noted that Germany had “extremely low salaries, less than €5 ($7.95) an hour,” that were paid to around two million people.

“We did not expect such an unflattering result for Germany,” the study said.

However, the institute nonetheless noted in a statement that “while both Germany and the US have large shares of low-wage workers, German workers receive health insurance, four weeks of paid vacation, and generous old age support-benefits most low-wage workers in the US can only dream of.”

Europe’s biggest economy is in the midst of a debate over extending a new minimum wage for postal workers to other sectors. That would represent a sea change in a country where such questions are normally settled between unions and management representatives rather than by state intervention.

Unions and part of the German left support setting a general minimum wage, while economists and many on the right oppose such a move. Six German economic institutes warned on Thursday that a minimum wage of even €4.50 per hour would result in the loss of jobs for unskilled workers.

“In recent years, the German government has intentionally expanded the low-wage work sector in an effort to reduce exceptionally high levels of unemployment,” the IAQ said.


German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.