World Economy

German Low-Wage Sector Expanding

German Low-Wage Sector ExpandingGerman Low-Wage Sector Expanding

Reports on the German labor market lately seem enthusiastic. The Federal Labor Office announced the lowest unemployment rate in 24 years.

In Germany, 2.65 million people were officially registered as unemployed in October, the lowest level since 1991, DW reported.

“Solid employment growth continues unabated,” the Federal Labor Office commented, with some believing full employment was just around the corner.

But there’s a downside to it all. One in five employees only receive a sub-standard wage in Germany, or about 8 million people across the nation. While that figure is from 2010, it seems unlikely that the recent introduction of a minimum wage of €8.50 ($9.30) per hour will have much effect on the low-wage sector. In Germany, workers earning less than €10.36 per hour belong to that sector.

  Political Disposition

Sociologist Christoph Kohler from Jena University, a renowned German labor market researcher, says there’s a direct link. “Joblessness in Germany has gone down, but the low-wage sector has increased,” he said. “This means that unemployment has largely been turned into low-paying jobs.”

He added that it was a matter of political disposition whether to welcome or criticize this trend. “Leftist forces in the country would say that’s no improvement, while others might say it’s better to have a low-paying job than no job at all.”

  Collective Bargaining

There’s another sign of more insecurity on the job market. The impact of wage agreements stemming from collective bargaining between employers and trade unions has been diminishing for years.

More than half of employees in eastern Germany and 40% of their counterparts in the western part of the country have no collective wage agreement to fall back on, said the German Statistics Office, Destatis, in a recent report.

The number of people having to work two jobs to make a living increased by 13% between 2011 and 2014 and now affects 5% of the total labor force, or roughly two million people.

“A crucial reason behind this is that the low-wage sector has expanded so much,” Kohler said, pointing to so called “mini-jobs” on which people earn less than €450 per month and thus have to look for another job as storemen or warehousers, for instance.

  Training Refugees

Training and qualification are pivotal in landing a job in highly industrialized nations. As routine jobs are increasingly taken over by machines and robots, the number of jobs for people with few skills has been going down for years.

And the situation looks set to get worse in this sector in the face of growing refugee numbers. Kohler argues that unless a huge training effort is made, the new arrivals will predominantly end up in the low-wage sector.

“I’m afraid the labor market separation into two camps will pick up momentum,” he says.

  Gender Gap

There’s also no cause for rejoicing when it comes gender equality. While 47% of the working population were women last year (up from 42% in 1994), only 29% of them held executive posts.

On average, women earned 22% less per hour than male workers last year, meaning that the gender pay gap basically hasn’t narrowed since the beginning of the century.

The government thus failed to meet its target of narrowing down the gap to 15% by a wide margin, the stats office reported