World Economy

German Advisers Warn Against Minimum Wage for Refugees

German Advisers Warn Against Minimum Wage for RefugeesGerman Advisers Warn Against Minimum Wage for Refugees

Berlin’s top economic advisers have recommended suspending the country’s minimum wage requirement to make refugees more attractive to employers. Easing access to the job market will help them integrate quicker, they say.

The German economy is strong enough to stem the costs of the refugee crisis, the country’s economic “wise men” said in their annual report released Wednesday. But they also warned that the country’s minimum wage, introduced just this year, was a stumbling block for newcomers trying to gain a foothold on the job market, DW reported.

The five-member panel, which is tasked with evaluating federal economic policies, suggested suspending the minimum wage of €8.50 ($9.1) for refugees to make them more attractive to employers.

“The minimum wage is likely to pose a barrier to entry (into the job market) for many refugees. Considering the growing supply of low-wage labor the minimum wage should under no circumstance be raised,” the group, officially known as the German Council of Economic Experts (GCEE), cautioned.

The government must make removing such barriers a top priority, the advisers said, arguing this would help newcomers better integrate into German society. In a September report , the Organization for Economic Cooperation and Development echoed this sentiment, saying that providing easy access to the job market was the best way to turn refugees into a boon, not a burden, for host countries.

 Refugee Costs Manageable

Germany alone is expected to receive at least 800,000, but probably closer to one million, new migrants this year.

The GCEE calculated the refugee crisis would cost Germany €22.6 billion ($24.28 billion) alone this year, including additional public outlays of up to €8.3 billion. That figure is even higher than the €21.1 billion estimate the Munich-based Ifo institute announced on Tuesday, which was almost double its previous projection.

“Considering the healthy state of the (federal and regional) budgets,” however, the government’s top economists deemed these costs “manageable.” The panel forecast GDP growth of 1.7% this year, or a surplus of €21 billion, followed by a slight drop to 1.6% in 2016.

But unless authorities do away with much of the red tape, the price tag could balloon even further.

“Lengthier asylum procedures and a deterioration in labor market integration could boost the costs significantly,” said Christoph Schmidt, head of the panel.

If handled correctly, however, the new migrants could also help fuel Europe’s biggest economic engine, they said. Experts have long warned that Germany is likely to lose steam as the population ages, with fewer, qualified young workers to replace them. Qualified workers, escaping war-torn countries such as Afghanistan and Syria, could help reverse that trend.