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Low Pay – Better no pay

This week a cross party group of German parliamentarians visited London to learn more about the introduction of the minimum wage, a policy to which Mrs Merkel’s Coalition is committed.

Given that Germany is now committed to such a course, one which curtails the right of individuals to sell their labour at a price of their own choosing, how should the adverse impact be mitigated?

First, regional differences should be taken account of in setting the wage. Next, there is to be a differentiation on the basis of age and experience. And, to help the employability of disabled people, the likely impact on the employability of disabled people ought to be reduced and opt-outs by consent permitted. Finally, within such differentials, there is a case to set the rate at one lower than the market might pay Indeed in London, because the minimum wage is normally below the market rate, it is less damaging. And here in Britain we ought to recognise that the higher, living wage, has the merit of not being compulsory.

Although Germany has low levels of unemployment at 5.2 per cent, lower than the UK’s 6.8 per cent and far lower than the Eurozone average of 11.7 per cent, with Spain at 26 per cent, the new policy might undermine such success.

Politicians should remember that for jobless people, low pay is better than no pay, and by introducing a minimum wage under law, they will make that option available only to those who are self-employed. These matters involve moral as well as economic questions.

German politicians will now prepare to introduce the minimum wage. Many in Germany already have reason to lament the coalition arrangements, where German economic prudence has been undermined including by easing the conditionality for eligibility to pensions. The new minimum wage will prompt further debate, between enthusiasts for Government interference in the market and pragmatists, many of whom will be from the former Eastern Germany, and are nervous about the impact that such proposals would have on employment in less advantaged areas.

Britain may privately welcome a decision in which Germany has decided to abandon the competitive advantage it hitherto enjoyed over the UK by not having a minimum wage. But many in this country and the EU will hope that pragmatism will prevail, and that the law will make the most of a worrying decision, for Germany and the wider international economy.

*Christopher Chope MP is the Conservative MP for Christchurch and a member of the Justice Select Committee, the Standards Select Committee and the Privileges Select Committee.

Sir Christopher Chope OBE MP

Sir Christopher Chope has been Conservative Member of Parliament for Christchurch since 1997, having previously represented Southampton Itchen between 1983 and 1992. He has been a member of the Political and Constitutional Reform Committee and served as a member of the UK delegation to the Parliamentary Assembly of the Council of Europe.

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