‘Mini-jobs’ don’t work in Germany, and they won’t work in Britain

Posted on 24 de December de 2012


(PUBLISHED IN THE GUARDIAN) Though being floated by the Treasury as a measure to increase employment, German ‘mini-jobs’ offer little money or security.

 The most recent copycat idea floated by the Treasury to promote employment creation through ever more flexible labour markets is the German “mini-jobs” initiative. Introduced in Germany in 2003 under the social democratic chancellor Gerhard Schröder as part of a wide-ranging labour market reform, the scheme has been praised for its alleged role in preventing a steep increase in German unemployment post-2008.

German “mini-jobs” are just what it says on the tin: precarious employment for up to €400 (£315) per month, likely to be extended to €450 in 2013. Whether a “mini-job” is an additional or a main job, “mini-jobbers” are exempted from tax and social insurance payments for earnings of up to €400, and employers’ social insurance contributions are considerably below those for equivalent regular jobs.

“Mini-jobbers” thus forgo core benefits of regular employment, such as building up pension claims. Beyond a basic threshold, income from “mini-jobs” also entails the reduction of unemployment benefit for recipients. In March 2012, an initiative, led by the social-democratic governed Länder in Germany’s upper chamber in March 2012, to impose a limit of 12 weekly hours for “mini-jobbers” – and thus effectively a minimum hourly wage – failed.

According to the most recent figures of the German Employment Agency, 7.3 million Germans, or one in every five employees, held “mini-jobs” in September 2010 – an increase of 1.6 million since 2003. The number of workers taking “mini-jobs” as additional side-jobs to make ends meet almost doubled from 1.3 million in 2003 to 2.4 million in 2010. About two thirds of “mini-jobbers” are women, and most “mini-jobs” are to be found in the low-skill segments of service sectors, led by catering, hospitality and construction.

While admitting that the scheme is costly for the state due to the exemptions from income tax, those advocating the scheme argue that it has not replaced regular employment and that increased labour market flexibility (meaning lower unit wage costs) has been instrumental in promoting German international competitiveness since 2003.

Unsurprisingly, the view from trade unions and sympathetic researchers is much grimmer: a 2010 report by researchers from the University of Duisburg-Essen, for instance, provides empirical evidence to show that “mini-jobs” are a growing low-wage trap with little prospect of longer-term transition, even into low-skill employment. Splitting regular jobs into mini ones is becoming more common. And “mini-jobbers” tend to be paid considerably less than the equivalent standard hourly wage for a given activity, nothwithstanding Germany’s anti-discrimination laws that explicitly prohibit this.

To fully appreciate the impact of “mini-wages” on the German labour markets and economy, it is important to recall that Germany does not have a statutory nationwide minimum wage. Wages are negotiated by sector, and in only 10 of these agreed minimum wages, currently ranging from €6.53 to €11.53 (or £5.13 to £9.06), are binding for all employers. Of 41 million people in employment in 2011, only just above 29 million had regular jobs, with the remainder either being self-employed or in “mini-jobs”. Real wages have stagnated since the 1990s and fallen by 2.9% between 2004 and 2011. Poverty in work is on the increase and income inequality is growing faster in Germany than in any other western European economy.