Caution: this vehicle makes wild left turns

by Gokben Aydilek, Junior Economist, CASE — Center for Social
and Economic Research | 24.03.2015

On 1 January 2015, Germany established its first national minimum wage legislation, the Minimum Wage Act — Mindestlohngesetz (MiLoG). With a limited number of exemptions, the act imposes a general, sector-independent statutory minimum wage of 8.50 Euro per working hour to be paid to all employees in Germany, implying that regardless of the location of the employer, in Germany or abroad, the minimum wage requirement is applicable to all employees while they are working on German soil. Moreover, in case of non-compliance with the law, employers would face tremendous penalties, reaching up to EUR 500,000.

Thus, by reaching beyond its borders, the new law has raised the concern among hauliers in the countries neighbouring Germany as they are also obliged to pay according to the law if they want to carry out cabotage operations over German roads. Right after the implementation of the new law, transport companies in Eastern European countries, especially in Poland, raised their voices against the new law stating that they should not have to pay their drivers at the required rate for the time they spend in Germany.

This subject is of particular importance for Poland since the comparatively low labour costs in the country have a major role in achieving a quarter of the European cabotage business, according to the calculations based on Eurostat data.

The other controversial point of the act is the necessity of foreign firms to submit a rather thick file of documents stating their compliance with the minimum wage rules and indicating the names of their employees to the German customs authorities, in addition to further supporting documents in German, such as employment contracts, working schedules and wage accounts of the employees.

Yet, following the meeting with Polish Labour Minister Władysław Kosiniak-Kamysz, a few weeks after the new law had its effect, Germany did not disregard the oppositions and temporarily stepped on the brake on applying its minimum wage law to foreign truck drivers transiting German land. However, according to the Financial Times, German Labour Minister Andrea Nahles said:“The suspension will not apply to cabotage, the national carriage of goods by non-resident hauliers, or to journeys that involved loading or unloading in Germany”.

Mindestlohngesetz, the impact of which clearly goes beyond the borders of Germany and indeed reaches through the wage policies in other Member States by indirectly requiring them to set a wage rate for the employees not residing but temporarily working in Germany, puts a question mark on the boundaries of its scope which is meant to be national. Hence, at this point one might feel the urge to question whether the new act is in line with the EU Principal of Subsidiary. It is also worth noting that the case when workers of companies in other Member States are being sent for temporary services thoroughly differs from the case when workers start a new life in the host country in which case the Posted Workers Directive is applied.
Another puzzling point is the compatibility of the new legislation with the European Single Market Act, the aim of which is to allow goods, services and capital to circulate in the European Union as freely as in a single country. However, considering the economic realities, the new act dramatically decreases the competition power of carriers of the Eastern Member States who wish to transfer through Germany. As the minimum wage in those countries is indeed a quarter of the one in Germany, they cannot afford to pay their workers as high as their Western counterparts. Thus, the new act clearly harms the competition power of several Member States, and pushes them out of their ways to growth and development.

The European Commission has received the objections of countries, including Poland, regarding the new German act on foreign truck drivers. An answer from Brussels is expected between April and June. Yet, in case of a decision not in favour of Eastern countries, apart from its potential butterfly effect on the other Member States and overall in the EU, the implementation of the act itself seems interesting regarding how the German authorities would keep track of whether each foreign truck driver driving on German roads is getting paid according to the German Minimum Wage Law or not.

CASE — Center for Social and Economic Research is an independent, non-profit economic and public policy research institution, established in 1991 in Warsaw.

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