Union Calls for Increased Oversight to Combat Minimum Wage Violations

In discussions surrounding the potential increase of the minimum wage to EUR15, concerns are rising over the possibility of a surge in undeclared work, particularly in eastern Germany. Economic expert Friedrich Schneider predicts that if the minimum wage rises as anticipated, the underground economy could grow by EUR3 to EUR5 billion. Many employers may find it challenging to meet the new wage standards, leading them to resort to paying employees below the minimum wage illegally.

Schneider estimates that in 2025, the total value generated from undeclared work in Germany could reach EUR511 billion, which accounts for approximately 11.5% of the expected gross domestic product. He foresees that between six and eight million individuals might engage in informal employment.

Dominik Enste, an economist from the Institute of the German Economy, emphasizes the need for stringent measures against illegal employment, particularly in the construction sector. He advocates for a comprehensive crackdown on economic crime, especially on large construction sites where systematic exploitation and tax evasion often occur. Enste insists that existing regulations must be enforced rigorously to address these issues effectively.

The industrial union IG Bau is urging for more proactive inspections to tackle the rise in undeclared work. Union leader Robert Feiger has called for a significant expansion of the Financial Control of Undeclared Work, requesting a doubling of the Zoll (customs) staff to 16,000 personnel. He noted that despite earlier calls for this increase, there has been no significant enhancement to the workforce, which hampers efforts to combat both undeclared work and violations of the minimum wage laws.

As the debate on the minimum wage continues, stakeholders from both sides of the aisle are grappling with the implications of such changes. While some employers fear that a higher minimum wage could lead to increased illegal labor practices, others argue that without proper enforcement and oversight, the real issue lies in the inadequate measures currently in place to combat such violations.