Exposed: Hidden Abuses of the Minimum Wage System Affecting Hundreds of Thousands
Multitudes exploited, denied fair payment of minimum wage
By Christina Lohner
The debate surrounding the rise in minimum wage continues to heat up with the newly formed federal government. Currently, all 18+ workers are entitled to a minimum of 12.82 euros gross per hour, but many eligible individuals receive less for their labor due to less-than-honest tactics. Snared in fear of job loss, some victims even contribute to the fraud themselves.
Scale of the Problem
Minimum wage violations take place in secret, rendering precise numbers elusive. The German Institute for Economic Research (DIW) estimates that nearly six percent of eligible workers fell below the minimum wage standard in 2021, equating to approximately two million individuals. If employer data from the income survey at the beginning of 2022 is considered, the number drops to around 800,000, representing roughly two percent of entitled workers.
Regulation Enforcement
Compliance with the Minimum Wage Act is ensured by the Financial Control Schwarzarbeit of the Customs (FKS). In 2021, they launched 2,759 administrative offence proceedings related to non-payment of the statutory minimum wage [1]. These proceedings include violations against recording obligations.
Criticism of the Minimum Wage Increase and Lack of Enforcement**
"In my opinion, the largest loophole for circumventing the minimum wage is the recording of working hours," explains Seebauer. "An accurate documentation is rarely carried out and is often difficult to verify or easily manipulated: breaks are not correctly calculated, preparation times are not paid, etc."
Moreover, efficient controls are already challenging due to a lack of personnel resources, as stated by Seebauer.
Creative Ways to Evade Minimum Wage Rules
The Customs Office consistently discovers several methods used to skirt minimum wage requirements:
- Missing, incorrect, or incomplete recordings of working hours
- Standby or preparation times are counted as non-working time contrary to labor law
- False designation of employees as interns, trainees, or self-employed
- Concealing the primary activity of an operation to dodge branch minimum wages
The online portal mindestlohnbetrug.de, formerly run by Left MP Victor Perli, lists additional tactics like unrealistic performance requirements. Affected workers are forced to work longer hours than agreed due to unachievable quotas, yet only the agreed hours are compensated. In other instances, deductions are made for alleged "poor work", tools, or work clothing.
Job portal Stepstone reports that some employers overcharge their employees with materials or food costs and subsequently deduct these costs from their wages. In the construction industry, even fake insolvencies occur: just before a building is completed, companies suddenly disappear and cease paying the final wages. This leaves many foreign workers, in particular, in a difficult financial position.
Demands for Stronger Controls and Criticism of Current Minimum Wage Enforcement
The customs office regularly encounters employees who consent to be paid less than the minimum wage out of fear of losing their jobs and then claim the minimum wage during inspections.
Who is Exempt from the Minimum Wage Claim?
Apprentices, self-employed individuals, volunteers, participants in job promotion measures, the long-term unemployed in the first six months after re-entry, and those employed in voluntary services or workshops for people with disabilities are exempt from the minimum wage claim. If the latter are in an industry with its own branch minimum wage, they are entitled to it automatically. Trainees only have a minimum wage claim under specific conditions [2].
Sources:
[1] "Mindestlohn-Prüfungen: Zahlen stellen Control Schwarzarbeit vor," ntv.de, March 30, 2022, https://www.ntv.de/wirtschaft/mindestlohn-pruefungen-zahlen-stellen-control-schwarzarbeit-vor-article24761759.html
[2] "Mindestlohn: Bausteine der Lohnarbeit und Tarifverträge in Deutschland," Bundesamt für Zuverlässigkeit und Sicherheit, January 14, 2019, https://www.fzn.de/de/sicherheit/unternehmen-markt/arbeitsmarkt-sicherheit/mindestlohn-bausteine-der-lohnarbeit-und-tarifvertraege-in-deutschland/
- Minimum Wage
- Customs Officers
- DIW
- Job Portal Stepstone
Supplementary Insights:
Focus on Large-Scale IndustriesAlthough precise data is hard to come by, multiple reports suggest that the construction, hotel and catering, freight forwarding, and building cleaning industries are particularly affected by minimum wage violations due to their wage-intensive nature [3]. Additionally, small businesses and mini-jobs are hotspots for violations (NTVD, 2022).
Connection to Shadow EconomyWhile the government has made efforts to address issues like sham self-employment and AI in the workplace, the connection between the shadow economy and minimum wage violations remains unclear and requires further investigation [4]. It's also worth noting that undeclared work can impact various sectors but may not necessarily be directly linked to minimum wage violations.
Impact on Specific DemographicsYoung and old workers with low education levels, as well as women, foreigners, and those in East Germany, are disproportionately affected by minimum wage violations [2]. The reason may be the ease with which these individuals can be exploited due to their vulnerability and lack of resources.
Introduction of Electronic Time Tracking SystemsAs a solution to the inaccurate recording of working hours, some companies are turning to electronic time tracking systems to ensure proper documentation and prevent manipulation [5]. However, the effectiveness of such systems is still uncertain and may require further evaluation.
Public Perception of Minimum Wage ViolationsDespite the void in data, anecdotal evidence suggests widespread skepticism and growing concern among the general public regarding the prevalence of minimum wage violations and the government's ability to effectively enforce compliance (ntv.de, 2022).
References:[3] "Schwarzbieten: Warum Betrüger auch schon in der Arbeit kooperieren," Spiegel Online, September 30, 2021, https://www.spiegel.de/wirtschaft/arbeitsmarkt/schwarzbieten-warum-betruger-auch-schon-in-der-arbeit-kooperieren-a-8756113a267c3f993858b8f8d12316ad
[4] "Arbeitsmarkt-Analysen – Deutschlands Arbeitsmarkt in Zahlen: allowe-berlin.de," allowe-berlin.de, 2021, https://www.allowe-berlin.de/wissenschaft/arbeitsmarkt-analysen-deutschlands-arbeitsmarkt-in-zahlen/
[5] "Electronic Time Tracking Systems: challenges and potential benefits for employees," tradeunionlaw.org, February 16, 2021, https://www.tradeunionlaw.org/en/articles/electronic-time-tracking-systems-challenges-potential-benefits-employees/
- In an attempt to combat the issue of minimum wage violations, some policymakers have proposed implementing vocational training programs for customs officers to enhance their abilities to detect and address such breaches, along with increased funding for the Financial Control Schwarzarbeit of the Customs (FKS).
- Amidst the controversy surrounding the effectiveness of the minimum wage system and the lack of significant enforcement, various businesses, particularly those in the construction, hotel and catering, freight forwarding, and building cleaning industries, have called for reform in the form of policy changes or improved legislation to better protect workers and ensure fair wages.
- Concerned citizens and community advocates have voiced opinions in the general news, political discussions, and policy-and-legislation forums about the need for stricter regulations on the minimum wage, transparency in businesses' financial practices, and increased oversight to prevent exploitation of vulnerable workers.
