Accord Reached on Aspect of Labor Reform

After months of political haggling, the German government has reached an accord with the opposition on one aspect of the labor market reform package presented by the so-called Hartz Commission in September.

The opposition conservatives blocked a bill providing for reform in the low-pay job sector last month. But a joint mediation committee of the Bundesrat upper house, where the conservatives have a majority, and the Bundestag, reached an agreement on Tuesday for raising the pay threshold at which employees have to pay tax and social benefits from 325 to 400 euros.

The bill will be considered by the Bundesrat on Friday, but is expected to pass without significant opposition.

German Economy and Labor Minister Wolfgang Clement said the bill would cost the government 1 billion euros in lost revenue. But the law, which would take effect in April, is also expected to create more than 300,000 jobs.

With more than 4 million people unemployed in Germany, job creation – even of the low-paying kind – is an important concern across the political spectrum.

Under the agreement reached Tuesday, there is also a provision for incremental tax and social services contributions for those earning between 400 and 800 euros a month.

Issue of temporary workers still controversial

However, another central aspect of the job reform package presented by the commission led by Volkswagen executive Peter Hartz and comprising of representatives from industry, unions, science and politics, still remains unresolved.

The issue of payment of temporary workers has sparked controversy. The proposed reforms call for the right to pay temporary workers less money than their full-time counterparts. German unions have stepped in to oppose this aspect of the reform package and the future of this provision remains uncertain.