POLITICS & INSTITUTIONS - ECONOMY

Raising minimum wage taboo, says UEL



Jean-Jacques Rommes of the UEL business group said raising the minium wage would kill businesses and be counterproductive Mike Zenari/archives

Jean-Jacques Rommes of the UEL business group said raising the minium wage would kill businesses and be counterproductive Mike Zenari/archives

Jean-Jacques Rommes of the UEL business association categorically rejected any increase of the minimum wage, saying such a move would kill businesses within a year.

The biggest trade union OGBL launched a new campaign on Tuesday 28 November, in which it called for a 10% increase of the minimum wage.

After the employment minister Nicolas Schmit (LSAP) said on Wednesday 29 November in an RTL interview that the Luxembourg economy could manage it, and he could imagine increasing it in stages before the next elections in 2018, UEL (Union des entreprises luxembourgeoises) argued instead the neighbouring regions, especially in the trade sector, would become much more competitive and would kill these businesses in Luxembourg.

Wage bargaining is part of the social dialogue model, or tripartite, which includes trade unions, business lobbies and the government.

Rommes said that, while the Luxembourg economy was mostly driven by the financial centre, companies in the retail, the crafts and hospitality sectors were especially concerned and would not be able to make it. No one in the banking sector works for the minimum wage, so it would not play a role there. But in the hospitality sector, such an increase would be “catastrophic”.

While he recognised that the cost of housing was a big problem, it had not been properly tackled for the past 25 years and raising the minimum wage would not be the solution. The issue was a lack of offer: there was not enough land in the area zoned for housing construction, and this posed a problem not just for those on the minimum wage, but also for others.

Rommes said:

“This problem cannot be solved through the minimum wage. If you need 100 housing units and there are only 90, and you raise salaries, then there are still 10 units missing.”

The minimum wage in Luxembourg is €2,000 per month, while in the neighbouring countries it stands at €1,600. These companies work in Luxembourg as well, and under their conditions, so these small Luxembourg companies would lose business and have to let people go, he argued.

Rommes added that Schmit had not spoken as a member of the government, and this was already part of the election campaign for the LSAP.