Luxembourg companies are worried by the German minimum wage’s increase. Currently at €9.82 per hour, it is set to rise to €10.45 on 1 July and then to €12 in October. It will still be lower than the Luxembourg minimum wage (€16.0465 for qualified workers and €13.37 for unqualified ones), especially after taxes, which are higher in Germany. However, the gap is narrowing significantly.
For example, a person who lives in Trier and works in Luxembourg receiving the unqualified minimum wage of €2,313.38 gross would end up with €1,960.37 net. applicable from August will add another €84 to that person’s monthly remuneration. If the person drives to work 20 days per month they would spend approximately €200 for that period leaving them with an income of €1,844. Meanwhile in Germany, they would be receiving a gross income of €2,080 from October onwards, amounting to a net income of €1,484 but would likely spend less time travelling to work.
Most German cross-border workers are employed in the construction sector (17.5%) followed by those in finance and insurance (13.6%), trade (12%), manufacturing (11.8%), health (10.8%), and transport and storage (9%).
Pros and cons
“It is clear that Luxembourg is losing competitiveness compared to its neighbours,” says Michèle Detaille, president of industry federation Fedil. However, she points to other positives that the grand duchy can offer in terms of family allowances, aid for studies or parental leave.
Tom Baumert, director of Luxembourg's federation for commerce (CLC), is also optimistic. “This could have an effect. But it will remain limited. Germans often earn more than the SSM [minimum wage, editor’s note].” The impact would have been greater if the minimum wage had been increased in France or Belgium, according to him, because it is from these countries that many salespeople or cashiers who receive a minimum wage come from.
You need a differential to attract.
“Some cross-border workers have already decided to leave their jobs” because of the rise in fuel prices, says Marc Gross, director of public affairs at the Chamber of Skilled Trades and Crafts. An increase in the minimum wage could accelerate this phenomenon for the Germans in a sector where cross-border workers represent “more than half” of the workforce. However, he highlights that companies pay them above the minimum wage. “You need a differential to attract”.
“We are aware of the problem, but we don't have any solutions,” adds François Koepp, CEO of Horesca. He points out that salaries are also increasing in Luxembourg, in addition to company costs, which have risen by 30% in recent months. While they used to represent 27% of the final price for the consumer, they have risen to 34%, with salaries representing one third.
“Our margins are shrinking to nothing.” The sector is already looking for 2,000 qualified employees in Luxembourg. “Companies will have to invent new services that require less labour.” However, the hotel and catering industry employs only 33% of cross-border workers and Germans represent the “smallest portion”. But Koepp estimates that between 50% and 55% of employees in the sector earn the minimum social wage, whether qualified or not.
The difficulty of recruitment
Ferdi Steffen, founder of Steffen Holzbau, believes that the current problem is the increasing inflation and petrol prices. His employees live “in Prüm, in the Eifel, in Trier and in the Saarland”. This can mean up to 100 kilometres of travel a day for them. “People ask themselves whether it is worth it. We notice this especially in the recruitment of staff.” He assumes that this doubt could become even more apparent with the increase in the minimum wage in Germany.
People think of Luxembourg because of its financial sector, not because of the industrial one.
Silke Breuer, head of human resources at Carlex Glass, is also concerned about future recruitment. The company employs 500 people, 30% of whom are Germans. And the temporary contracts are mostly filled by French cross-border workers. “Someone who already works here is not going to quit,” says Breuer. But the company is currently looking for 11 people to replace them which Breuer admits is a difficult task. “People think of Luxembourg because of its financial sector, not because of the industrial one.”
On Friday 15 April, the French labour ministry announced a €34 increase in the monthly net minimum wage to €1,302 starting from 1 May. This narrows the gap with Luxembourg but there is still a longer way to go.
This story was first published in French on . It has been translated and edited for Delano.