Prime minister Xavier Bettel on 20 November had announced the wage increase for 1 January 2021, angering employer groups. The Union des Entreprises Luxembourgeoises (UEL) estimated that the decision would cost companies €60m, exacerbating the financial straits caused by the pandemic.

The Chamber of Commerce and the Chamber of Skilled Trades and Crafts (Chambre des Métiers) on 4 December followed suits, demanding the government withdraw the draft law.

Including the planned increase, Luxembourg’s minimum wage has risen by 24% since July 2010, the chambers said, adding that the grand duchy risked further losing in competitiveness because of the high costs for employers who must also pay social security contributions.

“Many companies have seen their cash flow deteriorate sharply in recent months and will not have the capacity to cushion this unexpected increase in labour costs,” the pressure groups said. “Such an increase will also weigh overwhelmingly on very labour-intensive sectors and will have consequences for employment in the country.”

The chambers argue that the decision will make it more difficult for low-skilled local labourers to find employment as companies will be even more likely to hire more qualified staff for the same price from across the border.

The government has foreseen a payment of €500 per worker for companies hit hardest by the pandemic to help shoulder the burden of the extra staff costs, but the chambers warned that this would be far from enough.

“In the present context, it would be important for the requested compensatory measure to be effective at least over a period of three years, i.e., from 2021 to 2023,” they said.

Statistics office Statec this week revised its economic forecast for Luxembourg. It anticipates the economy to contract by between 3.5% to 4.5% this year and recover by 4% at most next year. It had previously said GDP would shrink by 6% in 2020 and recover by 7% in 2021.