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Minimum wage in Germany has increased productivity


For quite a few economists, the minimum wage almost spelled the end of the West. The fears were probably exaggerated, as a study now shows.

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Low-wage workers: Less productive companies have left the market

Photo: Arnulf Hettrich / imago images

According to a study, the feared negative consequences for the competitiveness of companies in Germany due to the statutory minimum wage have not materialized.

The introduction of the minimum wage at the beginning of 2015 and its first increase in 2017 would hardly have led to companies leaving the market, according to the study by the Center for European Economic Research (ZEW) on behalf of the Minimum Wage Commission.

Some sectors have even become more productive.

"The main aspect of our study was the increase in wage costs caused by the minimum wage and ultimately affecting the competitive conditions of companies," explained ZEW expert and co-author of the study, Moritz Lubczyk.

The statutory minimum wage started on January 1, 2015 at a gross amount of EUR 8.50 per hour.

The first increase took place at the beginning of 2017 to EUR 8.84.

According to the study, micro-enterprises with up to four employees gave up in labor market regions where many employees previously earned less than 8.50 euros per hour.

This was particularly evident in eastern Germany, where the gross average wage in 2015 was significantly lower than in the west at the time of the study.

"It's often the less productive companies that leave the market," said Lubczyk.

However, the number of unemployed did not increase because of the otherwise strong demand for labour.

At the same time, according to the information, labor productivity increased in some sectors that were particularly affected by the minimum wage, such as betting and lotteries or the advertising industry.

This means that sales increased in relation to the workforce employed.

"On the one hand, this can be related to the fact that companies are investing more in capital, i.e. machines or technologies, and thus deploying their workers more productively," explained Lubczyk.

In addition: »If mainly less productive companies leave the market, then the average productivity of the entire industry increases.«

The statutory lower wage limit is currently EUR 10.45 gross per hour.

This corresponds to the decision of the Minimum Wage Commission made up of representatives from employers, trade unions and science, which regularly adjusts the amount.

At the request of politicians, an unscheduled one-time jump to twelve euros per hour will follow on October 1st.

In addition, there are collectively agreed minimum wages in several sectors.


Source: spiegel

All business articles on 2022-08-05

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