The economy’s concerns about the introduction of a statutory minimum wage were enormous. But the fears turned out to be unfounded.
As the study shows, the fearful negative consequences for the competitiveness of companies in Germany related to the statutory minimum wage did not materialize. According to a study by the Center for European Economic Research (ZEW), at the request of the Minimum Wage Commission, the introduction of the minimum wage at the beginning of 2015 and its first increase in 2017 would rather not lead to companies leaving the market. Some sectors have become even 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 the ZEW expert and co-author of the study Moritz Lubczyk. The statutory minimum wage was introduced on January 1, 2015 in the amount of EUR 8.50 gross per hour. The first increase took place in early 2017 to EUR 8.84.
The basis for the study was the Mannheim Enterprise Panel (MUP), which illustrates all enterprises in Germany, and the Structure of Earnings Survey (VSE), carried out every four years by statistical offices in EU countries. Data from Integrated Employment Biographies (IEB) for sectors and regions from the Institute for Labor Market Research and Occupation (IAB) are also included. Data from 2010-2018 were compared.
unemployment has not increased
The study shows that micro-enterprises with up to four employees have dropped out of those regions of the labor market where many workers previously earned less than € 8.50 an hour. This was especially true in eastern Germany, where the average gross wage in 2015 was significantly lower than in the west at the time of the survey. “Often it is less productive companies that leave the market,” said Lubczyk. Unemployment has not increased due to high labor demand.
At the same time, information shows that labor productivity has increased in some sectors particularly affected by the minimum wage, such as betting and lotteries, and the advertising industry. This means that sales increased relative to the workforce employed. “On the one hand, it may be related to the fact that companies invest more in capital, i.e. machines or technologies, and thus use their employees more productively” – explained Lubczyk. Moreover: “If mainly less efficient companies leave the market, the average productivity of the entire industry increases.”
The statutory minimum wage is currently EUR 10.45 gross per hour. This is in line with the decision of the Minimum Wage Committee, made up of representatives of employers, trade unions and academia, which fixes the amount on a regular basis. On October 1, at the request of politicians, there will be an unplanned one-time jump to 12 euros an hour. In addition, collectively agreed minimum wages exist in several sectors. (dpa)