Minimum wage may seem like a marginal issue in the election campaign for some people. You think: who does it concern? A few employees who have had poor training or are simply unlucky. But perhaps these citizens will think again when they read the data from the Federal Statistical Office. According to this, around ten million Germans earn less than twelve euros an hour. Ten million – and their families – basically benefit when the statutory minimum wage increases significantly.
It is therefore right that politicians should make this a major issue for the election, as was the case on Sunday in the TV debate of the chancellor candidates. The citizens are faced with a directional decision. The Union and FDP want to leave the minimum wage purely to a commission as before. Since it was introduced six years ago, it has raised the limit of what an employer has to pay at least from EUR 8.50 to EUR 9.60. The SPD and the Greens want to increase the minimum wage to twelve euros. That would make a huge difference to a lot of people.
Anyone who receives a minimum wage as a saleswoman, waiter or office job today earns 1,600 euros a month full-time – before deductions. At twelve euros it would be 2000 euros. Anyone who looks after children or pays rent in metropolitan areas would feel this clearly. It could also stimulate the economy. Those who earn more spend more. And minimum wage recipients in particular spend a higher proportion of their income than top earners, for example, who rely on their tax relief some parties focus.
The reality was different. Unemployment in Germany continued to decline
The crucial question is whether a lot of jobs will be lost at twelve euros. Then nobody would benefit from it. Market-liberal economists warned before 2015 against even introducing a statutory minimum wage at the level set at the time. The economy at that time, Lars Feld, predicted: “With a statutory minimum wage of EUR 8.50, unemployment would increase significantly.”
The reality was different. Unemployment in Germany increased further down. The lower wage limit cost bottom line, no spots. Something else happened, according to researcher Christian Dustmann and colleagues: less productive, poorly paid jobs disappeared and were instead created more productive jobs. The minimum wage therefore not only helps low-wage earners, it also has a positive effect on the growth of an economy.
Despite this great success, careful consideration should now be given to which minimum wage increase is the best for the country. From a minimum wage above 13 euros (the left demands exactly 13) the labor market begins to tip over and there is a risk of considerable job losses, warns the economist Tom Krebs in a new study – in which he costs twelve euros basically approves.
At least in the short term, it also plays a role how exactly the statutory wage limit is changed. It is best to do this in several steps. The timing is also important. When the minimum wage was introduced in 2015, the German economy had been growing for a few years – and it continued to grow over the next few years. That helped avoid job losses. Now the German economy is likely to grow this year and next also clearly. But the country is coming out of the corona crisis. Unemployment has been falling for more than a year, but only gradually. This speaks in favor of gradually increasing the minimum wage to twelve euros by the end of 2022. That is why it is right when, for example, SPD chancellor candidate Olaf Scholz speaks of making the increase in the first year of a new government. That leaves time.
Union candidate Armin Laschet argues partly across the board against more minimum wages, partly he would like to leave it completely to the government commission. It should be said that the Commission itself is proposing an increase to 10.45 euros by mid-2022. Second, the Commission can be valued, but it does not have to be heroic. Employers and trade unions contribute their interests there. And one of the two scientists there is Lars Feld, who classified the introduction of the minimum wage in 2015 as follows: “We’re far too well, that’s why we’re starting To make nonsense“.
Time has passed over this market radicalism. Minimum wages help to limit the power of many companies that pay adequate collectively agreed wages far less often than in the past. Many people also benefit from twelve euros, introduced with a sense of proportion used to belong to the middle class. They earn more than they get today.