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Ten years after its introduction, the minimum wage is still controversial. Its supporters consider it too low, while its opponents simply consider it “illegal”. But arguments are now exchanged more quietly.
There are government-set minimum wages almost all over the world; Interestingly, not in some European countries – for example in Italy, Austria, Denmark, Sweden or Norway. There, however – unlike in Germany – there is a high level of collective bargaining.
If you take a closer look, the minimum wage in many countries hardly deserves the name: in Russia we are talking about one dollar an hour, in China, Brazil or India it is two, but also in Hungary and Portugal it is only four or five dollars an hour Hour.
Germany introduced the minimum wage in 2015. At first it was 8.50 euros, but then rose steadily and significantly: to 12.41 euros today. This puts Germany in fourth place in a European comparison.
Rather, the positive expectations were fulfilled
Many people viewed it critically from the start, but the excitement surrounding the issue has pretty much subsided over the past ten years. Although the counterarguments are still the same, studies have now put many of them into perspective.
It was not observed that many jobs were lost due to company bankruptcies resulting from mandatory minimum wages. Consumer prices have obviously not risen as much as feared due to the minimum wage. However, the bureaucratic effort required to control companies increased in order to actually enforce the minimum wage across the board.
In fact, some of the minimum wage advocates’ predictions came true, as an analysis by the Hans Böckler Foundation suggests: The minimum wage not only saved many low earners from poverty despite having a full-time job and certainly created greater wage satisfaction for many, researchers from the Cologne Economic Center also observed and Social Sciences Institute (WSI) an increasing consumer demand due to the improved income situation.
Scientists at the Institute for Social Research and Social Policy were unable to clearly demonstrate a connection between the introduction of the minimum wage and a decline in undeclared work.
It’s not just the minimum wage that’s rising
“No hairdressing salon has failed because of the minimum wage,” says Bernd Kiefer, state guild master and on the board of the Rhineland-Palatinate state association of hairdressers. “If the stores had a healthy business policy, including a price development that adjusted accordingly – the customers also noticed that – then it was relatively easy.”
But the hairdresser with his own salon also felt that the introduction of a minimum wage had not only shaken up the wages of his unskilled workers. “We always talk about a force that hasn’t learned anything. That means that all trained forces then have to earn correspondingly more wages: And that’s the crux, because then all wages subsequently rise exorbitantly.” In order to pay the skilled workers as better as before, their wages had to be increased accordingly.
No more free play of forces
This is also where Steffen Kampeter comes in. The managing director of the German employers’ associations believes that the minimum wage undermines collective bargaining autonomy: “The introduction of the minimum wage in 2015 and the subsequent increase in the minimum wage by the Federal Ministry of Labor opened the door to state-controlled wage policy.” Only the Minimum Wage Commission has to decide on the amount, not politicians, said Kampeter.
For him, the argument about fighting poverty doesn’t count either: “The minimum wage – no matter how high it is set – is not a suitable means of reducing the risk of poverty.” When asked, the BDA official explained: The subsequent increase in the wages of those with higher qualifications, which is necessary to ensure that the significant advantage of skilled workers compared to unskilled workers is maintained, could cause companies problems. If these workers had to be laid off, new poverty would be created here, which would ultimately be linked to the introduction of the minimum wage.
Kampeter adds: “If you want to combat poverty, you have to create employment opportunities. This is best achieved through education and sustainable training as well as through wage structures that do not push even simple jobs out of the labor market.”
VdK demands an increase to 14 euros
However, the introduction of the minimum wage is a success story for VdK President Verena Bentele. It has set a lower limit for a living wage for millions of people in the low-wage sector.
Because of inflation, the social association is even calling for an immediate increase to over 14 euros. Since people in the lower income groups in particular would have more money at their disposal, purchasing power and economic power would be increased, because these wage groups usually spend all of their money on the domestic market.
But Bentele also sees a weakness in the minimum wage concept: “The Basic Law stipulates that the state is not allowed to tax the subsistence minimum. This basic allowance in tax law would have to be much higher than it is at the moment. This would benefit all employees and especially those with small wages wages benefit.”
Gastronomy remains a special case
Gastronomy is taking a different approach, for example in Rhineland-Palatinate. The minimum wage hardly plays a role here, explains Gereon Haumann, President of the industry association DEHOGA. “I believe the minimum wage is the wrong instrument. The right instrument is to have the state declare the general validity of negotiated collective wages, as we have been doing in the hospitality industry in Rhineland-Palatinate since the end of 2022. We have clearly regulated that every hospitality business has to pay our entry-level wage group. And that is five percent above the minimum wage.
For Haumann, too, the minimum wage is an inadmissible intervention by the state in collective bargaining autonomy. In his industry, he sees family-run businesses in rural areas that are particularly at risk because they only have a very small budget for personnel costs. “I believe that many companies have fallen by the wayside because they cannot afford certain wage levels for low-income earners, or that a lot of work has been eliminated in the low-wage sector. And that overall this has already cost a lot of jobs and companies.”
So drawing a conclusion after ten years of minimum wage is no easy task. Supporters and critics both feel confirmed; for neutral observers, the advantages and disadvantages are balanced. There is agreement that poverty must be prevented despite having a full-time job. Whether this creates a minimum wage or a strict collective bargaining agreement to ensure fair wages is unlikely to matter to those affected.