Will the minimum wage become a job killer?

Status: 10.01.2022 8:12 a.m.

The minimum wage is set to rise to twelve euros this year. That is what the traffic light coalition decided. Critics fear the end of collective bargaining autonomy and speak of a job killer. Right?

By Lothar Gries, tagesschau.de

The minimum wage is expected to rise to 10.45 euros by the end of the year. The minimum wage commission, for example, made up of representatives from employers and trade unions. But the new traffic light government wants to raise the minimum wage in the current year unscheduled to twelve euros. Federal Labor Minister Hubertus Heil has announced a corresponding law in “a few days, weeks”.

Employers and business-related critics are outraged. They criticize what they consider to be an inadmissible interference with collective bargaining autonomy and fear the loss of jobs. Employer President Rainer Dulger is considering taking legal action against the increase. “As it is currently intended by the federal government, I consider it a gross violation of collective bargaining autonomy,” said Dulger at the end of December. He sees the proposed law as a breach of the government’s promise “that the minimum wage commission is the guardian of the minimum wage and not politics”.

Attack on collective bargaining autonomy

“Whether, when and how we have the Federal Government’s actions legally checked in a qualified manner depends entirely on when this political minimum wage is to be implemented,” said Dulger. “The autonomy of collective bargaining is constitutionally protected.”

The critics fear that in the future it will no longer be employers and trade unions but rather political parties argue about which minimum wage would be appropriate. “The twelve-euro fix is ​​a turning point that could easily be followed by a political competition,” warned Holger Bonin from the Institute for the Future of Work (IZA) recently. He fears that this will quickly lead to a level at which there will be job cuts. Some experts say that an increase in the minimum wage is currently hardly manageable in retail or in the catering trade because they are going through difficult times due to the corona restrictions. The increased costs could therefore only be passed on to customers to a limited extent.

No massive job cuts occurred

Labor Minister Heil brushes aside such arguments. Already at the start of the lower wage limit in 2015 there were warnings of dire consequences, which then did not occur. This time, too, no disadvantages are to be feared. In fact, Deutsche Bank had warned at the time that the introduction of a statutory minimum wage of EUR 8.50 would result in the loss of up to a million jobs. The New Social Market Economy Initiative, a lobbying organization founded by the employers’ association Gesamtmetall, forecast 570,000 job cuts.

The experts relied on the arguments of neoclassical economic theory, according to which in a market economy an employee receives a wage that corresponds to his productivity. If the state forcibly increases wages, the employee costs the company more than he brings in. The result is layoffs.

In fact, this only happened in a few cases. Studies by the Federal Employment Agency have shown that the introduction of the minimum wage in Germany in 2015 only cost a few tens of thousands of jobs. There has not been a massive loss. However, the companies have mostly passed the increased personnel costs on to the customers – in the form of higher prices.

The job market has been swept clean

Even the further increase in the minimum wage to EUR 9.82 has not led to a massive rise in unemployment. On the contrary: the German labor market has been swept clean. Many industries are desperately looking for workers; Not only specialist staff, but also the low-skilled have become rare. Because many employees, for example in gastronomy or logistics, have looked for and apparently found other jobs after the Corona restrictions.

In view of this situation, the increase in the minimum wage to twelve euros has lost its initial horror. For example, the Hessen Regional Directorate of the Employment Agency expects a further increase in jobs subject to social security contributions as well as a further decline in the number of unemployed. “The only real risk for the job market would be large-scale and long-lasting corona lockdowns,” said Frank Martin dpa. On the other hand, the experts do not fear an increase in the minimum wage.

Up to ten million employees affected

Around nine to ten million employees would be affected by the measure. That is the number of people who currently earn less than twelve euros. Most of them are salespeople and cleaning staff. In the catering industry, too, up to 90 percent of employees are low-wage earners.

According to the Federal Ministry of Labor, one fifth of all employees in Germany receive an hourly wage that is less than two thirds of the average gross hourly wage. This puts Germany in sixth place in Europe. Only in Bulgaria, Poland and the Baltic states is the proportion of low-wage earners higher. For comparison: in France it is only 8.6 percent.

IG BAU boss Robert Feiger therefore welcomes the increase. The introduction of the minimum wage will not only result in fairer wages, but also increase the purchasing power of millions of workers, according to the unionist. “Overall, the statutory minimum wage will lead to an increase in purchasing power of around 9.8 billion euros a year,” Feiger is convinced. A “noticeable economic recovery” could be ensured through increased consumer spending.


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