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Global Economy

Hardly company tasks by minimum wage

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 hardly led to companies leaving the market, according to a study by the Center for European Economic Research (ZEW), which was carried out on behalf of the Minimum Wage Commission.

unemployment has not increased

One result of the study is that 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.

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. Unemployment has not increased because of the strong demand for labour.

Are companies investing more?

At the same time, according to the study, 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 labor 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 using their workers more productively," explained Lubczyk. "If mainly less productive companies exit the market, then the average productivity of the entire industry will increase."

Minimum wage will soon be increased again

The statutory minimum wage was introduced on January 1, 2015 at a gross rate of EUR 8.50 per hour. It was increased for the first time in early 2017 to EUR 8.84. The statutory lower wage limit is currently EUR 10.45 gross per hour.

The Minimum Wage Commission, made up of representatives from employers, trade unions and science, regularly adjusts the amount. It is also to assess the impact of the minimum wage on employee protection, competition, employment and productivity.

On October 1st, at the request of politicians, there will be an unscheduled one-time jump to 12 euros per hour. In addition, there are collectively agreed minimum wages in several sectors.

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