Study: Minimum wage has hardly any negative consequences for companies

According to a study, the feared negative consequences for the competitiveness of companies in Germany due to the statutory minimum wage have not materialized.

Study: Minimum wage has hardly any negative consequences for companies

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 would hardly have led to companies leaving the market, according to the study by the Center for European Economic Research (ZEW) on behalf of the Minimum Wage Commission. Some sectors have even become more productive.

"The main aspect of our investigation 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. The statutory minimum wage was introduced on January 1, 2015 at a gross rate of EUR 8.50 per hour. The first increase took place at the beginning of 2017 to EUR 8.84.

The data basis for the study was provided by the Mannheim Enterprise Panel (MUP), which depicts all enterprises in Germany, and the Structure of Earnings Survey (VSE), which is carried out every four years by the statistical offices in the EU states. Data from the integrated employment biographies (IEB) for sectors and regions from the Institute for Labor Market and Occupational Research (IAB) were also included. Data from 2010 to 2018 were compared.

unemployment has not increased

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.

At the same time, according to the information, 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 workforce 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. In addition: "If mainly less productive companies leave the market, then the average productivity of the entire branch increases."

The statutory lower wage limit is currently EUR 10.45 gross per hour. This corresponds to the decision of the Minimum Wage Commission made up of representatives from employers, trade unions and science, which regularly adjusts the amount. 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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