Minimum wage: why twelve euros are right – economy

It is a, yes: historical landmark. This Saturday, the minimum wage in Germany will rise to twelve euros an hour. That means a whopping 15 percent more. The dimensions really become clear when you know that companies only had to pay employees 9.60 euros a year ago. From there, it’s now 25 percent more. Millions of workers and their families will see this as a blessing, precisely because of the inflation. But couldn’t the minimum wage boost drive up prices further – and cost tons of jobs?

The latter debate accompanied the minimum wage even before he started in Germany in 2015. Among the major economies, the Federal Republic was late with the statutory lower wage limit. Great Britain, for example, which is certainly unsuspicious of socialism, introduced it in 1999. In response to the dwindling power of workers and unions across the West. As a stop sign for companies that maximize their profits at the expense of their employees.

The job warnings were wrong

Before Germany got that far 16 years later, free market economists warned of a catastrophe. A minimum wage will more than a million jobs cost, they predicted. That turned out to be wrong. Hardly any jobs were lost. And if so, then more productive jobs were created elsewhere.

What the SPD-led government is doing now is a bigger step than it started in 2015. The commission set up at the time increased the minimum wage very slowly. General wages rose faster, people on low wages fell behind. Before the general election, Olaf Scholz promised them more respect for their work. With the increase to twelve euros, he ignores the commission for once – with a resounding effect: This time around eight million employees get more money. In order to even twice as many benefit like when the minimum wage started.

Every second person earns more in restaurants

Above-average winners are women and part-time workers. Sectors that include gastronomy, security services or temporary work must pay every second employee better. In doing so, the chancellor sent an impressive signal that physically demanding work in the evenings and at weekends, when the majority of citizens are free, should be accepted in this country.

But won’t the increase cost many jobs now that the economy is going through the energy crisis soon to shrink? The market-liberal catastrophe scenarios are not to be heard this time. Other economists are relaxed. In fact, thanks to short-time work, not even the Corona crisis led to mass layoffs in 2020, and at that time the economy collapsed ten times as badly as is now expected.

There has long been a shortage of staff in many sectors. Companies prefer to keep their employees, even if they become a little more expensive. Large discounters and other service providers have already reacted and pay better for those positions that are rated slightly higher than the minimum wage. You just don’t want your people to switch to the competition if they pay more in the future.

Instead of job losses, liberal economists have identified another problem: more inflation. Ex-business wise man Bert Rürup warned months ago that a minimum wage of twelve euros would “encourage the start of a wage-price spiral”. That seems exaggerated. Calculated for all employees, the higher minimum wage means a wage increase of less than two percent. In addition, salaries make up only a part of the total costs of the companies. It is therefore to be expected that the inflationary effect stays in the zero-decimal point range. The higher minimum wage should be a boon whose side effects are negligible.

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