In the decade following the end of the financial crisis, employment in Germany has been rising every year. Wage growth picked up in its aftermath, even for employees not covered by collective agreements. The largest wage increases, triggered by a minimum wage of €8.50 introduced in 2015, were experienced by employees with low qualifications and employees in eastern Germany. A possible related decline in employment was hardly noticeable. Against this backdrop, it is not surprising that approval ratings for the statutory minimum wage are high and that a debate on raising the minimum to €12 per hour is gaining momentum. [...]
One effect of minimum wages which has so far received little attention in the empirical literature is their impact on the demand for goods in the economy. Recently, we have considered these demand effects for the case of Germany. Demand increases can occur, for example, if low earners spend the majority of additional income derived from a minimum wage-related uplift on consumption. This increases the sales of goods by companies affected, directly and indirectly. [...]
The data however point in a different direction. In the first three years after the introduction of the minimum wage, gross value added in low-wage industries rose much faster than in the economy as a whole. Beforehand, gross value added increases were roughly in line with overall economic growth. Apparently, companies in industries strongly influenced by the minimum wage have succeeded in generating higher revenues. Next to higher incomes, higher price increases in low-wage industries likely played a role, as pointed out by Bruttel, Baumann and Dütsch.
No comments:
Post a Comment