5 years minimum wage – status quo and outlook

The minimum wage was introduced in July 2014. Politicians are arguing about the results and possible consequences for the future.

Most recently, the minimum wage in Germany was raised from EUR 8.84 to EUR 9.19 at the beginning of 2019. This means that the minimum wage is now EUR 0.69 higher than when it was introduced in January 2015. Experts and politicians disagree about the effects of the introduction and continuous increase and the consequences to be drawn from them.
On the one hand, there is much to suggest that the minimum wage has not led to the much feared destruction of jobs. According to experts, the fluctuations on the labour market cannot be attributed to a significant extent to the introduction of the minimum wage.
On the other hand, many employers have found ways to mitigate the impact of the minimum wage on their own businesses. For example, parts of working hours are not recorded – usually in an inadmissible manner – and the minimum wage is thus partly circumvented. It is not unusual that benefits in kind, such as work clothing, which were previously provided free of charge, are now distributed to employees against payment.
Overall, the minimum wage has led to a real improvement in the income situation of very few workers. Also in view of the much more significant increase in rental costs over the same period.
In comparison, foreign employees who – temporarily – work in Germany benefit significantly more from the minimum wage. Often they are not burdened with German living costs at the same time, but use the German wage to support their families in other European countries.
At the same time, their foreign employers perceive the minimum wage as a double burden, as they often have to pay daily allowances in addition to the minimum wage under foreign tax law. Taking into consideration these daily allowances when calculating the minimum wage is only possible under special circumstances and within narrow limits.
Consequently, on the one hand, people in Germany are openly considering raising the minimum wage to around EUR 12 in order to bring about noticeable improvements for domestic employees.
On the other hand, some foreign employers are already struggling with the competitiveness of their prices, as they may in fact be subject to higher burdens than their German competitors when providing services in Germany.
It remains to be seen to what extent the minimum wage will be further raised – sooner or later – and what practical effects this will have on domestic and foreign employers and employees.

Source: German and European Press

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