29 feb 2016

Lessons from the German minimum wage one year later

On 1 January 2015 Germany introduced for the first time a general statutory minimum wage of € 8.50 per hour. This signaled the provisional end to a 10-year political debate in which trade unions, employer associations and political parties struggled to agree on whether and how a statutory minimum wage should be introduced. From the perspective of trade unions the introduction of a statutory minimum wage constitutes a "historical social reform". From the perspective of many employer associations it damages the autonomy of collective bargaining. Many economists predicted the loss of a couple of hundred thousand, maybe up to, one million jobs. Were these scare mongering, mischief or experts who just did not know what they were talking about? One year since the introduction of the minimum wage some academics thought it is about time to take stock. And a good stock they took and bundled into a report. They started by establishing what the theoretical scope of the minimum wage was at the time when it was introduced. They further verified what effect the introduction of the minimum wage had on the development of income and employment thus far. In this process they also looked at the interrelation between a statutory minimum wage and the determination of (minimum) wages through collective agreements.Finally, they discussed the possible adjustment of the statutory minimum wage that ? in terms of the German Minimum Wage Act ? is to be decided upon at the middle of 2016.

I have found the report enriching both for countries where minimum wage has taken roots as it offers a mirror through which a self reflection can take place and policy consolidation also given some considerations. For entrenched economies like the United Kingdom or transition economies, like Nigeria where important first steps have been taken towards minimum wage, there are a few cardinal take-homes for policy developers or evaluators.

The full report is here and attached



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