How the minimum wage has ‘increased productivity’ in Germany

How the minimum wage has 'increased productivity' in Germany
Photo: DPA
Productivity by German workers has increased since the country introduced a minimum wage in 2015, a study published Tuesday by Anglo-German researchers showed.

“Contrary to concerns that marked the debate before the national minimum wage was introduced, we did not find that it led to a reduction in employment,” University College London (UCL) researcher Christian Dustmann said in a statement.

“On the contrary, the minimum wage increased productivity by redistributing workers from less productive to more productive companies,” Dustmann added.

READ ALSO: Minimum wage is turning low-paid mini-jobs into regular work

Once the minimum wage was introduced, some low-wage employees moved to bigger companies where more full-time jobs requiring better qualifications were available, the group from UCL and German Institute for Labour Market Research (IAB) found.

Such firms also pay a higher wage premium for comparable work.

In regions with the lowest average pay before the minimum wage, the introduction of the legal floor shrank the number of very small businesses with three or fewer employees.

But the average size of companies and the average number of workers at bigger businesses grew.

“This improved the mix of companies in these regions,” the researchers argued.

A centrist coalition government between Chancellor Angela Merkel's centre-right CDU party and the centre-left social democrats (SPD) introduced the minimum wage.

Since 2015, minimum hourly pay for the roughly 15 percent of German workers affected has grown from 8.50 to 9.19, with the next revision slated for 2021.

But the minimum wage was introduced during a long period of growth for Europe's largest economy, which squeezed unemployment to around five percent — its lowest level since Germany's 1990 reunification.

“Our results can't necessarily be generalised to other labour markets or other time periods,” warned IAB researcher Matthias Umkehrer.

READ ALSO: Germany's minimum wage to raise twice in 2019, yet poverty persists

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