Is Germany’s minimum wage really helping to reduce salary gap between rich and poor?

Is Germany's minimum wage really helping to reduce salary gap between rich and poor?
Photo: DPA
New figures released by the Federal Statistics Office (destatis) show that the hourly wage gap has been coming down for several years. But experts say that the picture isn’t completely rosy.

It is a problem that has caused anger across the western world. Top earners are receiving ever more money for their work while low-income wages are stagnating.

Statistics released this week by Destatis show that the trend in Germany is heading in the opposite direction – at least for hourly wages.

Whereas in 2014 someone classified as a top earner was taking home 3.48 times the hourly wage of a low earner, that difference dropped to 3.27 in 2018.

READ ALSO: Minimum wage to rise in 2019 but poverty persists

Put another way, the average hourly wage of a low income earner (someone in the bottom 10 percent of the wage scale) rose from €8.34 per hour to €9.71 between 2014 and 2018. At the same time, the wage of a top earner (someone in the top 10 percent) increased from €29.03 to €31.76 per hour. 

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“One reason for this development is the introduction of the statutory minimum wage on January 1, 2015,” Destatis states. In 2018, the minimum wage was €8.84 and it currently stands at €9.35.

The reduction of the wage gap was particularly pronounced in eastern Germany, where the percentage of people considered low income earners dropped from 34.5 percent to 29.1 percent.

At the same time there are still roughly twice as many high earners in former West Germany as there are in the east.

Smaller change than expected

Experts have cautioned though that good news from the statistics office doesn't necessarily mean that poorer people now have more money in their pocket.

Daniel Eckert, finance editor at Die Welt, reports that companies have reduced employees’ working hours since the minimum wage was introduced, meaning that although the gap in hourly wage has narrowed, the difference in monthly income between rich and poor has not changed.

Eckert also argues that the stagnation of wages in the top sector is not necessarily a good sign, as increases here are a signal that Germany’s companies well-paying sectors such as IT are enjoying international success.

READ ALSO: How the minimum wage has 'increased productivity' in Germany

Meanwhile, the German Economic Institute (DIW) in Berlin has estimated that 2.4 million workers still take home pay under the minimum wage due to the fact that they are pressured into working unpaid overtime.

The DIW therefore says that a new law is necessary to supplement the statutory minimum wage – one that requires companies to declare the hours worked by their employees.

“If the implementation of such a law were to help convert unpaid overtime into paid overtime, non-compliance with the minimum wage would probably also decline,” the DIW states.


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