Germany Minimum Wage Increase
According to recent reports, the German Federal Parliament passed a bill on June 3: From October 1st, the minimum hourly wage in Germany will be increased by 2.18 euros to 12 euros per hour, which will benefit more than 6 million people. According to Hubertus Heil, secretary of labor, the increase means an increase of 400 euros to 2,100 euros per month for workers earning 1,700 euros a month. Labor policy spokesman Martin Rosemann said the minimum wage would help close the gender pay gap and protect low-income people from poverty in old age. In addition, the income limit for a “Minijob” worker will be raised from €450 to €520, and the income limit for a “Midijob” worker will be raised from €1,300 to €1,600. The minimum wage refers to the minimum amount of labor remuneration paid by the employer or the employer under the premise that the laborer provides normal labor during the legal working hours. The minimum wage system was born in New Zealand and Australia in the late 19th century. After more than 100 years of development, by 2020, all developed countries and most developing countries in the world have implemented a minimum wage system or similar regulations. The system intervenes in wage distribution through laws at the national level and guarantees the basic livelihood of low-income workers. In some Western countries, the system can also widen the income gap between workers and those who receive unemployment benefits by setting a reasonable minimum wage limit, thereby encouraging employment, or, in other words, embodying “respect for labor” – this is one of the reasons why the German government decided to raise the minimum wage.
In April, the federal government released draft laws to raise the minimum wage and improve part-time work conditions. In June, the Bundestag passed the new law. After the implementation of the “12-euro minimum wage” system, Germany’s minimum wage will be the second highest among EU member states with a statutory minimum wage, after Luxembourg. In Germany, the legal minimum wage system is generally accepted because it is believed to have a positive income distribution effect and also improve the economic situation of low-income individuals. Among other things, this system gives those who choose to work a firm reason not to rely solely on state-provided benefits for a living.
In a paper studying the impact of the minimum wage on employment and wage levels in China, three economists pointed out that by setting the minimum wage, the government can guarantee the minimum income of workers and maintain the basic living standard of workers. It can also balance the asking price power of employers and employees in the labor market and adjust the distribution of capital and labor in economic outcomes. Narrowing the wage gap between laborers and increasing wages for low-skilled workers are also functions it can provide. However, the minimum wage system can also have a negative impact on the labor market. First, the minimum wage system will increase labor costs, thereby increasing social unemployment. Second, the minimum wage system may also harm the economic interests of the workers it most wants to protect—low-skilled workers—by causing them to lose their jobs instead. It can be seen that whether the increase of the minimum wage in Germany can bring obvious benefit is closely related to the political, economic and employment condition in Germany in the future.
By Tao Cheng
