1. Home
  2. Studies
  3. Minimum Wage, Income Distribution and Poverty Risk
Moritz Heumer / Hagen Lesch / Christoph Schröder IW-Trends No. 1 25. March 2013 Minimum Wage, Income Distribution and Poverty Risk
Minimum Wage, Income Distribution and Poverty Risk
Moritz Heumer / Hagen Lesch / Christoph Schröder IW-Trends No. 1 25. March 2013

Minimum Wage, Income Distribution and Poverty Risk

German Economic Institute (IW) German Economic Institute (IW)

An analysis of wage stratification based on the Socio-Economic Panel (SOEP) shows that a minimum wage of 8.5 euros an hour would affect 19 per cent of all dependent employees. Compared with other European countries this is a very high figure. The groups that would be particularly concerned are women, 24 per cent of whom would be affected, the marginally employed (63 per cent) and employees under 25 (50 per cent). The nature of the workplace is also highly relevant. For example, only 7 per cent of those employed by banks and insurance companies earn less than 8.5 euros per hour, whereas the corresponding proportion in the catering industry is 60 per cent. Of the fifth of employees with the lowest gross hourly wage only 27 per cent are in the lowest-earning quintile in terms of equivalised disposable income, which takes the whole household into account. This can be explained by the fact that the net income of employees earning under 8.5 euros per hour constitutes only 38 per cent of net household income and is the highest earned income in only just over half the households involved. Thus, at just under 17 per cent (fulltime employees 12 per cent) the poverty risk for this group is not significantly higher than that for the population at large (13 per cent). A universal minimum wage in Germany would therefore be an inefficient instrument of distribution policy.

More on the topic

Read the article
Attitudes towards social mobility
Maximilian Stockhausen IW-Report No. 58 18. November 2023

IW Distribution Report 2023: Attitudes towards social mobility

Fundamentally linked to the social market economy is the idea that everyone has the opportunity for social advancement, regardless of their social background, and that children should be better off than their parents.

IW

Read the article
Matthias Diermeier / Madeleine F. Fischer / Judith Niehues in SOEP papers External Publication 20. March 2023

Punching up or Punching down?: How Stereotyping the Rich and the Poor Impacts Redistributive Preferences in Germany

Redistribution and the welfare state have been linked by academic discourse to narratives that portray specific societal groups as ‘deserving’ or ‘undeserving’. The present analysis contributes to this scholarship in a twofold manner.

IW

Content element with id 8880 Content element with id 9713