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Hagen Lesch / Helena Schneider / Christoph Schröder IW-Analyse No. 145 20. October 2021 Minimum Wage Adjustment and a Living Wage in Germany: What can Germany learn from France and the United Kingdom?

Germany’s Minimum Wage Act accords a Minimum Wage Commission the task of deciding on a biennial adjustment to the minimum wage. While including an overall assessment, their decision is to be oriented on the development of collective wages.

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What can Germany learn from France and the United Kingdom?
Hagen Lesch / Helena Schneider / Christoph Schröder IW-Analyse No. 145 20. October 2021

Minimum Wage Adjustment and a Living Wage in Germany: What can Germany learn from France and the United Kingdom?

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

Germany’s Minimum Wage Act accords a Minimum Wage Commission the task of deciding on a biennial adjustment to the minimum wage. While including an overall assessment, their decision is to be oriented on the development of collective wages.

This binding rule has proven its worth. While the collective bargaining system has come under pressure to make adjustments in certain low-wage sectors, there have been no long-term detrimental effects on the collective bargaining process. The amendment to the adjustment mechanism proposed by the Federal Minister of Labour, which requires the minimum wage to be based on median income, would jeopardise this success and make se rious inroads on collective bargaining autonomy. The experience of France and Britain shows that, unless firms received wage subsidies, transforming the minimum wage into this so-called ‘living wage’ would create negative pressure on employment. This argument – together with the fiscal burdens such subsidies would give rise to – needs to be addressed when the policy is debated. Moreover, it should be borne in mind that the introduction of a living wage in the United Kingdom in 2016 took place in a highly favourable economic environment and that the measure includes an emergency brake for less favourable circumstances.

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What can Germany learn from France and the United Kingdom?
Hagen Lesch / Helena Schneider / Christoph Schröder IW-Analyse No. 145 20. October 2021

Minimum Wage Adjustment and a Living Wage in Germany: What can Germany learn from France and the United Kingdom?

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

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Helena Bach / Hagen Lesch / Sandra Vogel IW-Analyse No. 148 31. March 2022

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Since the signing of the Stinnes-Legien Agreement in 1918, the collective bargaining autonomy of Germany’s employers’ associations and trade unions has been the subject of continual political debate and at times its legitimacy even called into question.

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Christoph Schröder IW-Policy Paper No. 25 8. October 2021

Do we need a European minimum wage?

In many countries, a paradigm shift in minimum wage policy is discussed, or it has been implemented already. Instead of protecting employees from exploitation as a lower safety line, the minimum wage is intended to provide an adequate standard of living - if ...

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