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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?

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?

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

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The Pros and Cons of Trade Union Membership
Helena Bach / Carolin Fulda / Sandra Vogel IW-Trends No. 1 12. March 2024

The Pros and Cons of Trade Union Membership

The decline in collective bargaining coverage in Germany is often attributed to the reluctance of companies to join an employers' association which negotiates collective agreements.

IW

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Thomas Obst / Maximilian Stockhausen IW-Analyse No. 155 9. January 2024

A Macroeconomic Analysis of Wage-Price Spirals

The subject of this Analysis is the forms that wage-price spirals can take and how they influence macroeconomic stability and inflationary trends in Germany.

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