Does a hike in the minimum wage really cause inflation?

Guest commentWhy an increase in the minimum wage would be irresponsible

The corona crisis is putting a strain on the labor market. It is doing so much more than the rise in the number of unemployed would lead us to believe. At 510,000 from April 2020 to February 2021, this is still limited - thanks to generous special rules for bankruptcies and short-time work, which, however, increased sharply: from almost zero to 2.3 million checked advertisements. That is still far more than at the low point in the global financial crisis in 2009, even if the peak in May 2020 was much higher. There is a tremendous risk slumbering in this number: Nobody knows exactly what proportion of this group of people will ultimately end up unemployed as soon as conditions return to normal after Corona.

In any case, there is cause for great concern, especially for the many underqualified people in the particularly hard hit service sectors such as hospitality and tourism. Even in an optimistic scenario in which the industry with its complex international value chains recovers completely, many local service providers could fall by the wayside or at least permanently restrict their offerings. The result would be that many semi-skilled workers would be left behind, including, of course, an above-average number of foreigners. It is precisely this group that often receives the minimum wage.

The SPD and the Left are now proposing to increase this minimum wage in 2022 from 9.50 euros currently and 10.45 euros from July 2022 to at least 12 euros - an increase of 26 (!) Percent compared to today and 15 percent compared to the plans. And this regardless of the development on the labor market, which we do not yet know. This would be daring in normal times. In the recovery phase after the corona crisis, it is completely irresponsible. It would make the full re-integration of the unemployed and short-time workers into working life much more difficult. It would be a disservice to all those whose employment has temporarily disappeared due to Corona, but is by no means necessarily re-emerging. It could very well happen that a new large group of long-term unemployed will emerge, which will then be very difficult to return to employment.

The minimum wage debate comes too early

Another effect would be added. Since the introduction of the minimum wage in 2015, legislators have clearly made efforts to increase the minimum wage in such a way that it does not - as a politically set milestone - influence collective bargaining. A corresponding distance from the lower wage groups in the collective agreements was largely maintained, so that collective bargaining autonomy and the statutory minimum wage did not get too far in each other's way. With such a drastic increase in the minimum wage, as the SPD and the Left are now calling for, this situation would end, especially in those service industries whose collective wages in the lower qualification segment approach the minimum wage. This could have devastating consequences for the next round of collective bargaining: In the middle of the recovery phase after Corona, the German economy would be hit by a wave of wages and costs that endangers the new start that is due.

It is to be hoped that none of this will come true. The best guarantee of this would be to return to common sense in the political discussion. Only after a noticeable recovery of the German economy after 2022 should a review of the minimum wage be on the agenda. Until then, it is important for Germany to grow out of the crisis with a fresh start - step by step, with a constantly watchful eye on developments in the labor market.

 


Do you already know ours Newsletter "The Week"? Every Friday in your mailbox - if you want. Here you can sign up