Minimum Wage: Benefit or Drawback for Germany?
Although 20 of 27 governances in Europe have already implemented a minimum wage, Germany as one of the richest and most prosperous countries, still does not dare to pass a bill concerning the minimum wage. For example the United Kingdom decided to establish a national minimum wage more than 10 years ago. Particularly nowadays in times of discussions about escalating unemployment, unemployment aids and increasing poverty of children, it is even more important to think about possible consequences of a minimum wage und its meaningfulness for Germany.
To regulate the salary companies pay their workers means to increase the price of work, which can cause several problems. On the one hand there are definitely several, mainly small companies which are not able to afford the higher pays. As a consequence they would have to dismiss some of their employees or give up their business at all. Another possible reaction could be the substitution of workers for machines which are more reasonable, too. Mainly non-skilled or less-skilled workers would be concerned. Accordingly economical experts like George Stigler are of the opinion that minimum wages provoke higher rates of unemployment. As a result poverty would increase, despite higher pays.
On the other hand a lot of mainly bigger companies would decide to dislocate their habitats to countries where labor is cheaper as in China or India for example. Therefore this does not only mean fewer jobs for German inhabitants. The German governance would receive fewer taxes as well. Consequently the implementation of a minimum wage would affect the whole German economy negatively.
Furthermore, if a minimum wage was implemented several companies would employ workers without declaring them. The black market would grow and the German society would lose an enormous amount of tax payers. As a result the control of the latest wage guidelines would be very complicated and it would...
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