Does the statutory minimum wage have an influence on pension development and individual pension entitlements? We investigated this question on behalf of the Minimum Wage Commission. The study was published at the end of June 2020 together with the Third Report of the Minimum Wage Commission. On January 1, 2015, a statutory minimum wage was introduced in Germany. In addition to the frequently studied effects of the minimum wage on target variables such as wages, employment, working time, productivity, earnings situation or competitiveness, the statutory minimum wage can also have an impact on social security systems and, in particular, on how pensions develop. These effects can arise, for example, through wage, employment, working time or price effects. The study deals on the one hand with the potential effect of the minimum wage on the pension system as a whole, and on the other hand with the possible effects of minimum wage-induced wage changes to individual pension entitlements. Taking into consideration the Federal Statistical Office’s ex-ante estimates of the change in wage amounts, which do not yet take into account reductions in working time, the analyses on the impact of the statutory minimum wage on pension adjustment make it clear that there is or has been an effect on the adjustment of the current pension value and thus on how pensions are developing, but that this effect is ultimately very small. The contra-factually derived overall effect is almost zero. In other words, the central dimensions of pension finances – contribution rate and protection level – have remained virtually unaffected by the minimum wage (+/- 0.1 percentage points). If the reduced sharp increase in monthly wages due to the reduction in working hours is factored in, the effect is even lower. The limited influence of the minimum wage is also evident at individual level. It is true that depending on what the wage level was before the introduction of the minimum wage pension entitlements can be significantly increased. However, long-term employment in the low-wage sector would not result in poverty-reducing pensions simply due to the introduction and increase of the minimum wage alone. When interpreting the results, it is important to remember that budgetary context has not been taken into account. This is, for example, of crucial importance when considering the question of the risk of poverty in old age. The report (PDF in German) Further information on the Minimum Wage Commission (in German) Authors: Dr Oliver Ehrentraut, Philipp Kreuzer, Dr Stefan Moog, Heidrun Weinelt Do you have questions? Your contact at Prognos Dr Oliver Ehrentraut Partner, Director, Head of Economics Division View profile Our work on this topic Take a look at our latest projects and activities. 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