all projects

Study

Effects of the statutory minimum wage on pension development

Client

Minimum Wage Commission

Year

2020

Download PDF

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.

The invisible value of care work

2024
| Expertise

72 billion hours: That is how many unpaid care work hours are performed in Germany, annually, by women. In a new paper, we show the value of unpaid care work and how unevenly it is dis-tributed between men and women.

Regional purchasing power of pensions

2023
| Project

Where in Germany is retirement particularly cheap and where has it become more expensive than average? Prognos examined this for the German Insurance Industry Association.

The economic and social situation of the creative professions

ongoing
| Project

In a comprehensive study, Prognos analyses the social and economic situation of freelance and hybrid working creatives. The results will serve as a basis for targeted improvements.

Pension at 63 – Quo vadis?

2023
| Project

Retiring at 63 is very popular. In 2021 alone, more than 270,000 people took the option of early retirement. These were the findings of our study for the INSM.

Inflation – extra burden and relief for family households

2022
| Project

Calculations on inflation-related additional private household expenditure and the work of the Federal Government's relief package.

No generational conflict: Young and old are primarily looking for security.

2022
| Project

Study compares “boomers” and Generation Z: high need for security for young and old alike.

The impact of corona testing on the economy and health care

2022
| Project

Corona tests are designed to help reduce the incidence of infection. Prognos has now quantified the benefits of testing on the economy and health care.

40+x? Social contributions in focus

2021
| Project

Due to demographic aging in Germany, social security contributions will rise to 46% by 2040. These were the findings of our calculations for the INSM.

Wage income developments 2025

2020
| Project

If German economic productivity increases, not every individual benefits to the same extent. These are the results of our study commissioned by the Bertelsmann Stiftung.

The change of long-term care

2019
| Project

Prognos examined approaches to the further development of care professions and the prospects for the financing of the social long-term care insurance (SPV) up to the year 2050.

Care Perspective. Reorientation of the elderly care profession

2019
| Project

The annual expenditure of social long-term care insurance will continue to increase in the coming decades according to the results of a Prognos study for the Bertelsmann Foundation.

Integration: Strengthen cooperation between districts, associated municipalities & cities

2019
| Project

For the Robert Bosch Foundation, Prognos conducted a workshop with integration stakeholders from districts, municipalities, and cities.

Germany Report 2025|2035|2045

2018
| Project

Germany will become more global, more digital, greener and older in the next 30 years. This is shown by Prognos Deutschland Report from 2018/2019.

Women & retirement provision

2018
| Project

A stronger employment orientation for women can help to stabilise the public pension system – while also benefitting their own financial position in old age.

Calculation tool turns users into 'pension ministers'

2018
| Project

What are the financial implications of possible changes in the pension system? With the virtual calculation tool ‘Pension Minister’ central levers of pension insurance can be operated.

A reliable intergenerational contract?

2018
| Project

The Federal Government’s planned pension package would lead to significant additional expenditure on pension insurance and to permanent increases in pension contribution rates. These are the results of our study conducted on behalf of the INSM.

Future Family Report 2030

2016
| Project

This expert report looks at various scenarios. It shows that continued development of family policy has a positive impact on the economy as a whole.

Pension Perspectives 2040

2015
| Project

How high the pensions will be for a typical employee depends, among other things, on the occupation and the place of residence. This is the result of recent research by Prognos for GDV.

About us

Prognos – Providing Orientation.

Prognos is one of the oldest economic research centres in Europe. Founded at the University of Basel, Prognos experts have been conducting research for a wide range of clients from the public and private sectors since 1959 – politically independent, scientifically sound.

Learn more