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General report: Evaluation of the general statutory minimum wage

Client

Federal Ministry of Labour and Social Affairs (BMAS)

Year

2020


On behalf of the Federal Ministry of Labour and Social Affairs, we evaluated the impact of the statutory minimum wage in Germany since its introduction in 2015. According to the latest research, the minimum wage has contributed to protection against low wages. At the same time, it has been largely employment-neutral and has had little impact on competitiveness between companies. However, results do suggest that though companies have not responded to the minimum wage with redundancies, they have made adjustments to working hours. The effects identified are essentially due to the introduction of but not the increase in minimum wage.

“Despite the diverse research literature on the legal minimum wage, it remains unclear how many companies do not comply with the Minimum Wage Act or deal with the minimum wage with practices that are sometimes illegal,” emphasises Heidrun Weinelt, author of the evaluation.

Background and method

The Minimum Wage Act (MiLoG) entered into force on 1 January 2015, and introduced a mandatory lower wage limit. Numerous scientific analyses on the effects of the statutory minimum wage have since been made available, all of which have been evaluated for the current general evaluation. Similarly to the central objectives of the minimum wage introduction, three fields of action were distinguished: workers’ protection, the labour market, and competitiveness.

Read the overall evaluation (PDF, in German)

Two further investigations conducted by Prognos have also been included in this evaluation. Our economic team examined the fiscal effects of the minimum wage and analysed how the statutory wage limit affected traineeships.

Fiscal effects of the minimum wage

In examining the fiscal effect since the introduction of a statutory minimum wage, the team quantified the minimum wage-related changes in the public budget’s income and expenditure – in other words, in the tax and transfer system, as well as at statutory social insurance level. On the basis of the assumptions made, the overall fiscal effect amounts to around 1.1 to 2.6 billion euros compared to the situation without a minimum wage.

Effects of the statutory minimum wage on trainee relationships

Whether or not a trainee position is subject to the Minimum Wage Act depends on the type and duration of the training. The analysis suggests that in the course of the introduction of the minimum wage, trainee positions have been partially adapted so as not to be subject to the Minimum Wage Act. Traineeships that do not fall within the scope of the mandatory minimum wage appear to be offered more frequently by employers and are often (significantly) less well paid than trainee positions that are subject to the minimum wage legislation. This is especially true for compulsory trainee posts. The situation in the individual sectors differs greatly – both before and after the introduction of the minimum wage, in 2015.

Examination of the statutory minimum wage for traineeships (PDF, in German)

Further information on the BMAS website

Project team: Dr Oliver Ehrentraut, Heidrun Weinelt, Lisa Krämer, Jakob Ambros, Laura Sulzer

Do you have questions?

Your contact at Prognos

Dr Oliver Ehrentraut

Partner, Director, Head of Economics Division

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