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How Germany’s minimum wage affects the salary gap

How Germany’s minimum wage affects the salary gap

How Germany’s minimum wage affects the salary gap

While the hourly pay gap has reduced over recent years, the difference in monthly income between the country's rich and poor has stayed the same - because working hours have been reduced since the introduction of Germany’s minimum wage.

Wages on the up in Germany

New figures released by the Federal Statistics Office (Destatis) show that hourly wages in Germany have been increasing over the past several years. From 2014 to 2018, those who earn within the lowest ten percent of wages in Germany had their average hourly income increase from 8,37 euros an hour to 9,71 euros. Similarly, the average hourly earnings of the top 10 percent rose from 29,03 euros to 31,76 euros.

Essentially, in 2014 a high-income earner made 3,48 times more than a low-income earner every hour. However, by 2018, this had dropped to 3,27 times.

According to Destatis, one reason for the reduction of the hourly wage gap is the introduction of the statutory minimum wage on January 1, 2015. By 2018, the minimum wage stood at 8,84 euros. It has increased since then and is currently at 9,35 euros.

Has the income gap changed?

However, despite a reduction in the hourly wage gap, experts warned that the difference in monthly income has barely changed. Daniel Eckert, the finance editor at Die Welt, reported that, since the minimum wage was introduced, employee hours have been cut. Due to this reduction of hours, the difference in monthly income has stayed the same.

Eckert has also asserted that a slower rise in top sector wages is not necessarily a good sign, since increases in top sector wages denote the success of German companies, operating in the top-earning industries, on an international scale.

Making changes

According to the German Economic Institute (DIW) in Berlin, around 2,4 million workers actually take home less than minimum wage, because they are pressured into working unpaid overtime. Thus, the DIW has suggested that a new law, where companies are required to declare employee hours, needs to be put in place to supplement the statutory minimum wage.

“If the implementation of such a law were to help convert unpaid overtime into paid overtime, non-compliance with the minimum wage would probably also decline,” stated the DIW.

William Nehra

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William Nehra

William studied a masters in Classics at the University of Amsterdam. He is a big fan of Ancient History and football, particularly his beloved Watford FC.

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