ifo Institute: Increase in the Minimum Wage in Germany Was Passed On as Higher Prices
Companies in Germany passed on the cost of the previous increase in the minimum wage, which went up to EUR 9.19 on January 1, 2019, primarily through higher prices. This is the result of the latest Randstad ifo Personnel Manager Survey. Among participating companies, 44 percent report that they responded with price increases. Thus a negative impact on employment could mostly be avoided. Only 30 percent of firms reduced the amount of hours worked.
While 17 percent of companies reported that the increase of January 1, 2019 led to a higher number of mini-jobs, another 17 percent reported a resultant decrease in the number of mini-jobs. And whereas 11 percent reduced their headcount in response, 8 percent increased it. This means the increase in the minimum wage at the beginning of 2019 had hardly any negative effect on employment figures.
The most important reason for not reducing headcount is a desire to retain employees for the long term (62 percent in eastern Germany and 55 percent in western Germany). “High demand made it impossible to reduce headcount,” reported 53 percent of the companies in eastern Germany and 47 percent in western Germany. Concerns about the shortage of skilled workers were decisive for 35 percent of companies in eastern Germany and 30 percent in western Germany.
On January 1, 2020, the minimum wage was raised again by 1.7 percent to EUR 9.35.
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