A 22 percent increase in the German minimum wage: nothing crazy

Original Article ↗ Hacker News Discussion ↗

A recent study on Germany’s 22% minimum wage hike finds that low-wage workers saw real pay increases of around 5–6% with little observable impact on employment, though hours worked dipped slightly. Commenters debate whether such wage floors fuel inflation or are largely absorbed through modest price rises and lower profit margins, touching on concepts like “greedflation,” Modern Monetary Theory, and automatic wage indexation. The thread also contrasts German policy with U.S. examples (California, Seattle) and raises broader issues of cost of living, housing constraints, and how labor market institutions shape who actually benefits from wage gains.

Effects of the German Minimum Wage Increase

  • Study cited: a raise from €10.45 to €12 increased wages of sub-€12 earners ~6%; hours fell ~1%, so monthly pay up ~5% on average.
  • No clear employment losses detected in early data; longer-term effects considered “TBD” due to short timeline.
  • Some see this as evidence that sizable increases can be net-positive with limited downsides.

Inflation, Price Effects, and “Greedflation”

  • Debate over whether the study properly adjusts for inflation; one commenter notes real vs nominal is considered but time series is short.
  • Several argue minimum wage hikes don’t mechanically cause large price spikes because labor is often a modest share of total costs; even big wage jumps translate into small per-unit price changes in many sectors.
  • Others stress that any wage hike in labor-intensive tasks passes directly into higher prices for those services.
  • “Greedflation” is discussed: some claim high corporate margins are a major driver of recent inflation and that firms push the narrative that wages cause inflation; others cite economists skeptical that “greedflation” is a coherent explanation.

Minimum Wage vs Market Wage and Price Controls

  • Distinction made between legal minimum and prevailing market wages: in parts of the US, advertised entry wages far exceed the federal minimum.
  • Argument: modest statutory hikes near current market wages likely have little effect; very large hikes (e.g., to $20–30 in low-cost areas) might cause closures and job losses.
  • Framed as a general price-control problem: mild floors may be harmless; extreme ones distort supply–demand.

Indexation and Modern Monetary Theory (MMT)

  • Several comments discuss automatic wage indexation (e.g., Belgium) as a stabilizing mechanism that hasn’t produced hyperinflation there, contrasting with some “third world” experiences.
  • Confusion and disagreement over CPI vs “inflation” measurements and how indexation really works.
  • MMT discussion:
    • Taxes viewed as primarily freeing up real resources and creating demand for the currency, not “funding” spending in a monetary-sovereign state.
    • Advocacy of a Job Guarantee to anchor the value of currency to a fixed wage for unskilled labor.
    • Critics argue skilled vs unskilled labor aren’t commensurable, and such an anchor could distort labor valuation.
    • MMT proponents downplay interest-rate policy and favor fiscal tools instead.

International Comparisons and Cost of Living

  • Noted that California’s statutory minimum ($16) exceeds Germany’s €12.41, but commenters stress differences in taxes, healthcare, tuition, and housing.
  • Some argue after-tax, after-services comparisons are needed; others bring in PPP adjustments but these are criticized as too crude for quality-of-life judgments.

Housing, Rents, and Local Constraints

  • In places like Seattle and London, some see landlords capturing much of the benefit of higher wages via rent hikes.
  • One side blames planning and building restrictions plus affordability mandates for constraining supply and raising rents.
  • Another highlights concentration of ownership (large property managers, alleged price-fixing software) as enabling outsized rent increases even when construction occurs.

Seattle Minimum Wage Evidence

  • Anecdotal reports claim Seattle’s higher minimum produced mild price/hour shifts but overall improvement for low-wage workers.
  • An academic study is cited suggesting that wage gains were partly offset by reduced hours and slower low-skill job creation.
  • Thread concludes that empirical results are mixed and sensitive to timeframe and methodology.

German Wage Structure and Work Culture Anecdotes

  • Informal reports: entry IT wages around €22/h; STEM graduates in big cities around €55k, with ~€95–100k possible for experienced engineers under union scales and 35–40h weeks.
  • Union tables, seniority-based pay, and 35h standards are said to reduce incentives for individual initiative and risk-taking.
  • Some portray large German firms as bureaucratic and hostile to “rocking the boat,” which they see as bad for startups and innovation; others do not provide counterexamples, leaving this as anecdotal and localized.

Distributional and Labor-Market Side Effects

  • Observations that minimum wage hikes compress pay differentials: workers who were just above the old minimum may feel devalued when they end up close to the new floor.
  • Response: such workers should now have better outside options and bargaining power.
  • One commenter asserts higher minimum wages raise youth unemployment and that the “real minimum wage is zero”; others implicitly or explicitly reject this, pointing to empirical cases with no clear job loss.