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

Original Article ↗ Hacker News Discussion ↗

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.