The Effects of Minimum Wage on Economies: An analysis of German Minimum Wages

Thus far this paper has looked into the effects of minimum wage on a global scale. There is still much disagreement as to the effects of minimum wages. In order to make concise conclusions as to the effects of minimum wage this paper will take an examination of Germany’s minimum wage legislation. Germany has the largest economy and has the fourth lowest unemployment rates in the Eurozone. German is also one of five countries that have currently higher employment rates than before the global financial crisis. Some economists say this is due to Germany's ability to keep their labour costs at a minimum. In order to investigate this further it is worth to examine how Germany has dealt with minimum wage legislation previously. It is worth noting that German does not have a national minimum wage level, but rather many regional minimum wages depending on the requirements of work. Wages in Germany include many different minima determined at the infra-national level, as such as minimum wages can differ in relation to different sectors or regions. Joachim Wagner, a leading researcher in German Macroeconomics, analysed whether or not there was a wage curve, negative relationship between wage level and rate of employment, in German society in 1979 to 1990. Wagner restricted the data to only include German men working full time, females were at this time entering the workforce and thus omitted as a minority group, as well as measuring gross monthly earning. Wagner's results showed that there was no significant evidence of a wage curve in Germany but there was a steady wage in Germany regardless of the unemployment figures. Wagner null hypothesis was never rejected at a level of five percent which could indicate that there is a significant...

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...Januray 2014

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