The Pros and Cons of a Minimum Wage | Business| Economy and finance news from a German perspective | DW | 12.04.2005
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The Pros and Cons of a Minimum Wage

Unlike other EU countries, Germany does not have a minimum wage. DW-WORLD talked to the head economist of Barclays Capital, Thorsten Polleit and General Secretary of the European Trade Union Confederation, John Monks.


Do German workers really need a minimum wage?

DW-WORLD. There is heated debate in both Germany and the European Union about the minimum wage. How worthwhile do you consider it to be?

Thorsten Polleit: When it comes to strengthening growth and employment across Europe, the minimum wage is definitely the wrong instrument. Wages in parts of the continent are too high and minimum wages would not help to create much needed jobs in the low-wage areas.

Many politicians consider legally-binding minimum wages as a means of fighting wage dumping through workers from Eastern Europe . How do you see that?

To refer to social dumping is to play with false morals. We know that it is the consumer and those workers who are refused entry to the labor market who suffer from reducing competition through a minimum wage. Cutting off the market would paralyze the most important sources of growth and employment. With this in mind, it is misleading to make reference to social dumping.

Germany is one of very few industrial nations which does not have a minimum wage. Even exemplary countries such as the US , Britain and the Netherlands have had a minimum wage for many years. Why would it be such a bad thing for Germany ?

There are a number of countries which don't have a minimum wage, and it is important to take into consideration the fact that wages in Germany are already way above the average in other countries. A minimum wage would deepen the gap in wage discrepencies.

So would you say that the minimum wage kills jobs?

Minimum wages clearly prohibit the less productive workers from getting onto the labor market. This. in turn creates an increase in underemployment and the only way to solve that problem is with an open game of supply versus demand. A minimum wage wouldn't help the situation.

How would you suggest politicians go about creating more jobs?

We have to take into consideration that here in Europe, not only in Germany, we are in competition with many other nations such as India, China and other Asian nations. We also know that ultimately, affluence can only be created and maintained through the generation of better and cheaper solutions. We need less state intervention and more courage for reform, more courage for free market systems in Europe.

Click on the second part to read what John Monks thinks of a minimum wage.

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