The Government of Angela Merkel approved the tax in 2015 (which has been escalating to 9.19 euros per hour), an economy that until now had lacked this norm that puts a floor on the remuneration of workers. After five years, several conclusions can be drawn, among which stand out that the smallest companies have suffered from an increase in costs that they have not always been able to assume, which has produced a transfer of workers from small companies to larger ones, which in turn tend to be more productive. This, in turn, has reduced the number of these small companies, which in the case of Spain make up 95% of the business fabric. A reduction in the hours worked has also been observed in people who have been affected by the minimum wage.
It is also true that it has meant a considerable improvement in the remuneration of workers who are in the lowest tenth of income (the 10% with the lowest wages), in addition to not having destroyed jobs in net terms. How has the market absorbed the increase in the minimum wage without reducing employment? With the transfer of workers from small companies (they are not capable of paying the minimum wage) to larger, more productive companies with higher margins. Other experts also argue that some companies have decided to compensate for the rise in wages by reducing the working hours of their employees.
“Our findings show that the minimum wage induces low-wage workers to switch to companies with lower turnover rates, and to companies with a better-educated workforce that pay higher wage premiums,” the report says.
Thus, the wage and labor effects from the regional point of view confirm the results that have been appreciated from an individual perspective: “The minimum wage increases the average wage, without reducing employment. Therefore, the minimum wage not only helped to reduce wage inequality between people, but also between regions, without causing job losses among disadvantaged people or in disadvantaged regions”.
The dark side of these results
However, this transfer means the end of many small companies that are unable to compete with larger ones, which tend to have higher margins, are more capital-intensive and have a greater capacity to invest than small ones.
“Specifically, we show that the number of companies and the proportion of micro-enterprises -with less than 3 employees- decreased, while the size of the companies and the proportion of larger firms increased, in the regions most exposed to the minimum wage with respect to the less exposed regions, in the years after its introduction. In addition, we found that the minimum wage increased the average wage premium of firms, suggesting that the minimum wage has involved a compositional shift toward higher-paying firms,” the economists Christian Dustman, Attila Lindner, Uta Schonberg, Matthias Umkehrer and Philipp vom Berge stand out.
Although at an aggregate level the introduction of the minimum wage has generated both positive and negative results, there are always specific sectors that suffer the consequences more harshly. In this case, they have been small companies. The regions where the minimum wage has had the greatest effect (those in which there were lower wages) and where more SMEs (small and medium-sized enterprises) were established “have suffered a drop in the number of companies… This drop has been even more pronounced in micro-enterprises with no more than two employees”.
The economists who have carried out this work recall that this “would be in line with the hypothesis that the minimum wage expels the least productive firms from the market.” This leaves in the air the effect of the increase in the minimum wage in Spain, where 95% of the firms are small and only 30% of total employment belongs to large companies, which are the ones that absorb wage increases with the least problems. minimum.
Differences between Spain and Germany
(those with more than 250 employees and those between 50 and 249 employees). Larger companies have a greater capacity to invest in this type of capital, which usually has a very high initial cost, but which undoubtedly contributes to improving productivity.
In Germany large industrial companies have been protected, encouraged and helped. In Spain, the opposite occurs, companies with between 1 and 9 employees employ a greater portion of the employed. These types of small firms have more difficulties in undertaking investment in high-tech machinery. The latest employment data in Spain
Finally, Oliver Bruttel, economist and director of the business and information center for minimum wages in Berlin, explained in a paper published in 2019 that “our research suggests that the new wage threshold has led to a significant increase in hourly wages for those who earned less than €8.50 per hour before the introduction of the minimum wage However, this increase in hourly wages does not fully translate into an increase in monthly wages, as the available evidence suggests that hours of work have been reduced at the same time.
This expert argues that even when some research found some effect on employment, either positive or negative, its size has been negligible in relation to the total number of jobs. In addition, this expert adds that “as in other countries, the minimum wage has not helped to reduce welfare dependency and the risk of poverty… while companies that had to increase wages because they paid some of their employees less that the minimum wage before 2015 saw their benefits decrease. Finally, some industries with a high proportion of minimum wage workers were forced to increase prices, which were ultimately passed on to the consumer.
The introduction of the minimum wage in Germany and subsequent revisions have helped to increase the income per hour worked for the lowest-paid employees, however there is no evidence that their monthly wages have increased (companies have been able to reduce working hours). job). Although income inequality has been reduced (measured by the Gini coefficient), it has not substantially reduced the number of households at risk of poverty or their dependence on the welfare state.
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