Hello and a good day to you all!
I also wish you a happy new year. On top of this, I would like to send you my ideas on the minimum wages. After all, the regulations regarding same have become active yesterday. This article is also available on Politik-Poker. Why don’t you take a look at the website anyway? You might find some things worth reading.
ULF D. POSÉ | 02.01.2015
At long last, we now have it: the minimum wages legislation!
I am sure that the occasional Sylvester rocket was launched to celebrate the minimum wages legislation. At long last, millions of persons can now afford to buy the necessities of life without federal subsidies.
At long last, the exploitation has come to an end. But is that really true? Are minimum wages really fair and do they actually make sense?
It is certainly a good idea to think about income minimums. But then, thinking about them should eventually result in a responsible judgement. There are two questions you need to ask:
1. What is the purpose of a minimum wage, and will the legislation actually help?
and
2. Can we all afford to pay minimum wages?
Well, the purpose of a minimum wage is that people can live without needing federal subsidies. This is not possible with the minimum wage set to 8.50 € by federal law. Not for singles, and definitely not for families with only one breadwinner.
As early as 2004, the border value for a minimum wage you would need was 1,704 Euros before taxes per month. That equals an hourly rate of 9.78 Euros. Even at the time, there were 44,000 regularly employed persons who earned more than that and still had to rely in extra support by the state. The independent “Institut für Arbeitsmarkt- und Berufsforschung (IAB)” formulated in 2005 in rather clear words: “Depending on the household context, we (might) still have to talk indigence, even if someone earns more than 7.50 Euros per hour”.
Consequently, the goal to make it possible for everyone to earn a living without state support has not been reached. That remains true for a minimum wage set to 8.50 €. And it also concerns far fewer persons than is always said.
In the past, it has been postulated – primarily by the unions – that around two million persons need Hartz IV money, regardless of having work. That would be almost one out of twenty.
According to a study by the independent Institut für Arbeitsmarkt- und Berufsforschung (IAB) in the year 2005, that is indeed the number of adults who get additional money from the state. But among those were masses of persons who only held 400-Euro-Jobs. Of those who really worked full-time, only 495,000 persons received Hartz-IV money.
In April 2006, the number was around 473,000 and in 2007 it was 526,000. That is still an enormous amount. But then, among those 495,000 full-time employees who needed to add Hartz IV money to their income, there were only 14,000 singles who could not live on their full-time jobs. That is 0.035 per cent, rather than 5 percent – which would have equalled 2.1 million persons if one had believed the unions. This is how you manipulate people when they make up their minds.
Consequently, what counts if you are talking federal support is the marital status. If someone has a partner who earns no money, and if, on top of this, he has two children, then he cannot feed the family with a wage of 8.50 Euros per hour. Not mentioning this in the public debate is probably making the people look stupid. It is definitely dishonest.
Now, politics introduced the minimum wages for all areas starting with January, 1st, 2015. Yet if I look at how public projects are assigned to companies, then I see that the cheapest one gets the deal. This alone is sufficient to make you wonder. How the authorities lie!! Moreover, a legally fixed minimum wage unfortunately supports the Marxist idea that achievement should be honoured regardless of its usefulness/uselessness. This might be understandable as a humane concept, but at the same time it distorts the concept of what is truly the underlying idea of earnings.
The next step is to answer the question if people can afford to pay a minimum wage. If you determine minimum wages that an enterprise cannot pay because their sales situation does not yield the necessary return, you will only promote illicit employment and fake self-employment.
If work is not desired because it is too expensive for the entrepreneur, then it will disappear from the market – and the entrepreneur along with it. This might be a bitter truth, but it follows a very simply economic logic. Income is created through supply and demand on the workforce market, along with the added value achieved by the work.
If the wages are higher than the added value, then it can no longer be financed: the demand dies. As soon as an entrepreneur is forced to pay wages he cannot earn by fulfilling his orders, the enterprise will have to close down – or else the state will have to support it. We experienced this over and over again when, after the East-West unification contracts, equal (or almost equal) payment was made obligatory in East and West Germany. Eventually, we had some areas with almost 40 per cent unemployment.
Just take the example of temporary employment. A temporarily employed person who has been leased to a car manufacturer in the metal/electronics-industry will get the high metal/electronics industry wage for putting products onto shelves. If, a week later, he does virtually the same thing, but instead of putting buffers for the metal/electronics industry onto shelves, he now puts water bottles onto shelves for a retailer, he will get less money – for the same job.
Wages are all sorts of things, but they are certainly never fair.
The immediate outcry is that this is not fair. Unfortunately, according to Ulpian, justice is the wish to let all people be treated fairly. But the truth is that wages can never be fair. Nor will they ever be fair. They are based on what is appropriate, not on what is fair.
Whether a wage is appropriate depends on the demand and the added value. Consequently, the added value of putting water bottles onto a shelf can be considerably lower than that of putting buffers onto a shelf.
Just like fairness is never a basis for wages, the same is true for achievement. If it were otherwise, then putting buffers onto a shelf would have to be considered the same achievement as putting water bottles onto a shelf.
The achievement principle is Marxism in its purest form.
Performance-linked payment is not an invention of capitalism. In fact, it has been invented by Karl Marx, who used it as a polemic argument against the market-value-utilization-value principle as propagated by capitalism. Unfortunately, we seem to have forgotten about this.
Performance-linked payment ignores that the usefulness of work is its determining factor when it comes to wages. If performance were the determining factor, then a managing director who does 100 per cent of what he is supposed to do would get less than a skilled labourer who does 130 per cent of what he is supposed to do.
I believe that in this ideological dispute, many persons follow Bernhard Shaw, who once said: “Some people are only prepared to die for things they really cannot understand”.
Minimum wages – so what about the self-employed?
If you wanted to be strict, a minimum wages law would also have to include a law that enforces that certain products must be bought, where the price is also regulated. Introducing a minimum wage would have to make it obligatory for all customers to pay a suitable price. No economist would ever consent to such a drastic Marxist measure. At the same time, the example makes quite clear what a grotesque discussion we are into.
When talking minimum wages, we totally ignore a huge part of the work force: the entrepreneurs and self-employed. We in Germany have 100,000 self-employed persons whose income is below the legal seizure exception limit. All of them are extremely hard workers.
They work an average of 59 weekly hours and they have extremely little vacation time: around 15 days each year. There are around 600,000 self-employed persons who earn less than 7.00 Euros per hour. On top of those, we have 213,000 freelancers who learn less than five Euros per hour. And those ‘rich‘ entrepreneurs are supposed to be paid the 8.50-Euro minimum wage in the future? Well, it seems that politics have no problem with self-exploitation!
In the debate about minimum wages, the political care for freelancers is totally forgotten. Why do we want to deny employers and self-employed persons something that is considered fair for wage earners?
I presume that our politicians do not wish to admit that they consider self-employed persons as second class citizens who need no support. Perhaps it is also a little unfair to constantly put pressure on our politicians. They have to meet the demands of the current lobbyists at all times.
And still it might be worth consideration from an ethical point of view if full-time work that does not enable the worker to meet his needs at the level of social welfare payments might not be humane after all – as even the social court of Berlin decided.
Is the minimum wage a job killer?
And there is something else you want to remember. Even if the purpose of the minimum wages, namely that you can feed your family, cannot be achieved; telling people that the minimum wages will always and exclusively kill jobs is not absolutely true, either. All over Europe, the experiences they made with minimum wages are as diverse as the amount of said minimum wages. Eighteen out of 25 EU members introduced minimum wages a long time ago, among them are England, the Netherlands, Portugal, Spain, Ireland.
Even in the United States, we have a minimum wage per hour. So you can see that, by now, we stood rather isolated. So far, the increase of unemployment everybody feared caused by introducing the minimum wages has not yet happened in countries where they have it. This can be proved empirically. At least that is the argument of the politicians and unionists. Unfortunately, however, pointing out how the minimum wages function in other countries as a good example is also accompanied by several information deficits.
For instance, in the US, the minimum wages are not a tool for fighting poverty. The income is increased through a negative income tax. Until the end of 2014, the minimum wages in the USA were 7.25 USD. From January, 1st, 2015, it is 10.10 USD (which equals 7.48 €). But will that be enough without federal support? In 2012, families with two or more children received a maximum extra amount of money to the tune of 4,716 USD (3,218 €) in the United States. The Brits gave their poor earners up to 1,730 British Pounds per person (2,342 Euros).
These additional support sums are actually in the same spirit as the one that underlies the Hartz-IV regulations. In other countries, too, the minimum wage system does not automatically make it possible for a family in the United States or Great Britain to be able to live on one income.
At the same time, the amount of the minimum wage is a determining factor. Years ago, the OECD found out that minimum wages can only marginally influence the poverty line. Among young persons, unemployment rather increased through the introduction of minimum wages. The OECD took a closer look at the consequences of minimum wages in nine countries and concluded that the minimum wage had a negative effect on the job situation in 24 cases. In 15 cases, there was either no effect or sometimes a positive effect.
Then the “Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung (SVR)” investigated minimum wages. The result is truly interesting. If less than two per cent of the employees were affected with the minimum wage (like in the USA and Great Britain), there were “usually no or only small negative effects on the job situation. Sometimes there were even positive effects”. But here is the clinch: in France, the situation is totally different. There, the minimum wage is so high (9.53 €) that 15.6 per cent of the employees are affected. The consequence: increase unemployment among women and young persons.
In the eyes of the SVR, France is a good model of comparison for Germany. So maybe we should start being afraid, because the SVR also said that the increase in unemployment was rather drastic after they increased the minimum wages. A survey by Laroque and Salanié points in the same direction. If the minimum wages are increased drastically, you get more unemployment, if you increase them moderately, that is not likely to happen.
Mind you, the minimum wages can also be a defence instrument against competition. Just think of the Post AG. They got rid of their most important competition for letter delivery through introducing the minimum wage. For good reasons, the Post AG was in favour of the minimum wage. In the Netherlands, the Post AG is a rather small service provider. And their opposition to the minimum wages was rather vehement.
In Germany, however, there is another sad factor: our love of regulations. So far, nobody can really say to what extent the extra bureaucracy of documentation will be a burden for the enterprises.
And yet: even if you take all these factors into consideration, you should not make it too easy for the enterprises. An enterprise that cannot pay wages above the amount paid according to the Social Welfare Legislation either suffers from poor market circumstances, or else it will have to ask itself if mistakes were made in management.
The market and the competition decide about the final profit an enterprise can distribute. If an enterprise cannot pay its employees sufficiently, then it is either operating in the wrong market segment or offering the wrong products or producing at the wrong place, or else it has made wrong decisions. A good example from the past is Schlecker. The crises cannot be the reasons why the employees are financially ruined by the management.
udp
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