Fact of the Week: One-Quarter of the Pay Increases Resulting From Germany’s Minimum Wage Came From Low-Income Workers Moving to Larger, Higher-Paying Firms

Caleb Foote February 24, 2020
February 24, 2020

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Source: Christian Dustmann et. al., “Reallocation Effects of the Minimum Wage,” Centre for Research and Analysis of Migration Discussion paper 07/20, University College London, February 2020.

Commentary: Germany implemented a minimum wage of €8.50 in 2015, impacting 15 percent of the country’s workers. A new study puts to rest concerns that the wage increases would kill jobs, showing that the policy had no impact on the unemployment rate of low-income workers. Further, the study finds that the minimum wage increased wage growth for low-income workers making more than the minimum wage by 2.3 percentage points—25 percent of which is attributable workers moving to larger firms with higher productivity and wages.