Are minimum wages good for the economy? Principles:

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X. A minimum wage is not a violation of sensible market principles:

X.1. If the relationship between supply and demand cannot form a sensible balance due to external influencing factors, the following applies:

If the market is important for the material well-being of many, then an intervention in price formation is not a disturbance of the market economy, but is for it. The regulation should aim at creating the 'market-economically correct' price level.

However, the focus should be on eliminating the external causes in the meantime and then abandoning price regulation again.

(Example: Housing management in Germany after the Second World War, at the same time government subsidies for the creation of housing for the many refugees and those who had been bombed out, until management was phased out very quickly, followed by price regulation 20 years later.)

X.2. Is a minimum wage mostly appropriate in rich nations/economies?

Most of the time yes. The quality deficiencies in politics are the external factors that prevent balanced market activity on the labor market: In most developed economies, they lead to a considerable expansion, to a considerable oversupply of workers without vocational training for the core need of work in affluent nations.

Keywords on causes, for example: demographics, immigration without integration through education, EU rules for EU-wide equal treatment of competitors.

X.3. How long is a minimum wage appropriate in rich economies?
Until the external causes are resolved. For the most important external root cause - the lack of the average level of economic intelligence in the respective elected governing political circles - there are unfortunately no signs of a remedy in most developed economies.

X.4. Does a minimum wage reduce the number of jobs?
Hardly in the case of larger companies.
The sectors of the economy that must and can migrate to low-wage countries have long since migrated. Wages in the less underdeveloped economies are not simply 'extremely low because the citizens of these countries are so poor'. The differences are greatly amplified by other complex factors - if you want to formulate it so fuzzily, "artificially" are amplified. These differences are therefore becoming so extremely high that companies in many sectors of the economy can only survive by outsourcing their work to low-wage countries.

X.5. A minimum wage therefore mainly burdens / reduces work that cannot be outsourced abroad.
Examples: security guards, gastronomy, hotels, nursing staff, construction work. The minimum wage then simply means that the users of these services are obliged to pay the ''true'' costs of the work, instead of shifting this to the taxpayer (social security funds, however these services are organized and named by the state) because of market distortions ).

It is generally desirable that services should be paid for at the ''true'' cost. This would also be possible for most services with a high proportion of labor costs. It no longer works because the social security system was mostly bloated by the consequences of policy mistakes: Factors such as unemployment, early retirement, extended training periods, statistical non-recording of the economic value of raising children and domestic work.

To the extent that human labor represents only a small part of value creation through automation, material costs and capital costs, this tax burden, which has become absurd, can be borne.
However, if personal work generates almost 100% of the costs, this is difficult to achieve.

As a result, minimum wages actually lead to a reduction in official work, not because of the minimum wage, but because of the tax burden (consequences of political errors). As far as possible, depending on the branch of work, there is a shift to undeclared work (maintenance, domestic services, restaurants) or to state-subsidized work (care services, additional income from the state, etc.).

Ultimately, little work and income will disappear. But normal activities subject to social security contributions with the full dignity of full-fledged employment contracts are disappearing. Contribution-paying activity is disappearing, which in turn leads to even more tax burdens and thus to even more undeclared work and improvisational models.

X.6. Why might a minimum wage regulation also prevent higher employee incomes?
This can be seen perfectly in the French model of the minimum wage called SMIC, because it is an integral part of French economic life - ultimately cross-generational and designed down to the smallest detail. The consequence is, among other things, that many employers practice the minimum wage as a state wage determination. It's very simple: positions are then only advertised at the SMIC. There is an increase - if at all - mainly through bonus regulations and other superimposed models.

It is surprising to realize that minimum wage regulations can also increase profits for companies and reduce incomes for employees. This unexpected unwanted side effect is almost completely absent from the political discourse when talking about minimum wages.

X.7. Is a minimum wage regulation currently desirable for Germany? - Unfortunately yes.
This is only desirable because the low-wage sector is no longer a balanced market due to political mistakes (external influences) and therefore requires regulation.

Unfortunately, there is no sign of any reduction in the policy mistakes that triggered it. Germany has been in a long-term downward spiral since about 1970 as a result of policy mistakes. The intermediate highs and intermediate lows cover it up for a few years at a time. However, the long-term trend can be clearly seen in the statistics and is unbroken: a creeping downward spiral.

The LIBRA concept of a national contract for full employment is perhaps the only solution to break out of this spiral within a reasonably short period of perhaps 12 months. You can find out more here at vox7.org.

X.8. As long as nothing happens in the sense of the LIBRA concept or in a similar form, minimum wage regulations are the emergency plaster on the big wound.
Minimum wage regulations mean that users of services bear roughly the ''true'' cost - which is good - . Unfortunately, users also have to bear a greatly increased tax burden - which is bad because it distorts the market. The translated parts of the tax burden lead to the doubling of the ''true'' costs and thus to a substantial reduction in the visible purchase of such services.

This reinforces the downward spiral because non-workers lack ongoing training and acclimatization from work and because, in the case of undeclared work, the total loss of social security contributions leads to an increase in the tax rates for registered work.

X.9. Minimum wage regulation is the lesser evil as long as nothing better happens.
Minimum wage regulations are undesirable because they limit freedom, increase government oversight, create discord, create bureaucracy, complicate simple things, distort markets, prevent workers from freely negotiating pay and more pay.
Minimum wage regulations can only be legitimized if they reduce a considerable market distortion that already exists. You are then choosing the lesser evil.






The following text, originally quite long, was reduced to a small part a few years ago. - More about the reasons: See at the end of this text.

A. Minimum Wage: General Considerations. (-'VEW-MINI -)

A.1. Minimum wages are useful only for certain rather specific regulatory tasks.
In most real markets with a large, freely developed range of variation, constellations can arise that require temporary or permanent regulation. This regulation must be limited to the minimum necessary in order not to hamper the benefits of market dynamics.

Malfunctions in the labor markets would be very disruptive if they were paid far below the somehow defined average level of pay for the same work. Because then the error would be blamed on the taxpayer in a way that is detrimental to the common good (subsidization of work).

So it is definitely right to think about minimum wages. The core problem is the political momentum of such a regulation: the regulation of the minimum wage can gradually lead to the market functions being disrupted. In the long run, the determination could then become the main cause of significant above-average unemployment. The well-intentioned protection would turn into harm. A.2. Focus here: economic analysis - not political risks. The problem of improperly set minimum wages is a problem of bad politics. The error problem should not be the focus here, although it is the core problem. Rather, the aim here is to show what is right and wrong. This is intended to create an analyzed, objective basis for counteracting such errors with good, scientifically based arguments.
No position should be chosen on this website for the hardly objective dispute of opinion itself. This website should preferably not contribute any opinions, but only present objectively undoubted.

A.3. Minimum wages must always be defined with a dynamic adjustment clause.
This is an important general design rule:
If minimum wages are set, they must be designed "dynamically" so that their real content does not keep changing as a result of nominal shifts (devaluation of money and other things) and structural changes. The danger must also be counteracted that setting the minimum wage for election campaign reasons could gradually lead to a uniform wage in the country.

The remaining danger is that before each election a change in the formula will be proposed in order to win votes. The interest in increasing money is immediately understood by everyone. So it brings votes. The resulting much more important risk of increasing substantial and growing unemployment is not considered by the majority of eligible voters.

Every statutory minimum wage determination thus creates a demagogically misusable weak point in democracy with the danger of ending up in the low-wage sector in the event of considerable unemployment. This danger is perhaps best studied in France. Minimum wage determinations have been demagogically abused for decades. This has severely damaged France's economy. It is one of the main reasons for France's regression in the country's relative economic importance, with a consequent significant loss in political and cultural terms.

More about this in the e-book "VOX7 - Handbook of Optimal Government." Easily comprehensible scientifically based definition of the best rational policies for citizens, government and economy. 5 p. excerpt: uno7.org/pen/vak-opta-en.htm

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Minimum wage : disadvantages, advantages, recommendation.

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X.B.1. A minimum wage that is too low is ineffective. It is generally accepted that a minimum wage set so low that it has no effect is logically ineffective and, in principle, superfluous.
Example: If the regulated minimum wage were only half of the usual remuneration for simple work without the need for training.

However, a very low specification can make sense from the following point of view: It can be interpreted as an absolute lower limit against excessive (in extreme cases, enslavement-like) abuses.

Admittedly, such grievances can also be curbed by other regulations, for example immorality, exploitation, in extreme cases enslavement. But then a complex procedure would be necessary each time; case law would develop rules, but it would still be impractical.

In addition, vaguely defined criteria in social tort law are typically rules that will eventually be abused by extremist, unconstitutional forces against correct personalities with political activities. This danger is not small. Rather, this is always done in a preliminary form (ideologically oriented departments).

B.2. A minimum wage that is too high increases unemployment. A minimum wage that is so high that it exceeds the normal willingness to pay many respectable and desirable employers logically leads to a reduction in the supply of labour. The consequence is more unemployment. This leads to less income for the low-income. The minimum wage then causes the opposite of the intention.

Core rule: It's better to have 1 million low-paid workers getting a little co-payment from the taxpayer community than to have 1 million more unemployed wintering on taxpayer handouts, wasting away (knowledge, Willingness to work, further training, lack of social status, infringement of human dignity).

B.3. There is no permanently “just right high” minimum wage. Assuming the starting minimum wage is 'not too high, not too low'. It remains to be seen whether this even exists. In any case, it is certain that the future minimum wage will no longer be based on economic development, but on the party spectacle before elections, which is necessary for democracy. This guarantees that the determination cannot remain economically optimal in the long term.

Returning to France's experience:
(with a relatively high minimum wage): In low-wage regions, it discourages employers from hiring. The minimum wage is thus forcing creeping deindustrialization and significant and constantly expanding unemployment. In high-wage regions, it serves employers as a convincing argument that this is fair and therefore enough.
In Paris, the minimum wage after taxes and the like covers just the rent of a dilapidated old house small apartment of about 30 square meters. Ultimately, only 2-person households can still afford around 30 square meters. Some workers can no longer find an apartment and live in overpriced hotel rooms.

Wherever political action is taken around the world with minimum wages that are regulated too primitively, the interests of low earners will probably be damaged in the long run. France is one example among many. A relative ''impoverishment'' of employees can occur if one wants to prevent the relative ''impoverishment'' of employees with overly primitive regulations.

B.4. Is a minimum wage linked to collective agreements to be regarded as illegal?
A minimum wage linked to the cartel-compulsory economy agreements of the employer and employee lobbies (particularly collective agreements) can be regarded as unconstitutional.

Such an encroachment on fundamental rights should probably be reserved for the legislature. However, according to their nature, collective agreements will always contain regulations in several respects that can have an effect similar to minimum wages. - This should not be analyzed in more detail at this point, because it is obvious. The difficult concept of collective agreements can never be problem-free. This is one of the many problems.

B.5. The right to a normal employment contract The fact that a normal employment contract is now regarded as a special advantage must give food for thought as such, because ultimately it is also a minimum part of the employee's claims.

The causality is well known. The legislator has provided the normal employment contract with high protective effects (termination, continued payment in the event of illness and others). The expected result came about: Ultimately, the protective effect was low; but the possible erratic effects were prohibitive for essential categories of work and resulted in substantial non-employment.

However, since the unsuitable regulations were regarded as an acquis, the legislature could not downgrade the employees with the best protection, although the protective effect ultimately means little. So the legislature had to resort to the formation of secondary markets with greater denial of protection the more the others are protected.

Elevating a ''normal employment contract'' to a privilege is one of the many steps in the formation of caste-like social structures. There is objectively and undoubtedly a constant need for action here. However, since the political interest camps cannot agree on solutions for strategic reasons of power and advantage, there remains an element of the increasing sharpening of social group differentiation.

C. "Wage dumping" can't exist... can it?

C.1. The logic of the employment contract prevents any form of wage dumping.
An employee offers himself. What he gets as salary, he really gets. So there is no ''deficit'' and without a deficit there is no ''dumping''. One could only speak of wage dumping with such an individual contract if the employee would pay extra to keep his job. As we all know, this is extremely unusual and certainly not what is meant when relatively high earners and their unions take to the barricades against "wage dumping".

C.2. "Wage dumping" still exists - by the state with 1-euro jobs. The only one violating the rules of the game through wage dumping is the German state. It is he who is to blame for the reduction in normal employment contracts - with the "1-euro jobs". The state then gives employers and employees a gift of perhaps 80+% of the real cost of work. The employee's tax burden as an expense is higher than the sum of his income from the work itself. In this case, the state actually finances the rare special case of selling work at a dumping price that is in deficit.

The frequent justification that 1-euro jobs shouldn't displace work (and are a virtual gift from heaven?) cannot be rationally proven. The 1-euro jobber costs taxpayers around 10 euros per hour. And of course, with this wage dumping, the state is crowding out other employees who have received about the same amount up to now - but then with the dignity of a normal employment contract.

C.3. Accusation of "wage dumping" as discrimination against immigrants?
After the above non-opinionated text, an opinion is quoted in order to provide material for discussion. The website should not be identified with this. Read and discuss?

QUOTE: ,,The question arises as to why even Germany's typical do-gooder circles insist on accusing new foreign workers in Germany of wage dumping from time to time. One should actually regard it as an outpouring of do-gooderism to particularly include fellow citizens who have come from abroad in the devotion to human nobleness, since they have it much more difficult."

QUOTE: ..By choosing the reproachful expression "wage dumping" for hard-working foreigners, the critics are emphasizing the right of the German citizen community to higher income for the same work - including themselves. An interesting question... You could discuss this question in Germany with your normally hard-working friends and fellow citizens from Poland...''

More about this in the e-book "VOX7 - Handbook of Optimal Government." Easily comprehensible scientifically based definition of the best rational policies for citizens, government and economy. 5 p. excerpt: uno7.org/pen/vak-opta-en.htm

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