Minimum Wage and Economic Growth – Politicians are Mistaken
Oct 17, 2014
“Politicians are mistaken if they think that the statutory minimum wage recently passed by the German Parliament will not dampen economic activity and growth prospects”, says Niklas Potrafke, head of the Ifo Centre for Public Finance and Political Economy. “In fact, the minimum wage, which will take effect in January, is already subduing economic and growth prospects as businesses proactively factor in this prescribed wage level. The companies have anticipated that unit labour costs will rise and accordingly are already investing less. This is clouding the economic outlook and dampening long-term economic growth.”
Recently, some leading politicians have stated that the nationwide minimum wage could have no effect on current economic growth because it is not yet in force.
Prof. Dr. Niklas Potrafke
Ifo Center for Public Finance and Political Economy