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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.

Contact

Prof. Dr. Niklas Potrafke

Ifo Institute
Ifo Center for Public Finance and Political Economy
Phone: +49(0)89/9224-1319
Fax: +49(0)89/907795-1319
Email: potrafke @ ifo.de
Website

Press contact

Harald Schultz

Ifo Institute
Press, Publications, Conferences
Phone: +49(0)89/9224-1218
Fax: +49(0)89/9224-1267
Email: schultz @ ifo.de
Website


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