It isn’t easy to get a clear sense of how the introduction of a statutory minimum wage in Germany will play out. From one angle of vision, it should raise household disposable income and at the same time contribute to a much-needed rebalancing in the euro area. From another perspective, such a guaranteed minimum is likely to trigger an upward wage trend that couldn’t happen at a worse time for German manufacturers who are increasingly struggling to keep exports up. Assuming the Social Democratic Party (SPD) membership approves the deal between the coalition partners on December 17, two basic trends should help us determine the relative weights of these factors and grasp the implications of such a move:
- The extent to which wage increases spread to export industries, which already pay considerably higher wages than the agreed-upon minimum,
- Whether or not international demand for capital goods will recover. If it doesn’t, Germany will inevitably slip from its position as a leading exporter and will be unable to power the euro area economy.
On both scores, the introduction of a minimum wage will mean radical change in relation to the pre-euro era—not only for Germany, but for the entire currency bloc.
