On January 1, 2005 the fourth law for modern services on the labor market (Vierte Gesetz für moderne Dienstleistungen am Arbeitsmarkt/Hartz IV) was introduced.
It regulates social benefits in Germany.
With this change social benefits were cut.
These indirectly serve as a minimum wage as people are less inclined to work for wages below social benefits.
The German government has thus lowered the minimum-wage.
[1]
And at the World Economic Forum in Davos in Switzerland former German chancellor Gerhard Schröder praised the low-wage sector created by it.
[4] This becomes especially clear when the numbers are standardized.
[4] Germany also joined the Euro-Monetary Union in 1999. And a monetary union is characterized by the fact that there is only one key interest rate. And above all exchange rates disappear with a monetary union. As a result the key interest rate was too high for some countries and too low for other countries. In addition exchange rates eliminated the possibility for countries to balance their foreign trade balance. An even development of wages and labor productivity in all euro area countries was thus necessary. But this was not the case. This is visible in the unit labor costs. These are the wages in relation to labor productivity.
[5] As one can see other countries succumb to German wage restrain. As a result Germany provides lower prices through lower wages. And due to the lack of exchange rates the other euro countries are at the mercy of Germany's exports. But even without Germany the imbalances would remain due to different unit labor costs. If Germany were no longer in the euro then the next country would take on the role of the surplus country.
[1] Viertes Gesetz für moderne Dienstleistungen am Arbeitsmarkt
https://www.bgbl.de/xaver/bgbl/start.xav?startbk=Bundesanzeiger_BGBl&jumpTo=bgbl103s2954.pdf#__bgbl__%2F%2F*%5B%40attr_id%3D%27bgbl103s2954.pdf%27%5D__1545063076015
[2] Davos Annual Meeting 2005 - Gerhard Schröder 2007-04-30
https://youtu.be/k6ElcwqoOqM?t=21m10s
[3] Hamburger Appell
https://web.archive.org/web/20130226021243/http://www.wiso.uni-hamburg.de/fileadmin/wiso_vwl_iwk/paper/appell.pdf
[4] Frohe Kunde aus dem "Jobwunderland" Deutschland. Da lohnt ein genauerer Blick auf die Zahlen und die andere Seite der Medaille| 2018-01-03
https://aktuelle-sozialpolitik.blogspot.com/2018/01/frohe-kunde-aus-dem-jobwunderlanderland.html
[5] NOMINAL UNIT LABOUR COSTS, TOTAL ECONOMY
http://ec.europa.eu/economy_finance/ameco/user/serie/SelectSerie.cfm
We have a fantastic labour market in germany at the moment. A very well funtioning good low wage labour market. [2]This started the period of wage restrain in Germany. This was praised in an appeal by various economists. Various economists such as Hans-Werner Sinn consider this behavior to be good. [3] While the number of unemployed steadily decreased the number of hours worked remained the same. So no further work was created. The available work was only distributed to more people.
[4] This becomes especially clear when the numbers are standardized.
[4] Germany also joined the Euro-Monetary Union in 1999. And a monetary union is characterized by the fact that there is only one key interest rate. And above all exchange rates disappear with a monetary union. As a result the key interest rate was too high for some countries and too low for other countries. In addition exchange rates eliminated the possibility for countries to balance their foreign trade balance. An even development of wages and labor productivity in all euro area countries was thus necessary. But this was not the case. This is visible in the unit labor costs. These are the wages in relation to labor productivity.
[5] As one can see other countries succumb to German wage restrain. As a result Germany provides lower prices through lower wages. And due to the lack of exchange rates the other euro countries are at the mercy of Germany's exports. But even without Germany the imbalances would remain due to different unit labor costs. If Germany were no longer in the euro then the next country would take on the role of the surplus country.
[1] Viertes Gesetz für moderne Dienstleistungen am Arbeitsmarkt
https://www.bgbl.de/xaver/bgbl/start.xav?startbk=Bundesanzeiger_BGBl&jumpTo=bgbl103s2954.pdf#__bgbl__%2F%2F*%5B%40attr_id%3D%27bgbl103s2954.pdf%27%5D__1545063076015
[2] Davos Annual Meeting 2005 - Gerhard Schröder 2007-04-30
https://youtu.be/k6ElcwqoOqM?t=21m10s
[3] Hamburger Appell
https://web.archive.org/web/20130226021243/http://www.wiso.uni-hamburg.de/fileadmin/wiso_vwl_iwk/paper/appell.pdf
[4] Frohe Kunde aus dem "Jobwunderland" Deutschland. Da lohnt ein genauerer Blick auf die Zahlen und die andere Seite der Medaille| 2018-01-03
https://aktuelle-sozialpolitik.blogspot.com/2018/01/frohe-kunde-aus-dem-jobwunderlanderland.html
[5] NOMINAL UNIT LABOUR COSTS, TOTAL ECONOMY
http://ec.europa.eu/economy_finance/ameco/user/serie/SelectSerie.cfm
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