Every fifth eastern German makes under €7.50/hour

The proportion of eastern German employees earning less than €7.50 per hour is 20 percent, compared to 12 percent of western Germans, according to the Halle Institute for Economic Research (IWH). The study was based on data collected from thousands of German households. According to the institute, a worker earning €7.50 per hour and working a 40 hour week would bring home roughly €1,300 per month gross salary.

Published: 25 January 2008 15:10 CET

The study has fuelled the ongoing debate about introducing a minimum wage in Germany. Currently, none exists, as wages are generally determined by collective bargaining by unions. “Poor despite work” is a catchphrase used by supporters of a minimum wage, highlighting the inability of a growing proportion of Germans to earn subsistence wages.

The study shed light on the effect of minimum wage on the low paying jobs, often held by workers with little skill. “If the minimum wage is not compensated for by (the workers’) productivity, these jobs will in fact cease to exist,” said a notice issued by IWH, which is based in the eastern German state of Saxony-Anhalt. The report said that companies would react to the minimum wage by asking their employees to work overtime unpaid. The unpaid overtime would, in turn, decrease the need for more workers, according to the IWH.

Although the institute said that the exact impact of a minimum wage is hard to estimate, the report concluded “that the social-political motivated goal of work with a subsistence salary for everybody will not be reached.”