The pleasant market effect
The pleasant market effect
How the debate about the minimum wage vanished into thin air in Germany / #18
For most economists, markets are a pretty good thing.
Markets enable unlimited exchange processes with each deal leaving both sides better off (otherwise the exchange would not take place). In addition, economists appreciate the efficiency of markets. Prices reflect the costs of the product and information in the market. For example, rising prices due to increased demand attract new producers so that prices can fall in the medium term. Reserved, falling prices increase demand.
From an economic perspective, there are many good things to say about markets.
Non-economists often see things differently.
It is usually not the process itself that is criticised but the result (especially if the result is undesirable). Like rising rents in metropolitan areas (because more and more people want to live in big cities) or rising energy prices (because the supply of Russian gas has fallen drastically).
If rising prices hit relevant parts of the electorate, the pressure on politicians to do something about the market results also increases. But sometimes, the development is the other way around. A problem that has been hotly debated politically for a long time is disappearing into thin air due to market processes.
In Germany, this development can currently be observed with the minimum wage. Its introduction was hotly debated for a long time (it was introduced in 2015), and then there was a fierce debate about the level (it is actually 10.45 euros).
But today, the minimum wage is hardly an issue in Germany. The reason is demographic change. This year, 300,000 more people will retire than enter the labour market. In 2029, that number is estimated to be 670,000.
Workers are desperately needed. There are job advertisements on company cars, on displays in front of shops (like in the picture above, that I took this week in Berlin), and the internet is full of ads in which companies show themselves from their best sides to attract potential employees.
Because demand exceeds supply in many professional areas, wages are rising. Paying the minimum wage can hardly convince anyone to take up a job. As a result, not only wages are rising, also workplaces are increasingly being designed employee-friendly.
I guess, in this case also non-economists have no objection to the market outcome. ;-)
Onwards,
Johannes Eber
sources:
https://www.destatis.de/EN/Themes/Labour/Earnings/Minimum-Wages/_node.html
