A new study suggests that the upcoming minimum wage increases in Germany may have a positive impact on the state’s finances. According to Enzo Weber, an expert from the Institute for Employment Research (IAB) at the German Federal Employment Agency, the government is expected to save a significant amount of money in social welfare benefits due to the increased minimum wage.
Weber estimates that the federal government will save at least hundreds of millions of euros per year in social welfare benefits, as a result of the minimum wage increase. Additionally, the increased taxes and social contributions from employees, which account for around 40 percent of their additional earnings and the social contributions from employers, which make up around 20 percent, are expected to generate a substantial revenue for the state.
The expert’s calculation is based on the assumption that a higher minimum wage would lead to a reduction in the number of people receiving social welfare benefits, known as “Bürgergeld” in Germany. Currently, around 800,000 people, often referred to as “Aufstocker”, are in a situation where they work but earn so little that they still receive social welfare benefits. Many of these individuals would lose their entitlement to at least part of the social welfare benefit, or even the entire benefit, if the minimum wage were to increase, as they would be earning more.