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The minimum wage and the rural/urban wage structure in Germany

Author

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  • Thiess Büttner
  • Alexander Ebertz
  • Jens Ruhose

Abstract

The cost of living is lower in the countryside and wages are thus also usually lower than wages in the city. Such urban/rural differences as well as other dimensions of the wage structure have unfortunately been largely neglected in the debate on the introduction of a uniform, statutory minimum wage in Germany. A minimum wage does not reach many workers in the city but has a much larger effect on rural workers. The likelihood that the wage of an unskilled worker lies below a minimum wage of €6.50 is 10 percentage points higher in rural areas than in the cities, according to the results of the study. For women the difference is as much as 17 percentage points. Those who profit most from a minimum wage would be workers who continue to be employed in rural areas. The other workers would be forced into the urban labour markers. As the result of a minimum wage, the urban wage levels would fall in relation to the surrounding rural areas. At the same time, however, the cost of living would rise since rents would increase due to the additional migration to the cities. This indirect effect of a minimum wage would lead to a worsening of the working and living conditions especially for the socially disadvantaged. Even if a minimum wage had no negative employment impact on the economy as a whole, it could lead to a negative effect on the standard of living of low-wage earners.

Suggested Citation

  • Thiess Büttner & Alexander Ebertz & Jens Ruhose, 2009. "The minimum wage and the rural/urban wage structure in Germany," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 62(05), pages 20-26, March.
    • Handle: RePEc:ces:ifosdt:v:62:y:2009:i:05:p:20-26
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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