Firmly on the Road to Ruin

Well, we warned them not to do it. You can read it all in “How to Destroy Germany’s Economic Gains” and “Germany Rolls Back Labor Reforms”. As we pointed out on these occasions, economic laws cannot be suspended by political fiat. Germany has managed just fine for hundreds of years without a legislated minimum wage. However, when the new coalition agreement between Germany’s pseudo-Conservatives and the Socialists was made, the socialist faction finally saw an opening to push the minimum wage through.

The consequences were easy to predict: many unskilled workers would lose their jobs and become wards of the State forever. Minimum wages are not only truly hair-raising economic nonsense, they are moreover a violation of people’s right to freely enter into contracts. An unskilled worker is no longer even allowed to offer his labor at less than the minimum wage, since that would amount to “unfair competition”. A new underclass is thus created in Germany, and the country’s hard-won gains in terms of labor productivity are endangered. We can expect further side effects from this, such as e.g. rising crime rates.

Of course the socialists love it (even if they would never say so out loud). Higher unemployment means more people will depend on handouts from the State – and these people are regarded as a natural reservoir of votes for the socialists. Apparently they have forgotten that there was once a time when precisely such an underclass actually chose quite a different kind of political party, one that eventually made short shrift of all socialists.

Now we have the first empirical confirmation that the minimum wage is indeed about to wreak economic havoc on a breath-taking scale.


Taxi Fares Rising up to 60%, up to 70,000 Drivers to Lose Their Jobs

As German news magazine Der Spiegel reports, the first victims are consumers:


“Taxi rides in Germany are to become noticeably more expensive. In some regions, for example in Mecklenburg-Vorpommern, the price increase could be as high as 50 to 60 percent. “The national average of the tariff increases is going to be 25 percent,” the president of the German Taxi and Car Rental Association, Michael Müller said. He justified the heavy increase in passenger transport prices with the minimum wage. The tariff increases must be approved by the relevant city or county authorities.

From 1 January 2015, the legal minimum wage of 8.50 euros per hour applies nationwide to 200,000 to 220,000 taxi drivers. Currently, the average wage per driver is between € 6,00 and € 6,50 according to the association.

“Süddeutsche Zeitung” in a survey of taxi associations noted that taxi companies have applied for fare increases of up to 30 percent already in hundreds of cities and counties.”


(emphasis added)

So consumers will pay through the nose for the minimum wage hike. What is happening in the taxi industry is of course going to happen in many other labor-intensive service industries that employ a great many low-skilled workers.


Taxi Drivers Protest New Internet ServicesTaxis in Berlin – fares are going to rise by up to 60% due to the new minimum wage.

(Photo via Getty Images)


So what about the drivers? Will at least their jobs be saved? No, they most definitely won’t:


“However, the association also fears that by the end of the year, 50,000 to 70,000 taxi drivers could lose their jobs because companies can not bear the increased labor costs. According to the association, there are 28,000 taxi companies in Germany with 58,000 vehicles.  In Hannover, a taxi company fired its 65 drivers as a precaution after the minimum wage was announced, the case will be heard before the Labor Court in November.”


But, but … isn’t the minimum wage is a “sign of great social progress”, as the Social Democratic Party insisted when it celebrated its success in finally establishing it in Germany?

We believe some 50-70,000 taxi drivers will beg to disagree rather vehemently by the end of next year, and they won’t be the only ones disagreeing. So-called “pro-labor” legislation never achieves what it is supposed to achieve.

The market can either bear a certain level of labor costs or it can’t. If they become too high, businesses go bankrupt, and workers lose their jobs. It’s as simple as that. Were the Social Democrats unaware that all over Europe there is extremely high institutional unemployment precisely because of such nonsensical regulations? Are they really so economically illiterate that they don’t realize that one cannot simply increase prices by political fiat without consequences?

The labor courts in Hannover and elsewhere may well be hearing a lot of cases about employees losing their jobs on account of the minimum wage over the coming year or two, but if the companies concerned cannot afford to pay, this is only going to be a waste of time and effort.



Germany’s politicians have forgotten that just as no political decree can ever force the sun to rise an hour earlier, no political decree can ever alter the laws of economics. Germany has turned from being “Europe’s sick man” to becoming Europe’s economic locomotive over the past decade, and its labor reforms were the main reason for this transformation. But politicians can never leave a good thing alone. Once the pressure to enact reform is gone, they start all sorts of expensive foolishness, from Germany’s utterly disastrous “green energy” policy to introducing the minimum wage.

This is likely to eventually bring Germany back to square one. It may take a while until it becomes Europe’s “sick man” again, mainly because so many other European nations are in even worse shape from a structural point of view, but its political leadership is evidently working overtime to get there.


spdchef-sigmar-gabrielSigmar Gabriel, chief of Germany’s Socialist Party (SPD) – the adoption of the minimum wage was one of his party’s main conditions for joining the coalition government.

(Photo v ia AFP)



Emigrate While You Can... Learn More




Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.


Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA


6 Responses to “Germany’s Minimum Wage: Job Losses and Exploding Prices”

  • Like all progressive nonsense, the assumption is wages will be higher with a minimum wage. I believe it might actually define how cheaply one can pay for labor. Once they are done with the money, no one knows the true measure. Without a minimum wage, people are interested in making a living, thus interested in skills rather than pay rates. Without a definition of what the base is, they have to progress.

    I have noticed that the Chinese seem to have a lot of purchasing power, despite such low wages. I would assume it is due to the fact they aren’t paying others high wages either. I have read a lot of what appears to be non socialized in this socialist country. Of course, there are plenty of statist advantages.

    There are a lot of places in the US that a couple earning minimum wage could live well, if not for the government interest in defining living standards and inflating cost of many necessities. They may not be customers of the many multinationals, but live well with the basics of life. Bring in welfare programs and these necessitates become expensive. Demand is inflated at the expense of these people, to the benefit of landlords and others.

  • No6:

    Prices up 60% will help prepare the Germans for what is coming down the pike.

  • s nkuna:

    Not all government policies that works, if the policies fail must be cancel, or else the consumer and workers will be the one affected by the consequences of the policy

  • Keith Weiner:

    Very sad.

    By the way, of course governments *do* try to change the time that the sun rises. They call it “daylight savings time”!

    • SavvyGuy:

      This Daylight Savings Time nonsense twice a year makes me always rush out to cure my beer deficiency! Wouldn’t it be simpler (and infinitely smarter) to just fix a time halfway between the two limits and just live with it forever?

      Imagine that…a one-time 30-minute time adjustment, and we’ll never have to mess with the time again! Sadly, I doubt that will ever happen…

    • Yes, and the sad thing about THAT nonsense is that in the meantime, countless studies have shown that not only does it fail to create “energy savings” (the original reason for the introduction of daylight savings time), but has countless negative effects, mainly of a psychological and biological nature. The problem is that although it is only a one hour shift, it severely impacts the “biological clock” of many people. As a result, the incidence of depression, general tiredness, loss of appetite and other negative effects rises considerably among a significant part of the population, until their inner clock has adjusted, which is as a rule taking much longer than one may think. A loss in general happiness and with it a decline in economic productivity is the result.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Sovereign Bonds – Stretched to the Limit
    Anti-Vigilantes We dimly remember when Japanese government debt traded at a negative yield to maturity for the very first time. This happened at some point in the late 1990s or early 2000ds in secondary market trading (it was probably a shorter maturity than the 10-year JGB) and was considered quite a curiosity. If memory serves, it happened on just one brief occasion and it was widely held at the time that the absurd situation of a bond buyer accepting a certain loss if the bonds were...
  • Writing on the Wall
    Not Adding Up One of the more disagreeable discrepancies of American life in the 21st century is the world according to Washington’s economic bureaus and the world as it actually is.  In short, things don’t add up.  What’s more, the propaganda is so far off the mark, it is downright insulting.   Coming down from the mountain with the latest data tablet... [PT]   The Bureau of Labor Statistics (BLS) reports an unemployment rate of just 3.7 percent.  The BLS also...
  • Global Stock Markets: Danger Lies Directly Ahead
      A Global Pattern You are no doubt aware of the saying “sell in May and go away”. It is one of the best-known and oldest stock market truisms.   Mark Twain's famous saying about stock market speculation (the other one was “There are two times in a man's life when he should not speculate – when he cannot afford it, and when he can”).  From a seasonal perspective he was definitely right about September and October. [PT]   The saying is in fact justified...
  • Bond Yields in the Netherworld - Precious Metals Supply and Demand
      A Record Amount of Bonds with Negative Yields to Maturity Last week the price of gold went up $22, while the price of silver dropped ¢17. The big news last week was that the yield on all German government bond maturities is now negative. They are also all negative in Switzerland. And in Denmark, all maturities out to 20 years are negative. Interest rates are dropping rapidly in the US as well.   More than $14 trillion in bonds now trade at negative yields to maturity –...
  • Rising Stock Market Volatility – Another Warning Sign
      Bad Hair Days Are Back We recently discussed the many divergences between major US indexes, which led us to expect that a downturn in the stock market was close (see The Calm Before the Storm for details). Here is an update of the comparison chart we showed at the time:   The divergences between various indexes seem to be resolving as expected.   The next chart shows analogous divergences between the S&P 500 Index and two major foreign stock markets:   US...
  • Retail Holders Sell Their Gold - Precious Metals Supply and Demand
      A Myriad of Reasons to Buy Gold – But Small Holders are Selling Big moves occurred in the prices of the metals last week, with that of gold up $57 and silver $0.77. We have now reached a price of gold (if not silver) not seen since 2013, when it was on the way down. What is causing this sudden spike in price and renewed interest in gold?   A well-known depiction of investor emotions over a complete market cycle. Interestingly, it appears as though many retail gold holders...
  • Bitcoin – From Greed to Fear
      A Noteworthy Sentiment Change Bitcoin and other cryptocurrencies have declined quite sharply in recent days. Here is an overnight snapshot of the daily chart:   Bitcoin corrects again...   It is difficult to gauge sentiment on BTC objectively, but there is a service that tries to do just that. According to its greed & fear barometer, the recent decline seems to have triggered quite a bit of apprehension:   The BTC sentiment measure of has...
  • Interest Rate Watch and Bond Market Curiosities
    Things To Keep An Eye On Below is an overview of important US interest rates and yield curve spreads. In view of the sharp increase in stock market volatility, yields on government debt have continued to decline in a hurry. However, the flat to inverted yield curve has not yet begun to steep – which usually happens shortly before recessions and the associated bear markets begin.   2-year note yield, 3-month t-bill yield, 10-year note yield, 10-year/2-year yield spread,...
  • Getting to a Special State of Ugly
    Suspicious Phrases There are certain phrases – like “trust me” or “I got this” – that should immediately provoke one’s suspicion.  When your slippery contractor tells you, “trust me, your kitchen renovation will be done before Christmas,” you should be wary.  There is no way it will be done before late spring.   USD-CNH (offshore yuan) exchange rate – the support/resistance level at 7 finally breaks amid escalating trade war rhetoric. [PT]   Or...
  • Tumbling Interest Rates - Precious Metals Supply and Demand
      An Era of Low Time Preference Last week the price of gold moved up another $16, and the price of silver was up $0.14.   10-year treasury note yield since 1999 – it is almost back at the multi-decade low of 2016. The only other time in history when US treasury yields were this low was in 1944-1945, when the Fed was actively suppressing yields in order to provide cheap financing for the war effort. One year later (from mid 1946 to mid 1947) the CPI jumped to more than 17%...
  • A Bubble in Complacency - Incrementum Advisory Board Discussion
      Incrementum Advisory Board Meeting of 31 July 2019 At the end of July the Advisory Board of the Incrementum Fund held its quarterly meeting (a full transcript is available for download at the end of this post). The board was joined by special guest Simon Mikhailovich, a financial market veteran who inter alia co-founded the Toqueville Bullion Reserve. The title of the transcript and this post was inspired by his remarks.   Special guest Simon Mikhailovich   We...
  • Dead Meat in Jackson Hole
      The Pointlessness of Negative Yields If there are any virtues of debt instruments with negative yields we have yet to realize them. Certainly, we understand that as bond yields fall, bond prices rise, and bond investors are rewarded with capital appreciation. But when capital is appreciating as a consequence of negative yields, we suspect there is something fundamentally wrong with the capital itself.   Not only is the stock of negative-yielding debt at a new record high...

Support Acting Man

Austrian Theory and Investment


The Review Insider


Dog Blow

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts


Gold in USD:

[Most Recent Quotes from]



Gold in EUR:

[Most Recent Quotes from]



Silver in USD:

[Most Recent Quotes from]



Platinum in USD:

[Most Recent Quotes from]



USD - Index:

[Most Recent USD from]


Mish Talk

Buy Silver Now!
Buy Gold Now!