Using the Minimum Wage to Beat the Competition

Germany is considering a new government-imposed minimum wage — a price floor in the labor market — to apply to postal carriers and related workers.

One of the major proponents of the plan has been one of Germany’s biggest employers — its privatized postal service, Deutsche Post.

One might wonder why a big employer is pushing a plan that might raise its average variable cost. The reason is that the German Post, which is a high-wage employer, faces increasing competition from lower-cost carriers. If the minimum wage is imposed, it will not raise Deutsche Post’s average variable cost by much, since most of its workers already make more than the proposed minimum wage; but it will raise its competitors’ costs.

That will give Deutsche Post an advantage over its competitors — or at least reduce its disadvantage. It will be able to compete more successfully against its formerly lower-cost competitors.

Deutsche Post is thus proposing to help workers — and help itself!


whoanellie

The German Post should look at ways to be more competitive-if they're paying their workers more, then customers should be getting better services.

Although I believe in a minimum wage, I do not believe in a "living wage". Colin was right on. I've worked several minimum wage jobs in my life and a) I wasn't at minimum wage very long and b)it taught me the importance of an education.
Do we really want to reinforce the idea that you can skate through high school and be eligible for a job with a wage that will instantly support you? How does this keep us competitive in the world marketplace? How does this keep a McD's cheeseburger $1? It can't.
People my parents age could work at "the plant" and make a decent living with only a high school diploma. The kids I graduated with thought they could do the same - but surprise! the jobs aren't there. All we're left with is a very under-educated work force that doesn't understand the value of earning a dollar. If you want a living wage: work hard AND educate yourself.

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Colin

Barb -- Why should anyone be entitled to live off the minimum wage? Why should any job provide enough to live off of? Shouldn't the amount of pay simply be related to how much value you are providing your employer?

If a job pays $7/hour but provides $8/hour in value to the company, that is good for both parties. But if you then raise the minimum wage to $10 then suddenly the company has employees that are being paid more than they are worth. The result is layoffs. And I don't see how that helps anyone.

And, for the record, I have worked at minimum wage jobs so this isn't abstract. Of course, within a few months time I was given a raise and didn't make minimum wage anymore.

Sam

Oh, great idea. Let's increase everyone's costs so all we have are large companies and no one will ever be able to compete again.

Sounds like the electoral system in the US.

starkdawgs

This is not unlike what a lot of the U.S. unions support. Although few of their members make minimum wage, most of their workers have their much higher wages tied to minimum wage. In other words (for simplicity) if minimum wage were $5 an hour, certain workers have a guarantee that their position will pay a minimum of 3x minimum wage. If minimum wage goes up to $8 an hour they receive a minimum of $24 an hour without having to haggle or bargain (or be any better at their job).

Donald Meyer

Wal-Mart wins when government policies help to reduce its competition with "mom and pop" stores.
The smaller stores need lower cost labor such as teen-age stock boys, etc.
The customers get value -- personalized service, etc and the teenagers get both money and an education in business.
Wal-mart is neither good nor bad, but let government into the picture and bad things happen.

To Barb #9: Why stop with a small increase in min.wage? Let's triple it and also send out rebate checks to everyone with letters telling us to be greatfull to our leaders.

oddTodd

Kevin-

I believe WalMart's position is that they have many minimum wage earning customers, so raising the minimum wage will give their customers more money to spend at WalMart.

Mr. Stupid

I take it that Deutsche Post is not a quasi-government entity like it is in the US? Do they really have competitors? How many companies are clamoring to deliver a 2-mark envelope?

SIlas Russell

This is interesting. I wonder that if we had a livable minimum wage in the US, this could serve to even the playing field more for more ethical employers like Target and Costco against Wal-Mart, which, in my opinion, has been a detriment to our nation.

brandon

Jose:

In the short term, yes.

In the long term, unemployment will reach equilibrium and Germany will have higher inflation (due to artificially increased wages).

Kevin

I believe WalMart actually has a similar position.

John

To those saying "get an education": that is not a solution.

If everyone had an education, service jobs that "pay what they're worth" would not suddenly disappear. On the contrary, they would simply be filled by people with higher educations.

You are basically proposing that everyone engage in an educative minimum-wage in order to climb out of low wages, yet you are ignoring the very same argument you make against a minimum-wage increase.

Jose

Would this have any impact on layoffs and unemployment?

Barb

Sam - have you ever tried to live off a minimum wage job?

Our minimum wage needs to be raised again - it is ridiculous how little they are paid. And if that increases costs, then so be it.

mgroves

So instead of them actually improving/competing with low-cost carriers, instead they want to bring better carriers down to their level. And this is good?

The minimum wage, like most price controls, is a bad idea.

James Barlow

So everyone wins. Apart from the customers, obviously.

Maria

Having lived in Germany, I have disdain for Deutsche Post. Not too long ago, Germany "outsourced" its post to DHL. Their service is horrible and prices are outrageous. There are several smaller options to the DP in Germany that are cheaper and have better service, but the country as a whole is not known for their outstanding customer service.

Cody Faulkner

If people aren't able to live off minimum wage then what are they supposed to do to make up the difference?

I suspect the answer to that will impact upon the lower rungs of those who ARE able to live off their wage.

Craig

"help workers"

Austrian Conservative

Just for the record, even before this minimum wage was enacted, the Deutsche Post competitors said they would have to lay off employees or even go bankrupt, when paying such a minimum wage.
Of course the politicians didn't listen - as they always tend to do...
So what happened?

Some of the private companies went bankrupt, several layed off people (the biggest of them about 4000) and some simply don't pay the minimum wage but classify their employees not as mailmen but as "mail delivering service employees" or something (you can't really translate it).

But with this socialist spirit haunting europe and especially Germany (for god's sake: the former Socialist Unity Part - those east german guys - almost got 15% at some of the last elections) people tend to say i'd rather have no job and get my social security check than go working.

Jared

Enjoy your extreme swing to the right USA. Have fun in your next great depression.