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!