Relationship between basic social security and real minimum wage: A critical look at social balance

Basic social security is anchored in the welfare state principle of the Basic Law and defines a minimum standard that must be exceeded by minimum wages by standard benefits and the costs of accommodation. Only if the statutory minimum wage exceeds this standard, employment for people as an alternative to social assistance becomes attractive. increase in the minimum wageNot only the protection of employees, but also the reduction of poverty in old age.

Need to regularly adjust social benefits and minimum wage

Scientific services emphasize the importance of regular adjustments to social benefits and minimum wage as complementary instruments. Both should be oriented towards the same living expenses index to ensure a balanced ratio. If the basic security is too low, the pressure to raise the minimum wage increases, because otherwise employees with low wages despitework on state benefits. This creates a distorted work incentive that can severely disturb the social balance.

Work incentive and de facto wage caps through social benefits

High reference rates of basic security can also generate a positive work incentive by motivating employees to pursue a job subject to social security contributions. However, if minimum wages are just above the basic security rate, a limit for the amount of low wages is created. Employees are rarely willing to pay more income for marginallyto forego comfortable social benefits. As a result, basic social security becomes a wage cap and creates new challenges for the labor market and social policy.

Challenges through different indexings

The coupling of minimum wage and social benefits to different index values can lead to shifts in the distribution structure. The purchasing power of low-income earners fluctuates unequally and makes reliable planning for households with limited incomes more difficult. This inequality affects consumer behavior and ultimately also on domestic demand, which is responsible for a stableeconomy is of central importance.

Planning security for companies through clear regulations

A welfare state security system with clearly defined standard requirements offers companies important planning security. Minimum wage levels can be predicted so that personnel cost subsidies and labor costs can be calculated realistically. This strengthens economic stability in the long term and enables employers to achieve a sustainable personnel policy based on fair andreliable framework conditions.

Strengthening domestic demand through appropriate income reconciliation

The balanced coordination of basic security and minimum wage promotes domestic demand, since low earners can reliably achieve income above a minimum level and thus consume. This effect has a positive effect on the entire economy by supporting growth and reducing social inequality. The balance between the two components is a key tosocial cohesion and economic development in equal measure.

Minimum social standard and minimum wage as two sides of a coin

Basic social security and the minimum wage are not separate instruments, but are mutually dependent. Only through consistent and coordinated adjustment of both parameters can a socially just system be designed to promote employment and prevent poverty. Lack of vote leads to false incentives, wage pressure or uncertainty. A policy that harmoniouslycombines, protects the weakest and at the same time strengthens the stability of the labor market and social security.