CPB: Higher minimum wage also drives other wages

If the minimum wage is raised, part of the other wages increases. The Centraal Planbureau (CPB) concludes this in a study on the impact of a higher minimum wage.

If

the minimum wage rises by 10%, it will have an effect on wages up to 40% above the minimum wage. This can be explained by the fact that entrepreneurs are very interested in maintaining relative wage differences within the company, for example to motivate people to improve their productivity.

The stronger the minimum wage increases, the more income groups will be affected.

Rising costs

According to the CPB, these conclusions are in line with the report already published in April on the minimum wage. But now it has been calculated exactly how great the impact is and also how high the costs are for employers and the government.

The CPB estimates that if the minimum wage rises by 10%, it will cost the state EUR 6.3 billion. This is due to the coupling of the AOW pension and the assistance to the minimum wage, so they are increasing along with it. The CPB points out that half of this expenditure is returned to the treasury in the form of taxpayers money. The final price tag for the government is over 3 billion euros below the line.

Costs for employers

Employers wage costs also increase when the minimum wage rises. They will find that some of the wages also rise above the minimum wage. The CPB estimates that this will increase the average wage costs for the employer by half a percent.

Employers organisation VNO-NCW had already expected the increase in wage costs. If the minimum wage rises, the cabinet should also look at rising wage costs for employers, says VNO-NCW. In addition, rising labour costs also affect the number of jobs.

In April, the CPB already concluded that an increase in the minimum wage would be detrimental to employment. In the long term, 0.5% of jobs would disappear. This percentage is lower than previous forecasts of economists.

Even higher minimum wage

In this study, the CPB assumed a 10% increase in the minimum wage. But trade union FNV and the PvdA, among other things, want the minimum wage to be increased by 40%. The average labour costs for employers are then more than 10% higher.

But according to budget institute Nibud, that is only one side of the coin. The organisation has been advocating an increase in the minimum wage for some time. โ€œThere are currently tens of thousands of people in financial stress because they simply cannot live by the minimum wage,โ€ says spokesman Gabriella Bettonville.

Not an easy conversation

Trade union FNV welcomes the effect of an increased minimum wage on other wages. โ€œWe are pleased that it also has an effect on middle-incomeโ€, says Zakaria Boufangacha, employment conditions coordinator at FNV.

Boufangacha estimates that employers are not waiting for such an effect now. โ€œThe coronacrisis has also made it painfully clear that the minima have been hit the hardest.โ€ According to the trade union, it would be good if people with the minimum wage were to earn more money to have more bacon on their bones in the event of economic difficult times.

In the run-up to the elections, it becomes clear which parties want to push for an increase in the minimum wage. Left parties are traditionally hot for it. But earlier this year the VVD and the CDA also announced that a higher minimum wage could be negotiated.