Low wages

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Low wages are defined as the remuneration of a full-time employee that is just above or below the poverty line . If it is lower, the employee is not guaranteed adequate livelihood despite full employment .

Low wages in industrialized countries


General definition of terms

The term low wage is made up of two components, “low” and “wage”. The latter denotes the gross wage or salary actually paid from employment, including Christmas bonuses , vacation pay , bonuses, bonuses and benefits in kind .

A gross wage is “low” if it is not sufficient even from full-time employment to secure the livelihood of the employee . The low wage is thus on the edge of the poverty line , which is the absolute limit in Germany, for example, the social assistance level (see unemployment benefit II ).

In relation to a national income, the low wage is dated well below a local wage that is paid for a comparable job with the same seniority. In countries in which a collective wage has been introduced, the term low wage is used if the employee is paid remuneration that is below the collective wage in the sector. If such a comparable wage is not available, the low wage limit is set at two-thirds of a local wage.

Cheap wages is the slang term for low wages or for extremely low wages. The term is mostly used in the word low-wage country . Most of the illegally employed immigrants in Germany, especially from Eastern Europe and z. B. in the construction industry, are therefore effectively low wages, since part of the money that the builder pays the subcontractor in black remains with him. The employee then only receives between € 4.50 and € 6.50 per hour in cash as a daily wage . In German-speaking countries, legally employed people are referred to as low-wage workers if the pay for one hour of work is markedly below the lower limit of the collectively agreed wages in the relevant industries, i.e. even below the low wages defined above. Affected by wages that are less than € 7.50 per hour and thus certainly not secure a full-time living for an adult , are z. B. young hairdressers, waiters, security staff, call center employees and unskilled workers outside of the fields of work with collectively agreed wages. Mail carriers in companies competing with postal services received a cheap wage until the Post AG exerted pressure in competition and implemented a minimum wage of over € 9 per hour in the industry a few years ago against the resistance of employees in the other postal companies.

OECD definition

In line with the OECD definition , low wages are referred to as gross wages that are below two thirds of the national median gross wage of all full-time employees. The median wage is the median of the series of figures, consisting of the actually paid gross wages of all full-time employees in the country. This means that half of all employees earn more than the median wage, the other half accordingly less than the median wage.

Definition of terms

Wage dumping

Wage dumping is a political catchphrase that describes falling below a local wage or collective wage, which can endanger the employee's existence. But there are also low collectively agreed wages. B. in the hairdressing and taxi trade. Therefore, not every low wage is also wage dumping at the same time. Low wages define wages per se, whereas wage dumping describes the behavior of employers with regard to low wages.

minimum wage

Minimum wage is a legally regulated remuneration that represents the minimum for employment. Often the minimum wage is close to the low wage index.

Emergence of the low wage sector

Since the end of the 1980s, the low-wage sector has expanded rapidly due to technical change and globalization , i.e. the increase in international trade and the global economic division of labor. Market-oriented, low-productivity jobs were increasingly being replaced by imports. As a result, low-skilled jobs in industrialized countries fell, while more and more people asked for such jobs because more women wanted to work and more workers immigrated . In contrast, more and more highly qualified employees were sought. As a result, wages for low-skilled jobs decreased, while wages for high-skilled jobs rose due to excess demand.

The growth of the low-wage sector was facilitated by the fact that statutory minimum wages were either completely absent or that existing minimum wages fell in real terms because they had not been raised for years. Since fewer and fewer employees organized themselves into trade unions and the wage bargaining system became more and more fragmented, the employees had nothing to counter the emergence of low wages.

In Germany , the implementation of the Hartz concept promoted the development of the low-wage sector. At the World Economic Forum in Davos on January 28, 2005, then Federal Chancellor Gerhard Schröder said:

“We have to and we have liberalized our labor market. We have built one of the best low wage sectors in Europe. I advise everyone who is concerned with dealing with the facts, and not just with the reports on the facts. Germany tends to put its light under a bushel, even though it is the worst thing that can be done. We have built a functioning low-wage sector and we have placed incentives to take up work very much in the foreground of the benefit payment. "

Affected in the low wage sector

According to various empirical studies, the following groups of people are exposed to an above-average low wage risk:

According to surveys by the Institute for Work and Qualification (IAQ) at the University of Duisburg-Essen - 46.6% of employees without a vocational qualification (38.8% ) have the highest risk of only being paid with a low wage below € 9.30 per hour % of men, 53.4% ​​of women). 24.3% of employees who have completed vocational training are affected (17.2% of men and 31.6% of women). 8.6% of employed academics are below the low wage threshold mentioned.

Low wages are particularly focused on

  • Small businesses
  • Certain branches of the economy such as trade and services

Effects of low wages

The quality of the job is directly related to the level of wages. The lower the wages, the worse the working conditions. “Low wages are therefore always equated with poor working conditions, inadequate social security and no opportunities for further training, qualifications or a professional career.” In addition, low wages result in inadequate wage replacement benefits in the event of unemployment and illness. From a social and societal point of view, low wages are not only triggers for poverty in old age , they are also the cause of the impoverishment of a significant part of the economy.

Measures against low wages

  • The legally regulated minimum wage is a well-known measure against low wages. However, this can only work in favor of the employee if it is above the defined low wage and not below it. In addition, the minimum wage needs to be raised annually in line with inflation in order to counteract low wages.
  • If there is no statutory minimum wage, comprehensive collective bargaining systems regulate the minimum rates in the individual sectors. The measures with the greatest direct effect are in particular higher wage increases in the lower wage groups or even the abolition of these lower wage groups.
  • "Demanding employers to pay reasonable wages is synonymous with calling for a change in their personnel development policy and a change in their attitude towards qualification, further training, recruiting and retention of those employees at the end of the wage scale."
  • Low wages are to be raised by increasing the average national productivity, which is also supposed to work in favor of the sectors with low productivity.


year Low wage

(from all employees)

Gross low
limit per month

Gross low
limit per hour

1994 16%
1995 15% -17%
1996 16%
1997 17%
1998 17% € 1,546
1999 18%
2000 19%
2001 19%
2002 20%
2003 21%
2004 22%
2005 21% € 1,779
2006 20% -22% € 9.85
2007 23% € 9.62
2008 22% € 9.50
2009 20% -22% € 1,784 € 9.50
2010 21% € 1,802
2014 € 1,993 10 €
2015 € 2,056
2017 22.8% € 2,139 € 10.80

The gross wages of full-time employees who are subject to social insurance are considered. In 2009, half of this group in western Germany was below or above 14.25 euros / hour (median). The low wage threshold was 9.50 euros / hour. The median in 2009 was 2676 euros / month, the low wage threshold was 1784 euros / month. 20.2% to 22% of the group received a low wage (depending on the source).

Germany has had a general minimum wage since 2015 . The minimum wages of the other European countries are 40.5% to 62.7% of the respective country-specific full-time median wage. For German temporary employment agencies , for example, a minimum wage of 7.80 euros was decided by the unions of the German Trade Union Confederation with the temporary employment agencies. Nonetheless, cases of wage dumping sometimes also occur in temporary employment agencies, with the minimum wage being well below the minimum.

2010 earned 1,383,000 people in Germany so little that they as so-called spiking additional unemployment benefits related to the basic security to achieve. In May 2018 this was 1.108 million people. According to the information in the fourth poverty and wealth report of the federal government ( 2013 ), the proportion of employees with low wages (low wage rate) in Germany "according to calculations by the Institute for Work and Qualification has risen from a good 20 percent to around 24 percent since 2000 to 2007 and fluctuates since then by around 23 percent. "


Low wages in developing countries


Low wage refers to a very low wage level in an exporting country compared to the importing country, the former being represented by poor economies and developing countries and the latter by advanced industrialized countries.

A wage in an exporting country is low if it is in a very low ratio, measured by Western standards. A low wage is characterized by the fact that the wage in the exporting economy is much lower than that of a worker in an importing industrial country for a comparable job at the same age.

The hourly wages for industrial products from developing countries, for example, are mostly below 50 cents an hour, which is totally disproportionate by the standards of advanced countries. Usually, such low-wage employment in developing countries is associated with very harsh working conditions, which was particularly criticized by critics of globalization in the 1990s .

Development of low wages

Historical background

For the first time in world economic history, the international division of labor and specialization in comparative advantages began to be established in the second half of the 19th century . So far, the import and the domestic economy have not been in a competitive relationship, as trade was carried out for reasons of a lack of substitutes.

It was not until around 1870 that Europe became increasingly specialized in the manufacture of capital-intensive products, while land and labor-intensive goods such as raw materials and agricultural products were supplied by the " New World " and colonial countries. This was the first historical step towards the development of low-wage countries as they still prevail today. The Glen Gray Act , which was initiated by Prime Minister Cecil John Rhodes in what was then the British Cape Colony in 1894 and euphorically referred to as the Bill for Africa, is considered a historic milestone in this labor market structure . This law created a legislative basis for the existing policy of racial segregation and the economic model of the later apartheid ideology .

Since advancing globalization, which was disrupted by protectionism and the economic isolation of governments in the First and Second World Wars and only flourished again in the 1960s, an increased internationalization of capital has also been observed. This consisted in the relocation of the production of industrial products and services to developing countries, which could use their low costs for the production factor labor as a comparative advantage. The background to the restructuring of finished industrial products in less advanced economies in particular was the intention of international companies to maximize profits, which saw costs being minimized in the lower production wages in developing countries. The outsourcing of industrial production to developing countries has made it more important than low-wage countries.

Economic reasons

The theory of the Ricardo model states, among other things, that the relative wage level in an economy generally corresponds to the relative productivity level there (see graphic). With perfect competition, remuneration takes place according to the marginal productivity of the work, because in the long run employers can only pay wages up to the marginal productivity. Otherwise the labor costs would unnaturally drive up the costs of the actual production. This means that lower wages are paid when productivity is lower than when productivity is higher.

China, India and Mexico have a noticeably low productivity compared to the other countries on this chart. Their national wage level is correspondingly low. In contrast, Japan, Germany and the USA stand out with high relative wages and high productivity ( high-wage countries ).

A country's wage level is roughly proportional to its productivity.
country Hourly pay for production workers, 2000
United States 100
Germany 121
Japan 111
Spain 55
South Korea 41
Portugal 24
Mexico 12
Sri Lanka (1969) 2

Table: International wage rates in comparison (USA = 100)

Low wages in developing countries are the result of specialization in comparative advantages, i.e. in the production of labor-intensive goods.

The starting point is two countries with different productivity and labor potential. In the developing country , labor is abundant and capital scarce, which is why wages are relatively low. By contrast, wages are relatively high in industrialized countries, where labor potential is relatively low and capital resources are very plentiful.

Developing countries, which are well equipped with labor, offer good location conditions for producers of labor-intensive goods that absorb little capital. In contrast, industrialized countries, with their low labor potential and high wages, appear attractive to those sectors that produce capital-intensive. These factors of the factor prices lead to specialization in the sectors in which there are comparative cost advantages. Accordingly, industrialized countries export capital-intensive products and developing countries export labor-intensive goods.

From the socialist side, the iron wage law and the impoverishment theory were historically postulated. Both have not been empirically confirmed and do not play a role in the current discussion.


Low-wage countries are poor economies whose industries export products to high-wage countries and fall under the terms emerging, developing or third world countries. Low-wage earners are therefore all those in employment in an exporting developing or emerging country, in which the wage level is much lower than in the importing industrialized countries.

In these countries, workers in the export industry are particularly affected by low wages. In particular, workers in the electronics and clothing industry, but also employees in traditional agricultural production, receive a much lower wage than the wages in high-wage countries that import these goods.

Measures against low wages in exporting countries

Surveillance system

To improve wages and working conditions in poor economies, economists have proposed the introduction of a monitoring system whose findings should be made available to all consumers in the first world. This idea is supposed to be based on a variety of market failure and the assumption that consumers in developed countries prefer products made by adequately paid workers. A monitoring body that checks the remuneration and working conditions in the developing countries for certain minimum requirements, the products are marked as tested that meet these requirements. Exporting industries in developing countries are therefore forced to implement the minimum standards, otherwise they would find little or no buyers for their products.

It becomes problematic in practice because it cannot generally be assumed that consumers in the industrialized countries prefer tested products, but rather resort to uncontrolled products due to lower prices. In addition, this regulation only affects workers in the exporting industry, the remaining workers in developing countries, who make up the majority, are not subject to the minimum standards.

Official minimum standards in trade agreements

Low wages in developing countries can be counteracted by official minimum requirements that are integrated into trade agreements and contracts and must be observed by the export industries. These standards should not only regulate a minimum wage, but also appropriate working conditions in poor countries. The WTO acts as a control instrument , whose task is to call on the countries involved to comply with their international trade agreements.

Since these standards are set by the politicians of advanced countries, many developing countries are resisting them, as they see them as a competitive disadvantage. For these reasons, this instrument is also rather questionable.

Effects of low wages in exporting countries on economies

The impact of low wages in poor economies can be illustrated by the following example.

Two countries A and B with different productivity are assumed. In both countries there are only two industries, high technology and low technology. The production factor labor is more productive than B in both branches of country A.

It is assumed that country A needs one hour of work to produce a unit of measure in both industries, while country B requires two hours of work for one unit of low technology and eight hours for one unit of high technology. Expressed in real wages, which are measured by the quantity of goods, how much a worker can produce per hour, it looks like this:

country High technology goods / hour Low technology goods / hour
A. 1 1
B. 1/8 1/2

The establishment of foreign trade between A and B creates a balance of relative wages. In our case, wages in country A are four times higher than in country B, for both high-tech and low-tech products:

country High technology goods / hour Low technology goods / hour
A. 1 2
B. 1/4 1/2

Since it is cheaper to manufacture low-tech goods in country A and high-tech products in country B, high-paid jobs in the low-tech sector in country A are replaced by lower-paid jobs in country B. Although the low-tech industry in country B (before foreign trade) is half as productive as that in country A, the workers still receive only a quarter of the wages in country A.

On the other hand, there was an increase in purchasing power in both countries. Employees in country A, who are now all in the high-tech sector, can buy two units of low-tech goods instead of one. Country B, which is the low-wage country, is also experiencing a reduction in the import price in relation to the wage rate, so that per hour worked in the low-tech sector, instead of one eighth before, a quarter of a quantity of a high-tech good is now acquired.

According to this example model, specializing in comparative cost advantages brings both countries an increase in benefits. However, from considering a factor proportion model , foreign trade can lead to losses in country A, while workers in country B experience an income redistribution in their favor.

In practice, too, despite their low wages, developing countries experience increased benefits through an international division of labor. Low wages in poor economies in the export industry are also inevitable given the far lower productivity and lack of alternatives. Compared to advanced countries, wages may be very low and working conditions very poor, but in terms of alternative employment opportunities in developing countries, these working conditions are still an improvement. Whether increasing globalization is at the expense of workers in advanced countries is debatable. Many opponents of globalization, for example, use the argument of the increasing development of low wages in low-skilled sectors in industrialized countries as a result of the international division of labor.


  • Reinhard Bispinck, Claus Schäfer: Low wages and minimum wages. Data and discussions in Germany. In: Thorsten Schulten, Reinhard Bispinck, Claus Schäfer (eds.): Minimum wages in Europe. VSA-Verlag, Hamburg 2006, ISBN 3-89965-154-5 , pp. 269-297.
  • Gerhard Bosch , Claudia Weinkopf: Working for little money. Low-wage employment in Germany. Campus-Verlag, Frankfurt am Main et al. 2007, ISBN 978-3-593-38429-0 .
  • Gabler Economic Lexicon . 4 volumes. 16th, completely revised and updated edition. Gabler, Wiesbaden 2004, ISBN 3-409-12993-6 .
  • Paul R. Krugman , Maurice Obstfeld : International Economy. Theory and Politics of Foreign Trade. 7th, updated edition. Pearson Studium, Munich et al. 2006, ISBN 3-8273-7199-6 .
  • Henning Lohmann: Poverty of the working population in European welfare states. Low wages, government transfers and the role of the family. VS Verlag für Sozialwissenschaften, Wiesbaden 2007, ISBN 978-3-531-15745-0 .
  • Gerd Pohl, Claus Schäfer (Ed.): Low wages. The unknown reality: poverty despite work. Empirical inventory and proposed political solutions. VSA-Verlag, Hamburg 1996, ISBN 3-87975-684-8 .
  • Claus Schäfer (Ed.): Low wages - more employment? Low wage policy. VSA-Verlag, Hamburg 2000, ISBN 3-87975-750-X .
  • Wolfgang Strengmann-Kuhn : Poverty despite employment. Analyzes and socio-political consequences (= Frankfurt contributions to economics and social sciences. Series of publications by the Hans and Traute Matthöfer Foundation. Vol. 8). Campus-Verlag, Frankfurt am Main et al. 2003, ISBN 3-593-37087-5 (At the same time: Frankfurt am Main, University, dissertation, 2002).

Web links

Wiktionary: Low wages  - explanations of meanings, word origins, synonyms, translations

Individual evidence

  1. Claus Schäfer: Low wages - more employment? Low wage policy. VSA-Verlag, Hamburg 2000, p. 77.
  2. Gabler's economic dictionary . 16th edition. Wiesbaden 2004, p. 1920.
  3. ^ Henning Lohmann: Poverty of the working population in European welfare states. Low wages, government transfers and the role of the family. 1st edition. VS Verlag für Sozialwissenschaften, Wiesbaden 2007, p. 109
  4. Claus Schäfer: Low wages - more employment? Low wage policy. VSA-Verlag, Hamburg 2000, pp. 30-33
  5. ^ Speech by Federal Chancellor Gerhard Schröder at the World Economic Forum in Davos. (No longer available online.) Federal Government , archived from the original on February 17, 2012 ; Retrieved July 11, 2012 .
  6. IAQ press release, January 20, 2014 ( Memento of the original from January 23, 2014 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.iaq.uni-due.de
  7. a b Strategies against low wages . ( Memento of October 6, 2008 in the Internet Archive ) (PDF; 116.4 kB) Policy document of the European Public Service Federation (EPSU), created on June 14, 2006.
  8. a b c d e f g h i j k l m n o p q r SOEP, Institute of the German Economy Cologne, without trainees, cited according to insm.de
  9. a b dgb.de
  10. a b doku.iab.de (PDF; 655 kB)
  11. destatis.de: Press release 304: The scope of atypical employment has increased. August 19, 2009, accessed December 14, 2011 .
  12. a b IAQ 2011; quoted in the low-wage sector: stepping stone into employment. arbeitgeber.de, accessed on December 14, 2011 .
  13. a b focus.de ( Memento from March 4, 2016 in the Internet Archive )
  14. Despite a full-time position: one in five works below the low wage threshold. In: welt.de. November 18, 2010, accessed December 14, 2011 .
  15. ↑ The trend towards a low-wage society has accelerated - around one in five affected. (No longer available online.) In: lvz-online.de. October 29, 2011, archived from the original on December 2, 2011 ; Retrieved December 14, 2011 .
  16. Working for less than a ten an hour. In: rbb-online.de. December 11, 2016, accessed June 23, 2017 .
  17. ^ Basil Wegener: Taxi ride for low wages . In: Saxon newspaper . ( saechsische.de [accessed on April 13, 2020]).
  18. uni-due.de (PDF)
  19. Temporary work: 2.71 euros wages: "This is slavery" Süddeutsche.de
  20. ↑ The number of Hartz IV top-ups continued to rise, Reuters, May 13, 2011
  21. Statistics from the Federal Employment Agency from September 2018
  22. Fourth Report on Poverty and Wealth of the Federal Government (2013) (PDF)
  23. See also current research results from the Institute for Work and Qualification 06/2018, Thorsten Kalina and Claudia Weinkopf: Low-wage employment 2016 - considerable wage increases in the lower wage segment, but still a high proportion of employees with low wages
  24. Markus Grabke, Carsten Schröder: The low-wage sector in Germany is larger than previously assumed. (pdf) In: weekly report 14/2019. DIW-Berlin, accessed on April 29, 2019 .
  25. ^ Paul R. Krugman, Maurice Obstfeld: Internationale Wirtschaft. Theory and Politics of Foreign Trade. 7th edition. Pearson Studium Verlag, Munich 2006, p. 351.
  26. The Glen Gray experiment ( Memento from May 2, 2014 in the Internet Archive ) originally on www.newhistory.co.za (English)
  27. Aili Rehbein: Globalization . ( Memento of September 3, 2004 in the Internet Archive ) weltpolitik.net ( DGAP ), July 16, 2004
  28. ^ Paul Krugman and Maurice Obstfeld : International Economy. Theory and Politics of Foreign Trade . 7th edition, Munich 2006
  29. ^ Paul Krugman, Maurice Obstfeld: Internationale Wirtschaft. Theory and Politics of Foreign Trade . 7th edition, Munich 2006, p. 105
  30. ^ Paul Krugman, Maurice Obstfeld: Internationale Wirtschaft. Theory and Politics of Foreign Trade. 7th edition. Munich 2006, p. 354
  31. ^ Paul Krugman, Maurice Obstfeld: Internationale Wirtschaft. Theory and Politics of Foreign Trade. 7th edition. Munich 2006, p. 355
  32. ^ Paul Krugman, Maurice Obstfeld: Internationale Wirtschaft. Theory and Politics of Foreign Trade. 7th edition. Munich 2006, pp. 352–354