German Economics Think Tank Under Pressure

by Dirk Ehnts, Econoblog101

The German Institute for the Study of Labor (IZA) is under increasing pressure. Werner Rügemer, a critic of contemporary finance and banking, wrote in an article in Blätter für deutsche und internationale Politik that IZA would be “not independent” (the passage has been removed from the article). The president of IZA, former Deutsche Post chairman Klaus Zumwinkel, has sued Rügemer. It seems that the judge will allow 3 of 4 passages of Rügemer to stand.

A large share of IZA’s financing seems to come from Deutsche Post, also located at Bonn, which used to be the German postal service and is now a logistics enterprise. Of course, they employ many workers whose qualifications are relatively low. Hence they would stand to lose a lot of money from the introduction of a minimum wage, as has recently been announced by the German government. On labor day, unions called for minimum wages without loopholes. Here is an IZA article on that topic from May 2nd (one day after labor day):

The German governing coalition’s bold move to introduce a statutory minimum wage at an extraordinarily high initial level has raised quite a few eyebrows around the world. Minimum wages are certainly a global trend, implemented by many OECD countries. Nonetheless, there is wide agreement among economists that the German plan is a risky experiment with potentially vast consequences that are hard to predict. This became apparent during a recently held international IZA expert conference in Berlin, which generated a lot of public interest.

The “raised eyebrows” must have come from people not familiar with the matter, since minimum wages elsewhere are in the vicinity of the €8,50 that are to become the German minimum wage. The UK’s minimum wage is 6.31 pounds, which is €7,75 at today’s exchange rate, for instance. Also, I can’t see the ‘wide agreement among economists that the German plan is a risky experiment’. The article was written by IZA director president Klaus Zimmermann Zumwinkel, and of course one has to wonder in how far his views are independent from his institute’s sponsors. If he would write in favor of minimum wages, would his institute still continue to get money from the firms that support it today?