Posted by: Dirk | May 14, 2014

German economics think tank under pressure

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?

UPDATE MAY 14: I mistakenly attributed the article on minimum wages to IZA president Klaus Zumwinkel. The text has been rewritten to reflect that the actual author was IZA director Klaus Zimmermann. Thanks to the commenter who pointed that out to me.


Responses

  1. Excellent Post! Just one quick correction! The articel was written by the director of the institute – Klaus F. Zimmermann. Klaus Zumwinkel is the former CEO of Deutsche Post / DHL and is the President of the Institute. It shows us even more that the institute is not independent.

  2. Your argument makes no sense. If you care to research the topic, you will find that the Deutsche Post (and Zumwinkel in particular) have always been strong proponents of the minimum wage. They even fought for an industry-wide minimum wage, which was later struck down by the courts as hurting the competition (who paid low wages, while the Post pays relatively high wages). So your example is in fact the best argument to prove why IZA is not influenced by the Post. Otherwise they would have never been allowed to argue against a minimum wage…

  3. Thank you, John. Zumwinkel has been repeatedly called a person that follows a ‘Doppelmoral’ (moral double standards) by the mainstream press (http://www.sueddeutsche.de/geld/klaus-zumwinkel-muenchhausen-der-post-1.580093). He dodged taxes and was convicted for tax fraud in 2009. When the scandal erupted, he had to step down as Deutsche Post’s CEO. So, just because a person says “A” it does not mean too much in some cases. People that are paid by companies in private often hold quite different views than the ones they voice in public.

    Zumwinkel was in favor of the minimum wage when it would have helped Deutsche Post against its low wage competition, as you rightly mention. This was reported in the mainstream media (http://www.handelsblatt.com/unternehmen/management/koepfe/post-chef-klaus-zumwinkel-wenig-schmeichelhaft-seite-2/2874552-2.html). Now that Deutsche Post has more or less retained its market power, with the only strong contender in the market for letters gone long ago (http://de.wikipedia.org/wiki/PIN_Group), even the liberal-conservative government of some years ago thought loudly about introducing more competition through reforms (http://www.faz.net/aktuell/wirtschaft/unternehmen/briefmarkt-post-soll-mehr-konkurrenz-bekommen-11664026.html). Without any big competitors, a minimum wage in 2014 would and will harm Deutsche Post. Deutsche Post is also being investigated for dumping, as was reported four days ago (http://www.spiegel.de/wirtschaft/unternehmen/deutsche-post-aerger-wegen-moeglichen-preisdumpings-a-970112.html).


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: