Large companies slow down wage increases in Germany: study

Source: Xinhua| 2018-11-13 01:55:35|Editor: Yurou
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BERLIN, Nov. 12 (Xinhua) -- The market dominating companies is slowing down the growth of wages in Germany, a study by the Bertelsmann foundation published on Monday shows.

According to the study, employees in Germany's service sector lost a total of 11 billion euros (12.4 billion U.S. dollars) in potential wage increases during the period from 2008 to 2016 as a result of an increasing market concentration on large companies.

Speaking to Xinhua on Monday, Dominic Ponattu, co-author of the study and economic expert at the Bertelsmann foundation, mentioned that especially the "platform economy" often moved towards the concentration of companies."Network effects play an important role here. Once you are big enough, you can set standards and become almost unassailable for your competitors," said Ponattu.

Public services, like private service providers in health care or the waste management industry, have been affected the most by the growing concentration of companies. Significant potential wage losses were also suffered by the sectors of logistics, legal advice and wholesale trade.

According to the study, one of the main reasons for this development was the "working methods of superstar companies" in digitized markets. They would often manufacture their own products and services particularly efficiently and due to nature of digital technology with relatively few employees. As a result, these companies would be more efficient and could significantly improve margins.

However, the concentration of companies in some sectors like finance, energy as well as construction has decreased from 2008 until 2016. "Superstar companies are not bad per se," emphasized Ponattu. "They drive innovation and have earned their success. They make the economic 'cake' bigger. Yet it was problematic that only a few investors and major shareholders benefit from the success of these superstar companies."

According to Ponattu, there was no difference measured between German and foreign companies regarding the increase of wages. However, it was questionable whether the wage rates between the companies would differ significantly. "There are superstars abroad just as well as there are superstars in Germany. If companies from other countries enter the German market, their wage ratio should not be higher than that of the local superstar companies," economic expert Ponattu added.