This paper examines the economic implications of the posted workers law. The law provides that employment regulations such as minimum wages in the German construction sector are to be applied to both German and foreign companies operating in Germany. By choosing such an interventionist instrument, its impact is rather harmful to the economy, leading actually to an exclusion of Portuguese, Irish and other employees from the German labour market. Thereby the law not only prevents the convergence of living conditions within the European Union but also increases the costs of construction and living in Germany. Another consequence of the law is that the demand for protectionist instruments in other sectors and countries will become stronger. In order to improve the social and employment conditions in Europe, the paper therefore suggests to introduce more instead of less competition in the German labour market.
© 1996 by Lucius & Lucius, Stuttgart