“It is not enough to do good; one must do it the right way.”
—John Morley (1838-1923), British statesman, writer and newspaper editor
I took time off from studying for my upcoming macroeconomics exam this afternoon to attend a campaign rally on Bonn’s Münsterplatz. It wasn’t loyalty that drew me there — I make it a point to visit political events across the spectrum to see how much of what politicians say aligns with economic literature versus political rhetoric. Today’s event, supporting Die Linke’s mayoral candidate, featured Heidi Reichinnek, the party’s parliamentary group leader and member of the Bundestag from Berlin, as a guest speaker.
Among her remarks, one statement stopped me cold: disabled people should receive the German minimum wage — and a high minimum wage at that — to sustain a living, with the clear implication that employers, not the state, should bear this cost. The crowd applauded. The sentiment is morally compelling, even admirable. But as someone who sometimes spends their days wrestling with labor economics, I couldn’t shake a troubling question: would this policy actually help disabled workers, or would it inadvertently harm the very people it aims to protect?
This isn’t a trivial concern or an academic exercise. Real livelihoods hang in the balance, and the gap between good intentions and effective policy can mean the difference between employment and unemployment for Germany's most vulnerable workers.
The Current Landscape: Where Disabled Workers Stand Today
Germany’s minimum wage currently sits at €12.82 per hour as of 2025. For most workers, this represents the floor below which wages cannot legally fall. But the reality for disabled workers is more complex. Many work in sheltered workshops (Werkstätten für behinderte Menschen, or WfbM), where they often earn significantly below standard minimum wages — sometimes as little as €1.46 per hour (or $1.71 per hour). These workshops follow special rules that treat disabled workers differently from regular employees, so they are not automatically covered by standard minimum wage protections.
The rationale behind this system isn’t callousness — it’s recognition of economic reality. Many disabled workers face productivity challenges, require accommodations, or need additional support that increases employment costs. Germany already provides substantial policy support through integration subsidies (Eingliederungszuschuss), which can cover 50-70% of wages for disabled workers in regular employment, along with funding for workplace accommodations and ongoing support services.
This framework reflects decades of policy evolution, balancing the goal of inclusion with the need to maintain employment opportunities. But Reichinnek’s proposal would fundamentally alter this balance, requiring employers to pay high minimum wages without corresponding public support — a shift that demands careful economic analysis.
Why Standard Minimum Wage Logic Falls Short
Most discussions about minimum wages rely on perfectly competitive labor market models, where the standard concern is straightforward: set wages above market-clearing levels, and employment falls. But disabled labor markets deviate significantly from these assumptions, creating a more nuanced picture.
First, these markets often exhibit monopsony characteristics (situations where employers have significant wage-setting power due to limited competition for workers). When firms have monopsony power, they can pay workers less than their marginal productivity — the economic value each worker contributes. In such cases, modest minimum wage increases might actually boost employment by forcing firms to pay closer to workers’ true economic value.
However, disabled labor markets also feature high substitutability between disabled and non-disabled workers for many tasks, significant fixed costs for accommodations, and productivity differences that vary widely across individuals and job types. These factors complicate the simple monopsony story and create conditions where wage mandates could backfire.
The Economics of Substitution: A Framework for Understanding Risk
To understand why Reichinnek’s proposal could harm disabled workers, consider a simplified model of firm decision-making. Suppose firms can hire two types of workers: disabled D and non-disabled N. The firm’s output depends on both types according to a Constant Elasticity of Substitution production function:
Where Q represents total output, A is a productivity parameter (how efficiently the firm converts labor into output), LD and LN are quantities of disabled and non-disabled labor, 𝛼 determines the relative importance of each labor type, and 𝜌 relates to the elasticity of substitution (how easily firms can substitute between worker types):
The elasticity of substitution 𝜎 is crucial here. When 𝜎 is high (workers are easily substitutable), firms can readily replace disabled workers with non-disabled ones if disabled wages rise. When 𝜎 is low (workers are complementary), such substitution is difficult.
The firm’s optimal hiring decision balances marginal productivity with wages:
Where MP represents marginal productivity (the additional output from hiring one more worker) and w represents wages.
If a minimum wage mandate suddenly increases wD while wN remains constant, firms face a choice: accept lower profits, reduce disabled employment, or substitute toward non-disabled workers. The math shows that when workers are highly substitutable (high 𝜎), even small wage increases can trigger substantial employment losses.
Real-World Implications: Three Scenarios
Scenario 1: The Optimistic Case
If disabled labor markets exhibit strong monopsony characteristics and low substitutability, Reichinnek’s proposal might work. Firms currently underpaying disabled workers would be forced to offer fair wages, and limited substitution possibilities would preserve employment. However, this scenario requires very specific conditions that may not hold broadly across German labor markets.
Scenario 2: The Substitution Trap
More likely, many firms would respond to higher mandated wages by substituting toward non-disabled workers or automation. A disabled worker previously employed at €8/hour might lose their job entirely when required wages jump to €12.82/hour, especially if their productivity — through no fault of their own — doesn’t justify the higher cost to profit-maximizing employers.
Scenario 3: The Small Business Exit
Small businesses, which often provide the most flexible and accommodating employment environments for disabled workers, might exit the market entirely if forced to pay high wages without offsetting subsidies. The math is stark: a small café that employs a disabled worker 20 hours per week would see labor costs rise by nearly €100 per week under Reichinnek’s proposal —potentially enough to make the position unsustainable.
Policy Instruments: Why Design Matters
The choice of policy instrument fundamentally shapes outcomes. Consider three approaches:
Employer-Paid High Minimum Wage (Reichinnek’s proposal)
This places the full cost burden on employers, maximizing the risk of employment reduction through substitution or firm exit. While it ensures that employed disabled workers receive higher wages, it does nothing to address the underlying productivity gaps or accommodation costs that justify different wage levels.
Employer Subsidies
Programs like Eingliederungszuschuss work by reducing effective labor costs to employers while ensuring disabled workers receive decent compensation. The government pays the difference between market wages and what disabled workers receive, preserving employment incentives while achieving distributional goals. The economic efficiency is clear: firms hire based on net costs, not gross wages, maintaining employment while society funds the difference through progressive taxation.
Hybrid Approaches
A modest wage floor combined with targeted subsidies can balance fairness with employment preservation. For instance, requiring employers to pay at least €8/hour while providing subsidies to reach €12.82/hour reduces substitution incentives while ensuring adequate compensation.
The mathematical intuition is straightforward. Let we be the effective wage cost to employers and wr be the wage received by workers. Under pure minimum wage mandates:
Under subsidized approaches, we < wr, with the government covering the difference. Employment levels depend on we, while worker welfare depends on wr. Separating these allows policy to optimize both simultaneously!
Germany’s Current Framework: Already Reflecting Economic Logic
Germany’s existing policies already incorporate much of this economic reasoning. Integration subsidies reduce effective labor costs while ensuring disabled workers receive adequate compensation. Sheltered workshops provide employment opportunities for workers whose productivity might not justify minimum wage in competitive markets. Legal accommodation requirements spread costs across society rather than concentrating them on individual employers.
These policies aren’t perfect, and there’s legitimate debate about their adequacy. But they reflect decades of experience balancing inclusion goals with economic constraints. Reichinnek's proposal would abandon this nuanced approach in favor of a blunt instrument that could inadvertently harm the workers it aims to help.
The Normative Question: What Should We Value?
It’s crucial to separate positive economic analysis (what will likely happen) from normative judgments (what we should value). Positively, economic theory and empirical evidence suggest that unconditional high employer-paid minimum wages for disabled workers risk reducing employment opportunities through substitution effects and firm exit.
Normatively, however, society should absolutely ensure that disabled workers receive fair compensation and dignified employment. The question isn’t whether disabled workers deserve good wages — they do. The question is which policies will actually deliver those outcomes without creating unintended harm.
Consider the moral calculus: is it better to have 100 disabled workers earning €6/hour with government subsidies bringing their total compensation to €12/hour, or 60 disabled workers earning €12.82/hour directly from employers while 40 others remain unemployed? The first scenario provides both higher employment and equivalent compensation, funded through progressive taxation rather than concentrated on individual employers who may lack the resources or market power to absorb such costs.
The Stakes: Why Economic Reality Matters
People’s livelihoods genuinely hang in the balance here. For disabled workers who face significant barriers to employment, losing a job often means extended unemployment, loss of work experience, and social isolation. The psychological and economic costs compound over time, making employment preservation crucial for both individual welfare and social inclusion.
Moreover, employment provides dignity and social connection that pure income transfers cannot replicate. A policy that reduces disabled employment — even while raising wages for those who remain employed — may fail on both efficiency and equity grounds. The workers who lose jobs are often those most vulnerable to long-term unemployment, creating a cruel irony where well-intentioned policy harms its intended beneficiaries most.
A Path Forward: Evidence-Based Policy Design
Rather than abandoning support for disabled workers, policymakers should embrace approaches that align good intentions with economic reality. (See my article on former finance minister Christian Lindner and Germany’s debt brake.)
This means expanding and improving integration subsidies, investing in accommodation support, providing training opportunities, and ensuring that sheltered workshops offer pathways to competitive employment where possible.
It also means recognizing that different disabled workers have different needs and capabilities. A one-size-fits-all minimum wage mandate ignores this heterogeneity, while flexible policies can be tailored to individual circumstances and local labor market conditions.
The goal should be maximizing both employment opportunities and compensation levels for disabled workers, recognizing that these objectives sometimes require different policy instruments. Economic theory provides guidance on achieving this balance, but only if policymakers are willing to prioritize evidence over political rhetoric.
Conclusion: When Good Intentions Aren’t Enough
Standing in Bonn’s Münsterplatz this afternoon, listening to Heidi Reichinnek advocate for higher minimum wages for disabled workers, I was struck by the genuine moral conviction in her voice. Her intentions are admirable, and her concern for disabled workers’ welfare is most likely sincere. But good intentions alone cannot overcome economic reality.
The hard truth is that policies affecting vulnerable workers require exceptional care in design and implementation. The stakes — jobs, incomes, dignity, and social inclusion — are too high for naive approaches that ignore economic constraints. Disabled workers deserve better than policies that sound good in campaign speeches but fail in practice.
This doesn’t mean accepting the status quo or abandoning disabled workers to market forces. Instead, it means embracing evidence-based approaches that recognize both the moral imperative to support disabled workers and the economic realities that shape employment decisions. Integration subsidies, accommodation support, flexible wage structures, and targeted training programs offer proven pathways to better outcomes.
The choice isn’t between caring about disabled workers and understanding economics — it’s between effective policies that actually help and ineffective ones that merely signal good intentions. For the disabled workers whose livelihoods depend on getting this right, that distinction makes all the difference in the world.
As I walked home from the rally, my macroeconomics textbook waiting on my desk, I couldn’t help but think that the real test of any politician’s commitment to disabled workers isn't the warmth of their rhetoric, but their willingness to grapple seriously with the complex realities of labor markets. Disabled workers deserve leaders who understand that good policy requires both moral conviction and economic competence. Anything less risks turning compassionate intentions into harmful outcomes — a betrayal of the very people such policies claim to serve.