The opinion that an increase in wages and salaries by EUR 100 would increase domestic demand by the same amount, i.e. by EUR 100. – The fact is, however, that (mid-2010) less than EUR 29 of this amount will have an impact on domestic demand. This is because – slightly more than half of the amount is absorbed by social security contributions (pension insurance, health insurance, unemployment contribution, nursing care insurance) and taxes, – EUR 8 is saved and – EUR 12 is used to purchase imported goods or import components of domestic goods. Despite these statistically clearly demonstrable facts, the purchasing power theory is still persistently advocated – especially by trade union functionaries.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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