According to the findings of a study by the Bertelsmann foundation published recently, a slowdown the growth of wages in Germany is being caused by the large companies that dominate the market.

The increasing concentration of the large companies in the German market resulted in a loss of a total of 11 billion euros (12.4 billion U.S. dollars) for the employees in potential wage increases in the service sector in the country between 2008 and 2016, the study claimed.

The “platform economy” often forced the larger companies and the market to move towards the concentration of companies in the market, said Dominic Ponattu, co-author of the study and economic expert at the Bertelsmann foundation. “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.

The growing concentration of companies has hit most the companies that are operational in the public services industry such as the private service providers in health care and the waste management industry. The sectors of logistics, legal advice and wholesale trade have also been impacted by significant potential wage losses.

The “working methods of superstar companies” in digitized markets was one of the major factors for this market development, analyzed the study. Companies in these sectors made use of very few employees as they often engaged in the manufacturing of their own products and services quite efficiently driven by digital technology. This resulted in such companies becoming more efficient and also being able to significantly enhance their profit margins.

The report however also noted a decrease in the number of companies between the study period, resulting decreased firm concentration in some industries such as finance, energy as well as in construction. “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.”

In terms of increase in wages, the study found no difference in the wage increase by German and foreign companies, according to Ponatt. But the study also questioned whether there is any large or significant differences between the wages paid to employees by German and the foreign companies. “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

(Adapted from Xinhuanet.com)

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