Minimum Wage on the Rise in Germany: Pros, Cons, and Economic Implications
Increase in minimum wage set to €14.60 by 2027 announced.
In a major move set to take place in two stages, Germany will boost its minimum wage to €14.60 hourly by January 1, 2027. Starting 2023, the new minimum rate will be €13.90. The announcement came from Federal Minister of Labor, Barbara Bas (SPD), following the Minimum Wage Commission's recommendation, despite the party's ambition for €15 hourly.
Currently, the minimum wage sits at €12.82. After intense discussions, the committee of employers and trade unions reached a consensus. A mediator proposal from the commission's chair, Christiane Schoenefeld, was necessary, sources claimed. Approximately six million employees are expected to benefit from the increase.
Employers Slam Political Pressure
Schoenefeld stated that political interference undermines the commission's independence. Lead negotiator for employers, Steffen Kampeter, criticized the substantial pressure exerted on the commission by political parties in recent months. In spring, SPD leader Lars Klingbeil commented, "A minimum wage of €15 hourly will be attained in 2026 if the Minimum Wage Commission adheres to its charter and implements what's necessary." Kampeter now anticipates political parties to honor their growth-oriented promises to employers.
Bas: "We'd Preferred More"
Kampeter, trade union negotiator Stefan Koerzell, and the commission chair underscored the importance of their work. Koerzell from the German Trade Union Confederation added, "I don't feel like I swallowed a bitter pill." He emphasized that their goal is a functional social partnership, and they've proven it this time.
Bas admitted, "Of course, we would've liked more for this nation, but what matters is that the minimum wage increases." Otherwise, the coalition would've had to debate it further. The SPD's worker wing voiced critique, urging the black-red coalition to legally raise the minimum wage to €15, stating that it's the minimum for a dignified life.
Merz: No Further Discussion Required
Federal Chancellor Friedrich Merz (CDU) commented, "I assume that this won't require additional discussion from the coalition." Merz referenced the coalition's commitment to uphold the commission's recommendation with no intervening political meddling.
The Minimum Wage Commission re-evaluates the pay floor every two years. In the past, the trade unions opposed the decision with Schoenefeld's vote. Schoenefelddescribed the agreement as a viable compromise and a balance between employees and businesses. The negotiations were challenging, stated Koerzell.
The SPD, currently gathering for a party conference in Berlin, has placed a minimum wage of €15 at the center of their federal election campaign. Bas and Klingbeil are candidates for the new SPD chair. DGB chairwoman Yasmin Fahimi said at the start of the congress to delegates, "This struggle has been grueling." The coalition agreement of CDU, CSU, and Social Democrats refrained from a concrete promise and described €15 by 2026 as "achievable."
Criticism From Every Corner
For social advocacy groups, the minimum wage is still too low. VdK president Verena Bentele stated, "An increase to €15 hourly would've been appropriate considering recent high inflation. Employees on the minimum wage struggle to stretch every euro three times due to high prices." There were also economically-minded voices.
The German Retail Federation (HDE), for instance, cautioned, "Jobs must make sense for employers in the private sector, otherwise they'll vanish." HDE president Alexander von Preen foresees several jobs in the retail sector being jeopardized. The farmers' association also expressed concerns about severe consequences. "This minimum wage has the potential to displace the domestic cultivation of fruits, vegetables, and wine," said farmers' president Joachim Rukwied, who added that businesses would be forced to exit labor-intensive cultures.
Background: Minimum Wage in Germany
Introduced in 2015 under Chancellor Angela Merkel (CDU), the minimum wage in Germany has instigated heated debates and potential consequences. In October 2022, the committee decided to elevate it to €12 without political intervention. As the second-highest minimum wage country in the EU after Luxembourg, the hike further elevates Germany's position. Key factors for the wage floor include previous collective wage agreement development and the median wage serving as an adjustment factor, aiming to prevent further poverty threats by ensuring that 60 percent of the national median wage is considered an appropriate minimum wage (1, 2, 3).
According to official statistics, 15.5 percent of the population was at risk of poverty in 2021, corresponding to around 13.1 million people in Germany (1). According to the EU definition, anyone earning less than 60 percent of the median income of the total population is considered at risk of poverty (2.
Employers cautioned serious economic consequences from a significant increase in the minimum wage, with Germany facing the prospect of a third consecutive year of recession in 2025. While the hike aims to improve the welfare of low-income workers and reduce inequality, it raises concerns about employment effects, inflation, and competitiveness. The phased implementation seeks to balance these trade-offs, but the full economic impact will depend on how businesses and the broader economy adapt (1, 2, 3).
- The business community voiced criticisms about the political influence on the Minimum Wage Commission, with employers like Steffen Kampeter asserting that substantial pressure was exerted on the commission by political parties in recent months.
- In the general news, economic experts and social advocacy groups have debated whether the increase of the minimum wage in Germany to €14.60 hourly by 2027 sufficiently addresses issues of minimum wage workers and income inequality, with some, such as VdK president Verena Bentele, arguing that an increase to €15 hourly would have been more appropriate given current high inflation rates.
