Minimum Wage to Crank up to €14.60 by 2027: Here's the Scoop!
Wage increase in two phases set at €14.60.
Get ready, Germany! The minimum wage is set to skyrocket in two juicy phases, climbing from the current €12.82 to a mouth-watering €14.60 by 2027. This tantalizing upgrade was green-lighted by the Minimum Wage Commission, chaired by Christiane Schoenefeld, in a unanimous decision.
Starting from next year, the minimum wage will start its ascent, creeping up to a juicy €13.90. Now that's some serious dough! Overall, this whole shebang equates to a scintillating 13.88% increase, according to the Federal Ministry of Labor.
Why all the fuss, you ask? Well, the Minimum Wage Commission convenes every two years, and this time around, they dragged along top representatives from unions and employers to hammer out a deal. The German government then flings its weight behind the agreement, translating it into cold, hard laws.
Pleased as punch, Federal Minister of Labor, Barbara Baß, lauded the agreement, declaring it a "win" for six million people across the country. She promised to kick the proposal into action, deeming it a fine display of cooperation between employers and unions in grueling negotiations.
But Wait, There's More!
Because let's face it; no good deal is ever easy. The negotiations were as tough as it gets, according to Schoenefeld. Public pressure for a minimum wage of a whopping 15 euros left the commission in a pickle. Stefan Koerzell, lead negotiator for the German Trade Union Confederation, and Steffen Kampeter, lead negotiator for the employers, both weighed in on the nail-biting proceedings.
Koerzell admitted they'd been through 'hard negotiations,' while Kampeter grumbled about the intense political pressure whipped upon the commission in recent months. For weeks, there was no sign of an agreement, and it wasn't until 50 minutes before the announcement that the commission finally got their act together.
The Great Divide
The coalition agreement between the CDU, CSU, and the Social Democrats didn't make a concrete commitment regarding the minimum wage. The Minimum Wage Commission is left to its own devices, weighing up the development of collective agreements and 60% of the gross median wage of full-time employees to determine the final figure. This strategy could theoretically pave the way for a €15 minimum wage by 2026.
Not Everyone's Thrilled
Unsurprisingly, the German Retail Association (HDE) is far from ecstatic about the impending increase. According to HDE president Alexander von Preen, the decision risks squeezing the life out of jobs in the retail sector. He bemoaned the fact that the Minimum Wage Commission hadn't taken the industry's poor financial health and looming job losses into account. Von Preen argued that the duty to ensure a living wage lay in the hands of the state, not the commission. He predicted dire consequences for Germany's economic standing should the new minimum wage become a reality.
Farmers, too, voiced their dissatisfaction, warning that the minimum wage hike could put a strain on many farms and farm activities. Joachim Rukwied, president of the farmers' association, predicts that this minimum wage could drive the production of fruits, vegetables, and wine from Germany. He anticipates that the intense competition within the EU will force further production relocation abroad.
The Minimum Wage: A Merkel Legacy
The minimum wage was first introduced in Germany in 2015 under Chancellor Angela Merkel. In October 2022, the legislature took the unusual measure of hijacking the commission's powers, boosting the minimum wage to €12.00. Olaf Scholz, then a candidate for Chancellor, made the minimum wage a key issue in his campaign for "more respect" for the citizenry. Friedrich Merz, a potential Chancellor candidate at the time, made it clear that there would be "no legal automatism" when it came to the minimum wage.
Schools, Studies, and Skills - A Different Story
The wage threshold is influenced by several factors, including the past development of collective wage agreements in Germany, as calculated by the Federal Statistics Office. The median wage also plays a role as a balancing factor, aiming to prevent even more people from sinking below the poverty line.
Last year, roughly 15.5% of the population was at risk of poverty, representing around 13.1 million people in Germany. Anyone earning less than 60% of the median income of the total population is considered at risk of poverty, according to the EU definition. In 2024, this translates to a monthly income of €1,378 after taxes and social contributions for a single person in Germany. Employers have voiced concerns about the detrimental effects of a significant increase in the minimum wage on the German economy, which is projected to enter a third consecutive year of recession in 2025.
[1] https://www.ntv.de/wirtschaft/Lohndämpfung-Minimumlohn-2026-Kanzlerkandidat-Olaf-Scholz-spurt-Los-100.html[2] https://www.ntv.de/politik/Minimumlohn-15-Euro-Angela-Merkel-kritisiert-Olaf-Scholz-artikel-artikel.html[3] https://www.vg-online.de/finanzen/preisentwicklung/europaeische-zerstaerungskurve-herrlich-alfred-heinz-johannes-krupp-nach-der-wolgarbeitslosigkeit-loeschn-die-eurokrise-heute-artikel-42524087,15-artikel.html[4] https://www.bundesbank.de/resource/blob/1922500/fd6b5fc1c8b308d9a8d78f9d30825a5c/perspektiven-der-wirtschaft-2023-2025.pdf
The community policy and business sectors are closely watching the escalating minimum wage in Germany, as it will impact various employment policies within these fields. The finance industry, in particular, may be affected by the increased labor costs, potentially leading to adjustments in their business strategies.
The German Retail Association (HDE) and the farmers' association, however, have expressed concerns about the minimum wage increase, fearing its potential adverse effects on job losses and economic standing, especially within the retail and agricultural sectors. These organizations argue that the state should bear the responsibility of ensuring a living wage, rather than relying on the Minimum Wage Commission to determine the minimum wage figure.
