Minimum Wage In Germany

Germany's minimum wage is €12 per hour, pre-tax since 1 October 2022. The legislation (german: Gesetz zur Regelung eines allgemeinen Mindestlohns) was introduced on January 1, 2015, by Angela Merkel's third government, a coalition between the SPD and the CDU. The implementation of a minimum wage was the SPD's main request during the coalition's negotiations as its central electoral promise during the 2013 federal election campaign. Previously, Germany had minimum wages only in specific sectors, negotiated by trade unions, and some were below the minimum wage level introduced in 2015.

The initial minimum wage was 8.50 euros per hour pre-tax. Since then, Germany's Minimum Wage Commission () regularly proposes adjustments to the minimum wage level. It was last increased to 10.45 euros per hour pre-tax. Due to inflation, this wage in August 2022 was worth as much as euros were worth in January 2015.

On 3 June 2022, the Bundestag voted 400 to 41, with 200 abstentions, to approve raising the minimum wage in Germany to €12 per hour on 1 October 2022. The October 2022 increase in minimum wage will result in a gross monthly salary of at least €2,080 for a full-time employee, meaning someone working a forty-hour work week.

However, there remain exceptions to the wage minimum for workers on a traineeship, employees during their vocational training, volunteers, internships up to three months, youth and the long-term unemployed.

Minimum Wage Commission

In order to adjust the amount of the minimum wage, the German government instituted a permanent commission, with nine members: a president, three workers’ representatives, three employers’ representatives and two economists that do not have voting rights within the commission. It assesses Germany's overall economic performance to find a suitable minimum wage level. The first minimum wage adjustment was made in June 2016, and was followed two years later by another adjustment, in June 2018, that raised the minimum wage to €9.19.

Debate around the minimum wage in Germany

The minimum wage was one of the most controversial topics during the 2013 legislative election campaign. The social democratic party SPD, the German green party and the left-wing party Die Linke, were in favor of a general minimum wage. By contrast, the economically liberal FDP, and the socially conservative CDU, remained skeptical.

The economic research institution CESifo Group Munich advocated against the introduction of a minimum wage of €8.50. According to a study of the Center for Economic Studies of the Ifo Institute in 2014, the minimum wage was predicted to cost up to 900,000 jobs, especially in the eastern part of Germany. However, a study from the London School of Economics and Political Science contradicted it by demonstrating that the minimum wage did not actually lead to job losses. Indeed, the Economic Policy Research Discussion Paper, which analyzed employment levels in Germany across different regions from 2011 to 2016, showed that the unemployment rate decreased in regions with previously lower wage levels. Besides, a study of the German Institute for Economic Research showed that the minimum wage increased the hourly wage, but not the total income of people who work in the low-wage sector. Since hourly wages increased slightly, working hours decreased simultaneously to offset higher costs.

The pending October 2022 minimum wage increase to 12 euros per hour, is estimated to increase the pay of over 6 million people according to Labour Minister Hubertus Heil, and should not cost jobs, a prime concern of critics.

Applicability to driving through Germany

The European Commission introduced an infringement procedure against Germany on 19 May 2015, arguing that the application of the minimum wage in the transport sector had a disproportionately restrictive impact on the freedom to provide services and the free movement of goods, two of the principal freedoms on which the European Union is based. The Commission issued a supplementary letter on this subject to the German authorities on 16 June 2016, initiating two months' notice of potential legal action.

Current and past rates

The below table displays how the German minimum wage level has developed over time. To be precise, it shows the pre-tax (German ) hourly minimum wage. The last column, in 2015 euros, shows that in real terms, the minimum wage level has increased less than in nominal terms. In other words, when Germany raised the minimum wage, the increases were partly eaten up by increases in the cost of living (inflation).

Compliance

A few months after the introduction of the minimum wage on 1 January 2015, around 10% of university students working jobs eligible for minimum wage were still being paid less, illegally.

An estimated 0.5 to 2.4 million workers were illegally paid below the minimum wage in Germany in 2018.

External links

Official English translation
of the Minimum Wage Act

References

{{Europe topic, Minimum wage in

Labor in Germany
2015 establishments in Germany
Germany
Social policy
Third Merkel cabinet