Work - Minimum wage rises to 12.41 euros per hour
The statutory minimum wage will rise from 12 euros to 12.41 euros per hour on January 1. Compared to the last increases in 2022, the increase will be lower this time.
This is also due to the weak development of collectively agreed wages in recent years, on which the responsible minimum wage commission is based, said Mario Bossler, head of the minimum wage working group at the Institute for Employment Research (IAB), to the German Press Agency. The last unscheduled increase on October 1, 2022 was set by the traffic light government instead of the commission. The minimum wage was increased from 10.45 euros to 12 euros.
It is not possible to say exactly how many people in Germany will benefit from the minimum wage increase. However, according to the Federal Statistical Office, around six million employees (15 percent) were working in the low-wage sector in October 2022. The low-wage sector therefore includes jobs that pay less than 12.76 per hour. According to the figures, around 5.8 million people who previously earned less than 12 euros an hour benefited from the increase in the minimum wage to 12 euros in October. On January 1, 2025, the minimum wage is then set to rise by 41 cents to 12.82 euros.
The minimum wage at a glance
A minimum wage has been in place in Germany since 2015 - employees were not allowed to earn less than 8.50 euros an hour after its introduction. In the following years, the minimum wage gradually increased to 12 euros - an increase of 41 percent over the years. There were particularly large increases in 2022: it went up from 9.60 euros to 12 euros in three steps - most recently by law through the traffic lights.
This time, for the first time, the employer and employee representatives in the commission did not agree on the increase. The union representatives had demanded a significantly higher minimum wage increase. In order to break the stalemate between the two sides, a passage of the Minimum Wage Act came into play: the chair of the commission, Christiane Schönefeld, presented a mediation proposal. However, as this also failed to gain a majority, Schönefeld exercised her right to vote as provided for in this case and helped it gain a majority. The trade union side was outvoted.
The minimum wage is stated as a gross amount - i.e. before deduction of taxes, pension, health, long-term care and unemployment insurance. How much of this remains net depends, for example, on the minimum wage earner's tax bracket, marital status or number of children. Mini-jobbers are also entitled to minimum wage. There are special rules for trainees. In the case of student jobs, "orientation internships" alongside studies or training that last less than three months and "compulsory internships" as part of studies, there is generally no entitlement to minimum wage.
If an employer pays less, even though there is an entitlement to minimum wage, they face fines of up to 500,000 euros. The company can also be excluded from the awarding of public contracts. There is a "minimum wage calculator" on the website of the Federal Ministry of Labor: by entering the gross salary and weekly working hours, you can check whether the salary is below the minimum wage.
Comparison with real and collectively agreed wages
Despite the high inflation of the past two years, minimum wage earners can now afford more than when it was introduced in 2015. According to a recently published study by the IAB, purchasing power in September 2023 was 11.6% higher than when it was introduced in January 2015. This means that the development of the minimum wage has now also overtaken that of average collectively agreed wages. According to the study, they have lost around 3.8% in real terms since 2015.
Until January 2022, things were different, the IAB figures show: collectively agreed wages had risen even faster than the minimum wage by then. Since the coronavirus pandemic, however, collectively agreed wages have developed "relatively unfavorably", says Bossler. Due to high inflation, the values have even fallen in real terms. The minimum wage has therefore not only overtaken inflation, but also collectively agreed wages, especially due to the increases in 2022. According to Bossler, the collective bargaining negotiations in the coming months will show whether the gap in collectively agreed wages can be closed again.
What the minimum wage has triggered
Many hoped that the introduction of the minimum wage would above all reduce wage inequality in Germany. A number of research studies have shown that this has been successful, says Bossler. Before the coronavirus pandemic, wage inequality had almost returned to the level of the 2000s. A "positive effect" can be seen here following the introduction of the minimum wage.
Fears that companies would react to the higher minimum wage by reducing employment, on the other hand, have not materialized. So far, there have only been descriptive results on the last increase to 12 euros. "However, these do not indicate that there has been a massive reduction in employment as a result of the minimum wage," says Bossler. The experts assume that employers are instead passing on the higher personnel costs to consumers through higher prices. However, increases must be handled with caution, as a reduction in employment is still possible.
Employers warn against government intervention
"Higher pay is always a challenge - especially for small and medium-sized companies," says Steffen Kampeter, Managing Director of the Confederation of German Employers' Associations. "In some cases, they are already struggling to keep up with the current cost pressure. This is particularly true in the service sector, where we are seeing clearly wage-driven price increases as well as company closures."
However, Kampeter considers the increase in the statutory minimum wage to 12.41 in January to be "sensible and, above all, moderate". It is based on the development of wages and thus protects the autonomy of collective bargaining. The association is sharply critical of government intervention in the minimum wage. "It is crucial for us employers that the minimum wage does not interfere with the freely negotiated wages of collective agreements as a state wage."
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- The difference in collective bargaining negotiations between employer and employee representatives regarding the minimum wage increase was unprecedented in the minimum wage commission, located in Germany's Institute for Employment Research (IAB).
- Despite the high inflation and weak development of collectively agreed wages, the minimum wage increase in Germany from 12 euros to 12.41 euros on the turn of the year will benefit around six million employees, according to the Federal Statistical Office.
- The German Press Agency reported that Mario Bossler, head of the minimum wage working group at the IAB, cited the weak development of collectively agreed wages as a factor for the lower increase compared to previous years.
- Bossler further mentioned that the traffic light government set an unscheduled increase to 12 euros in October 2022, bypassing the minimum wage commission's recommendation.
- Steffen Kampeter, Managing Director of the Confederation of German Employers' Associations, praised the increase to 12.41 euros as "sensible and moderate," emphasizing its basis on the development of wages and the protection of collective bargaining autonomy.
- With the turn of the year, Germany will have a beautiful field to cover in addressing the challenge higher minimum wage poses to small and medium-sized businesses, particularly those in the service sector.
- In Berlin, the Social Democratic Party and trade unions voiced concerns about the potential impact of increased tariffs on German companies, leaving employers and employees collectively looking ahead to address these concerns while ensuring fair wages and a strong working environment.
Source: www.stern.de
