With a minimal wage set at €14 per month, around one-fifth of businesses anticipate workforce reductions.
A rise in Germany's statutory minimum wage from 12.41 euros to 14 euros could see approximately 20% of businesses anticipate redundancies, as per research by the Institute for Employment Research (IAB).
This increase to 14 euros would directly impact over half of all businesses, which is significantly more than the rise to 12 euros in October 2022. As IAB researcher Erik-Benjamin Börschlein explains, "a sudden jump in the minimum wage seems to have a substantial influence on the wage structures and job expectations of German businesses in the short term."
This study fuels the political and economic debate surrounding the minimum wage. In the traffic light coalition, for instance, the SPD and the Greens are advocating for a minimum wage above 14 euros. Federal Minister of Labour Hubertus Heil also expressed this expectation at the start of September in a letter to the Minimum Wage Commission.
By mid-2025, the commission, comprised of union and employer representatives, must submit a proposal outlining the magnitude of the minimum wage increase from 2026. The FDP and major economic associations, however, oppose a sudden increase in the minimum wage and urge the commission to decide on the more divisive increase.
The research reveals that 58% of businesses in both Western and Eastern Germany employ workers earning less than 14.41 euros. The IAB surveyed businesses, inquiring about employees in the lowest wage groups who earn either the 12.41 euro minimum wage or slightly over it. In the east, this minimum wage is paid out more frequently: 25% of businesses reported paying 12.41 euros to their lowest wage group. In the west, this was only 18%.
The lower the income of the lowest wage groups, the more likely businesses are to predict a decline in employment once the minimum wage reaches 14 euros. Among businesses whose lowest wage groups currently earn the 12.41 euro minimum wage, 30% expect job losses. In total, about 19% of all surveyed businesses forecast job cuts if the minimum wage is increased to 14 euros.
This increase in the minimum wage to 14 euros could potentially lead to significant challenges for businesses in the west, as 18% of them currently pay this rate to their lowest wage group. In the ongoing debate, some political parties and economic associations are advocating for a gradual increase instead of a sudden jump, to minimize potential job losses.
