The statutory minimum wage will rise from 12 euros to 12.41 euros per hour on January 1st. Compared to the last increases in 2022, the increase will be lower this time.
This is also due to the weak development of collective wages in recent years, which the responsible minimum wage commission is guided by, said the head of the minimum wage working group at the Institute for Labor Market and Occupational Research (IAB), Mario Bossler, 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 impossible to say exactly how many people in Germany will benefit from the minimum wage increase. According to the Federal Statistical Office, around six million employees (15 percent) were employed 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 information, around 5.8 million people who previously had 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 expected to rise by 41 cents to 12.82 euros.
The minimum wage at a glance
There has been a minimum wage in Germany since 2015 – after its introduction, employees were not allowed to earn less than 8.50 euros an hour. In the following years, the lower wage limit gradually increased to 12 euros – an increase of 41 percent over the years. There were particularly large increases in 2022: in three steps it went up from 9.60 euros to 12 euros – 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 called for a significantly higher increase in the minimum wage. In order to break the stalemate between the two sides, a passage from the minimum wage law came into play: the commission chair, Christiane Schönefeld, presented a mediation proposal. Since this did not find a majority, Schönefeld exercised her voting rights provided for in this case and helped him gain a majority. The union side was outvoted.
The minimum wage is stated as a gross amount – i.e. before deducting taxes, pension, health, nursing care and unemployment insurance. How much of this remains net depends, for example, on the tax class, marital status or number of children of the minimum wage earner. Mini-jobbers are also entitled to a minimum wage. There are separate rules for trainees. For student jobs, “orientation internships” alongside studies or training that last less than three months, and “compulsory internships” as part of your studies, there is generally no entitlement to a minimum wage.
If an employer pays less even though there is a right to a minimum wage, they face fines of up to 500,000 euros. In addition, the company can be excluded from awarding public contracts. There is a “minimum wage calculator” on the Federal Ministry of Labor website: By entering the gross salary and the weekly working hours, you can check whether the salary is below the minimum wage.
Comparison to real and collective 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 percent higher than when it was introduced in January 2015. This means that the The development of the minimum wage has now overtaken that of the average collective wages. According to the study, they have lost around 3.8 percent in real value since 2015.
The IAB figures show that things were different until January 2022: by then, collective bargaining wages had actually risen more than the minimum wage. Since the corona pandemic, collective bargaining wages have “developed relatively unfavorably,” says Bossler. Due to high inflation, real values have even fallen. 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 shortfall in collective wages can be made up again.
What the minimum wage caused
Many people hoped that the introduction of the minimum wage would primarily reduce wage inequality in Germany. A number of research studies have shown that this was successful, says Bossler. Before the corona pandemic, wage inequality had almost returned to the level of the 2000s. One sees a “positive effect” following the introduction of the minimum wage.
However, fears that companies would respond to the higher minimum wage by reducing employment did not come true. So far there have only been descriptive results for the last increase to 12 euros. “But these do not indicate that there has been a massive reduction in employment as a result of the minimum wage,” says Bossler. The experts suspect that employers will instead pass on the higher personnel costs to consumers through higher prices. However, increases must be handled carefully, as job cuts are still possible.
Employers warn against government intervention
“Higher remuneration is always a challenge – especially for small and medium-sized companies,” says the managing director of the Confederation of German Employers’ Associations, Steffen Kampeter. “It is already difficult for them to keep up with the current cost pressure. This is especially true in the service sector, where we clearly see wage-driven price increases as well as company closures.”
However, Kampeter sees the increase in the legal minimum wage to 12.41 in January as “sensible and, above all, moderate”. It is based on tariff developments and thus protects collective bargaining autonomy. The association sharply criticizes government interventions in the minimum wage. “It is crucial for us employers that the minimum wage, as a state wage, does not interfere with the freely negotiated wages in collective agreements.”
