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EXPLAINED: Who will benefit from Germany’s minimum wage hike?

Germany's new €12/hour minimum wage, which came into force on October 1st, is set to benefit more than six million people. We look at exactly who is going to be helped by the €1.55/hour increase.

Social Democratic Party General Secretary Kevin Kuehnert addresses a press conference in front of a placard showing German Chancellor Olaf Scholz and the words 'Now vote for 12 Euro minimum wage - promise kept' 
Social Democratic Party General Secretary Kevin Kuehnert addresses a press conference in front of a placard showing German Chancellor Olaf Scholz and the words 'Now vote for 12 Euro minimum wage - promise kept'  in Berlin ahead of the introduction of the new minimum wage from October 2022. Photo: Tobias SCHWARZ / AFP

How much has the minimum wage risen by?
As of October 1st, the minimum wage now stands at €12 per hour, up from €10.45 previously, i.e. an increase of almost 15 percent.

How many people are going to benefit from the increase?
According to the Hans Böckler Foundation’ Institute of Economic and Social Research (WSI), a trade union-linked research foundation, there are at least 6.64 million people who were earning less than €12 per hour before the increase. This includes 3.5 million women and 2.7 million men.

Will this mainly benefit people in full- or part-time work?
If we look at the number of hours worked, we can see the following picture: 1.4 million full-time employees will get a boost to their earnings, and 1.8 million part-time staff and three million people with so-called ‘mini-jobs’ will earn more per hour. A mini-job is where you can either earn a maximum monthly sum or work for no more than three months/70 days per year. Those who only have a mini-job don’t have to pay social security contributions.

The upper earnings limit for people with mini-jobs also rose on October 1st. People can now earn a maximum of €520 per month, up from €450/month previously. 

READ ALSO: The rules in Germany around mini and midi jobs

Does the increase have anything to do with the current energy crisis?
No. The coalition government had already planned this before Russia invaded Ukraine and the resulting energy crisis. After the Bundestag (lower house of parliament) passed the draft law on June 3, 2022, it was confirmed by the Bundesrat (upper house) on June 10 where concerns about the cost-of-living crisis played a key role in the final debate. At that time, several politicians warned that spiralling energy prices and inflation were making many people’s living situations untenable. The government has since introduced other initiatives to help people cope.

READ ALSO: Wohngeld: How people in Germany can get help with rising living costs

In which sectors will the increase have the biggest impact?
More than 60 percent of people working in the hospitality sector will be affected by the increase. According to government data, 46 percent of those working in the agricultural and forestry sector were earning below €12/hour. Thirty-two percent of those in the property sector and 29 percent in the transport and warehousing sector also earned less than the minimum wage.

What are trade unions and employers’ associations saying about the hike?
The German Trade Union Confederation (DGB) has been pushing for an increase for a long time. DGB head Stefan Koerzell recently called the step “a ray of hope in these difficult times”. But the Confederation of German Employers’ Associations’ BDA called Labour and Social Affairs Minister Hubertus Heil’s draft law for the increase of the minimum wage “extremely questionable” from a political and legal perspective. The BDA’s criticism was not targeted at the increase itself, but rather the fact that it was the legislator who was deciding on wage increases instead of employers and trade unions.

What role do trade unions and employers’ associations play when it comes to the minimum wage?
Normally a big one – they sit on the minimum wage board. This committee normally proposes the incremental increases for the base hourly salary, which was introduced in 2015 – it then stood at €8.50. The new legal increase to €12 is outside of this usual mechanism, but the coalition government has promised that after this, the minimum wage commission will be responsible for future increases once again. 

READ ALSO: Everything that changes in Germany in October 2022

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MONEY

Germany reaches agreement on Bürgergeld – with a couple of catches

Members of Germany’s traffic light coalition government and the opposition Christian Democratic Union party have reached an agreement in the dispute over plans for a new citizens‘ income. There will be tougher sanctions against benefit recipients and fewer discretionary assets.

Germany reaches agreement on Bürgergeld - with a couple of catches

Last week, the German government’s plans to reform unemployment benefits with its new “Bürgergeld”, or citizens’ income, proposals were blocked in the Bundesrat.

The legislation was held up mostly by members of the Christian Democratic Union (CDU/CSU) which had been strongly opposed to the proposals for a six-month Vertrauenszeit (trust period) in which benefits claimants would not incur sanctions, as well as to the amount of assets recipients would be able to hold on to.

READ ALSO: EXPLAINED: Will Germany’s controversial Bürgergeld still come into force?

On Tuesday, politicians from the traffic light coalition parties and the CDU/CSU reached a compromise on the proposed reforms which means that some of the key measures will be scrapped.

No trust period

The CDU/CSU was able to push through its demand for more sanctions for recipients and the six-month trust period will now be scrapped completely.

Instead, it will be possible to enforce benefit sanctions from the first day of an unemployment benefits claim if recipients don’t apply for a job, or fail to turn up for appointments at the job centre, for example.

The CDU and CSU also demanded that unemployment benefits recipients be allowed to keep less of their own assets when they receive state benefits. The original plan had been for assets worth up to €60,000 to be protected for the first two years, but the compromise reached has knocked this down to €40,000 for one year – during which time benefits recipients will not have to use up their savings.

Following the announcement of the agreement, Green Party later Britta Haßelmann said “I regret it very much”. According to Haßelmann, the trust period was the core of the reform designed to stop people from having to take up “just any job”.

READ ALSO: Bürgergeld: What to know about Germany’s unemployment benefits shake-up

Other traffic light colleagues were more optimistic, however. Katja Mast from the SDP spoke of a “workable compromise in the spirit of the matter,” while FDP Parliamentary Secretary Johannes Vogel said that it had succeeded in “making a good law even better”.

CDU/CSU leader Friedrich Merz, meanwhile, sees the compromise as a great success for his party, though he also praised the willingness of the parties in the government to reach an agreement.

“The coalition was very quick and – to my surprise – very largely willing to make compromises here,” Merz said. 

What happens next?

Tomorrow, the Mediation Committee of the Bundestag and Bundesrat will meet to discuss the proposals. If the agreement is confirmed, the welfare reform could clear the final hurdle when it is voted on Bundesrat again at the end of the week. According to the federal government’s plans, if it’s approved, Bürgergeld will come into force in January and replace the current Hartz IV system. 

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