Employers are still mad. Or so they pretend. “I don’t rule out the whole thing failing,” said a member of the Minimum Wage Commission, referring to the most important meeting in three years last weekend. The anger about the increase in the minimum wage to twelve euros by October 1, 2022 by the federal government runs deep, the three employers on the commission see themselves discredited: “We are at the mercy of a political intervention,” says one employer in the Tagesspiegel. What effect this intervention really had in the end will become apparent this Monday when the committee will present its proposal for raising the minimum wage on January 1, 2024.
In 2015, the then black-red government introduced the minimum wage of 8.50 euros and set up a minimum wage commission that decides on the increase every two years. Three members each from employers and trade unions discuss this under the direction of a chairperson: Christiane Schönefeld, a former board member of the Federal Employment Agency, has been the chair since last February.
The work of the Commission is simple and complicated at the same time. The basis for the increase in the minimum wage is the wages determined by the Federal Statistical Office in the previous two years; that’s easy. It becomes difficult when “fair and functioning competitive conditions” and secure jobs are to be striven for. The EU Commission’s new minimum wage directive doesn’t make things any easier, not to mention the high inflation rate.
42
cent could the minimum wage rise in 2024?
Agreed wages rose by an average of 2.2 percent in 2022 and by 1.3 percent in 2021. Based on the currently valid minimum wage of twelve euros, the Commission could therefore decide on an increase of 3.5 percent or 42 cents as of January 1, 2024. But that’s not enough for the unions. DGB board member Stefan Körzell takes up the employer’s argument of political intervention: the minimum wage must be so high that it does not get into the political debate. And that means an hourly wage of 13.50 euros for Körzell. Employers, on the other hand, do not even want to use the twelve euros as a basis for calculation, but instead the 10.45 euros that the minimum wage would be if the one-time increase to twelve euros by the legislature had not taken place.
The calculation went wrong
On June 30, 2020, after a tough struggle, the commission agreed to increase the minimum wage in four stages: EUR 9.50 as of January 1, 2021, EUR 9.60 as of July 1, 2021, EUR 9.82 as of January 1 2022 and to 10.45 euros on July 1, 2022. The small steps at the beginning can be explained by the uncertainty caused by the pandemic, the big step at the end with the calculations of the employers, who had hoped to keep the topic out of the 2021 federal election campaign. That went wrong. Olaf Scholz won the election with the demand for twelve euros, twelve euros have been in effect since October.
Due to the extraordinary increase to twelve euros per hour, the minimum wage was raised by more than 22 percent within just one year. Nevertheless, with reference to the inflation rate of 6.9 percent last year and probably a good five percent in 2023, trade unions are calling for a significant increase in the minimum wage in 2024 and possibly in a further step in 2025. The target is the EU recommendation.
EU proposes 13.50 euros
As the most important benchmark for an appropriate minimum wage, the European Minimum Wage Commission recommends that the minimum wage should not be less than 60 percent of the so-called median wage. The twelve euros in Germany currently make up about 53 percent of the median wage of full-time employees. In order to reach 60 percent, the minimum wage would have to be raised to 13.50 euros.
The employers reject this: the minimum wage directive has not been transposed into national law and is therefore irrelevant for the German minimum wage commission. A risky position that may provoke a new political intervention.