Anyone who receives the minimum wage can now afford more for the same working hours than when it was introduced in 2015. The increases more than compensated for the loss of purchasing power caused by inflation, according to a study by the employment agency.
Since its introduction almost nine years ago, the statutory minimum wage in Germany has increased more than the collective wages and has more than compensated for the high inflation. The purchasing power of the minimum wage, currently twelve euros per hour, was 11.6 percent higher in September 2023 than when it was introduced in January 2015, according to a study by the Institute for Labor Market and Occupational Research (IAB). The institute is the research facility of the Federal Employment Agency.
Collective bargaining wages lost their real value
Collective bargaining wages, on the other hand, have lost 3.8 percent of their real value since then. “Minimum wage earners can now afford more for the same working hours than when it was introduced in 2015,” said IAB director Bernd Fitzenberger.
By January 2022, collective bargaining wages had risen even more than the minimum wage, explained the IAB. In real terms, collective wages rose by 3.7 percent since the introduction of the minimum wage in 2015 to January 2022, and the minimum wage by 2.2 percent. But “since then the tide has turned”: between January 2022 and September 2023, the minimum wage rose by 9.3 percentage points in real terms, while collective wages fell by 7.6 percentage points in real terms.
Reversal of the trend by raising it to twelve euros
This is due in particular to the one-off increase in the minimum wage to twelve euros on October 1, 2022 by the traffic light coalition, explained the head of the IAB minimum wage working group, Mario Bossler. According to the study, the minimum wage increases more than offset the loss of purchasing power caused by inflation. “This also applies if you take into account that low earners are more affected by inflation than higher earners,” said IAB researcher Martin Popp.
The study could shed new light on the recent dispute over the level of the minimum wage. A commission made up of employer and employee representatives is responsible for setting the statutory minimum wage; It should base its recommendation for the government on adjusting the minimum wage on the development of collective wages.
The SPD and the Greens want reform of the minimum wage commission
In the summer, the committee decided that the minimum wage should increase by 41 cents in each of 2024 and 2025, initially to 12.41 euros and then to 12.82 euros. The decision was not made unanimously, but against the votes of the union representatives, who had demanded a significantly larger increase. Criticism came from the SPD in particular – and calls for reform of the commission.
According to the law, the government can only implement the Commission’s proposal unchanged and cannot set a different amount. The cabinet approved the corresponding ordinance from Labor Minister Hubertus Heil (SPD) on the minimum wage increase in mid-November. The regulation states that the increase “a total of 6.83 percent significantly lags behind the current general price development”. The study now shows that when looking over a longer period of time, the minimum wage has increased more than prices.
Employers warn against interference
The employers’ lobby warned against political interference in the procedure surrounding the minimum wage. After increasing the statutory minimum wage to twelve euros, Chancellor Scholz promised that this was a one-off intervention, recalled employer president Rainer Dulger. “His party has just paved the way for preparing the next intervention,” Dulger told the dpa news agency, referring to the SPD party conference. This is not about a blanket setting of the minimum wage by the legislature. The working methods of the Minimum Wage Commission should be changed in such a way that it leads to a “significant increase in the minimum wage”.
Dulger warned against damaging collective bargaining autonomy in Germany. The statutory minimum wage should not become “a political football”.