German Chancellor Olaf Scholz (SPD) has said that the country should increase minimum wage payments in line with general wage developments.

Minimum wage should be coupled with wider pay increases, says Scholz

Chancellor Olaf Scholz has said that the national minimum wage (Mindestlohn) should increase simultaneously with pay increases across German society.

“The minimum wage should rise in tandem with overall wages,” Scholz said in his weekly Saturday video message, explaining that wages in Germany have risen more sharply in recent months than “they have in a long time”. "Good working conditions, decent wages, more employment - that's how we ensure new growth," Scholz added.

According to the Federal Statistical Office (Destatis), in 2024 the average German income before tax is 45.358,00 euros per year. As of January 1, 2024, the national minimum wage is 12,41 euros per hour, amounting to an annual minimum income of 24.616,48 euros before tax.

The chancellor said that if the minimum wage were currently linked to broader wage increases, Germany would already have a Mindestlohn of 14 euros per hour. According to current plans, the national minimum wage will increase to 12,82 euros per hour on January 1, 2025, and to 15 euros on January 1, 2026, but this latter increase is yet to be confirmed.

The Federal Labour Ministry estimates that around six million people in Germany currently work in jobs that pay minimum wage. Of these 6 million people, women and people working in federal states of the former East are disproportionately represented.

How is the minimum wage currently decided in Germany?

Germany introduced a statutory minimum wage in January 2015. Since then, the national minimum wage has increased every year and the amount of the increase is decided by the Minimum Wage Commission (Mindestlohnkomission).

The Mindestlohnkomission is made up of six members; two employers, two employees and two academic advisors who are recommended by employer and employee organisations and appointed by the Federal Government. The six members have voting rights and the commission is led by a chairperson. New representatives are appointed to these roles every five years.

Every year the commission sets a minimum wage based on the development of collective bargaining agreements settled between German trade unions and employers. The commission is also tasked with assessing whether the minimum wage “provides adequate minimum protection for employees, allows for fair competition and does not lead to job losses”.

Once the commission has settled on a figure, the German government can introduce the new minimum wage. The new minimum wage must be the same as the amount suggested by the commission, as the government cannot independently decide a national minimum wage amount.

Thumb image credit: Tunedin by Westend61 / Shutterstock.com