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Germany approves the increase in the minimum wage to 12 euros per hour from October | Economy

The German Federal Parliament (Bundestag) gave the green light this Friday to one of the key promises of the Social Democratic Party (SPD) in the electoral campaign last September: the rise in the minimum wage. Thanks to the votes of the deputies of the three parties that make up the so-called traffic light coalition (SPD, Greens and the liberals of the FDP), the Bundestag has approved a 25% increase in the minimum wage, from the current 9.82 euros per hour up to 12 euros.

This increase will benefit some 6.2 million people, mainly women and workers from eastern Germany. The rise is scheduled for October 1 and will be effective in two phases. In the first, in July, the minimum wage will rise to 10.45 euros, while in October it will reach 12 euros. At the same time, it is planned to increase the minimum remuneration limit of the so-called minijobs —jobs for a few hours— from 450 to 520 euros per month, a measure that favors more than six million workers.

The bill prepared by the Ministry of Labor had been approved by the Council of Ministers on February 23. This Friday, the parliamentary majority formed by the government coalition, plus the votes of The Left, approved the increase. The Christian Democrat parliamentary group and the far right AfD abstained in the final vote.

“Whoever has been earning 1,700 euros gross full-time on the basis of the minimum wage will receive 2,100 euros in the future,” Labor Minister Hubertus Heil, the Social Democrat, told the Bundestag. The politician added that this increase is only a first step. “For this reason, we will make sure that in the future, federal government contracts only go to companies that pay according to collective agreements,” he said.

The decision to increase the minimum wage to 12 euros was practically the key that opened the door to the coalition that currently governs in Germany. The Greens and the FDP Liberals agreed to raise it and not raise taxes in a preliminary pact that kicked off formal negotiations between the three forces. The 12-page document, presented on October 15 of last year, laid the foundations for a possible executive that would be headed by the Social Democrat Olaf Scholz, then Finance Minister in the acting government led by Angela Merkel.

Among the key points of that preliminary negotiation was the decision to increase the minimum wage throughout the first year of government from 9.6 euros an hour to 12 euros, a 25% increase in one go. A commission would also decide on future hikes. This was the key demand of the Social Democrats, supported by the Greens but viewed with suspicion by the Liberals.

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The rise in the minimum wage has been criticized by the employers’ Confederation of German Employers’ Associations (BDA), which has lamented that politicians have bypassed the minimum wage commission, where employers and unions usually negotiate increases. The Federation of German Trade Unions (DGB), for its part, has lamented that the minimum remuneration of minijobs. According to official data, more than seven million people are employed in this modality, but these contracts are practically free of social costs for the employer ―who contributes a maximum of 31 euros per month for each employee―, while the worker must contribute to the retirement insurance 3.1% of that income.

The introduction in Germany of an interprofessional minimum wage was decided during the second great coalition chaired by the conservative Angela Merkel, promoted by the then Labor Minister, the Social Democrat Andrea Nahles. Then a remuneration of 8.40 euros per hour was set, a level that in subsequent adjustments gradually rose to the current 9.8 euros.

Already in Merkel’s last term, it was planned that the minimum wage would increase again to reach 10.45 euros per hour in 2022. The SPD promised during the election campaign to raise it to 12 euros, which was backed by the Greens. This was one of the main trump cards of Scholz’s campaign, whose party emerged as the most voted force in the last general elections, with 25.7% of the vote.

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