[Germany] Nearly 2 million workers set for 25% pay rise

Almost 2 million workers in Germany, Europe's biggest economy, are set to receive a significant pay rise, CNN Business reports.

On November 24, three German political parties agreed to form a new government. Social Democrat Olaf Scholz will succeed Angela Merkel as chancellor following lengthy coalition negotiations.

As part of the coalition agreement, the country intends to raise its minimum wage to €12 ($13.46) per hour, from the current rate of €9.60 ($10.77).

According to Carsten Brzeski, an economist at ING, the increase has the potential to boost the income of nearly 2 million people in Germany who currently earn minimum wage salaries, about 5 per cent of the country’s workers. He said the move was "clearly significant."

The minimum wage was already set to rise to €10.45 ($11.72) in July 2022. The text of the coalition deal did not specify when the bigger one-off increase will take effect.

UBS economist Felix Huefner said the move should "boost overall wage growth" across the German economy but cautioned it could "contribute to broader wage pressures."

Germany's central bank reportedly took the unusual step of publicly criticising the measure, calling it "worrying." The bank said it would have a knock-on effect on wages for higher earners.

Inflationary pressure

Economists and policymakers around the world have been closely observing rising wages as a key component of inflation. In Germany, inflation stood at 4.5 per cent in October, the highest measure in almost three decades, as energy prices soared and the cost of food rose.

Germany first introduced a national minimum wage of €8.50 ($9.54) in 2015.

As the power of labour unions has declined support for minimum wages in Europe has grown. The European Commission says there was a drop in the proportion of EU workers covered by collective bargaining agreements between 2000 and 2015, with particularly steep declines observed in central and eastern Europe.

A new draft EU law announced earlier in November seeks to reinforce minimum wages across the bloc with new requirements.

"During the previous crisis, lowering minimum wages and dismantling sectoral collective bargaining was the harsh medicine prescribed to many member states," EU Parliament member Agnes Jongerius - sponsor of the measure - said in a statement. "Now, we are fighting to increase statutory minimum wages and to strengthen collective bargaining in Europe."

Germany's minimum wage is already one of the highest in the European Union.

Source:  CNN Business

(Link and quotes via original reporting)

Almost 2 million workers in Germany, Europe's biggest economy, are set to receive a significant pay rise, CNN Business reports.

On November 24, three German political parties agreed to form a new government. Social Democrat Olaf Scholz will succeed Angela Merkel as chancellor following lengthy coalition negotiations.

As part of the coalition agreement, the country intends to raise its minimum wage to €12 ($13.46) per hour, from the current rate of €9.60 ($10.77).

According to Carsten Brzeski, an economist at ING, the increase has the potential to boost the income of nearly 2 million people in Germany who currently earn minimum wage salaries, about 5 per cent of the country’s workers. He said the move was "clearly significant."

The minimum wage was already set to rise to €10.45 ($11.72) in July 2022. The text of the coalition deal did not specify when the bigger one-off increase will take effect.

UBS economist Felix Huefner said the move should "boost overall wage growth" across the German economy but cautioned it could "contribute to broader wage pressures."

Germany's central bank reportedly took the unusual step of publicly criticising the measure, calling it "worrying." The bank said it would have a knock-on effect on wages for higher earners.

Inflationary pressure

Economists and policymakers around the world have been closely observing rising wages as a key component of inflation. In Germany, inflation stood at 4.5 per cent in October, the highest measure in almost three decades, as energy prices soared and the cost of food rose.

Germany first introduced a national minimum wage of €8.50 ($9.54) in 2015.

As the power of labour unions has declined support for minimum wages in Europe has grown. The European Commission says there was a drop in the proportion of EU workers covered by collective bargaining agreements between 2000 and 2015, with particularly steep declines observed in central and eastern Europe.

A new draft EU law announced earlier in November seeks to reinforce minimum wages across the bloc with new requirements.

"During the previous crisis, lowering minimum wages and dismantling sectoral collective bargaining was the harsh medicine prescribed to many member states," EU Parliament member Agnes Jongerius - sponsor of the measure - said in a statement. "Now, we are fighting to increase statutory minimum wages and to strengthen collective bargaining in Europe."

Germany's minimum wage is already one of the highest in the European Union.

Source:  CNN Business

(Link and quotes via original reporting)