Germany’s robust economy leads to minimum wage hike Germany’s robust economy leads to minimum wage hike

Germany’s robust economy leads to minimum wage hike
04 Jul 2018

Germany is to raise the minimum wage to €9.19 (US$10.64) per hour next year and to €9.35 (US$10.83) the year after, its labour minister has said.

Hubertus Heil said the two-stage increase reflected the country’s robust economy and strong labour market, which have led unions and employees to agree generous pay increases this year.

The rise from the current level of €8.84 (US$10.30) is based on a complex formula that partly reflects an average wage hike of 4.8% over the last two years in Germany. The increase in the minimum wage in 2019 will amount to about 4%.

Economists welcomed the recommendations, but expressed some reservations. Alexandra Fedorets of the DIW institute told Reuters that for the pay rises to be effective, the Government must ensure employers comply with minimum wage rules.

"Many workers are still paid less than the minimum wage even though they are entitled to it," she said. "In addition, rising hourly wages don’t automatically translate into higher monthly incomes because many people, specifically the under-employed, work less hours and do so involuntarily."

Holger Schmieding of Berenberg Bank also said the pay hikes could make it harder to integrate refugees into the labour market.

“This creates more barriers to the labour market for less qualified refugees," he said. "The integration of many people with the permanent right to remain will unfortunately be made somewhat difficult."

Germany’s unemployment rate has fallen to record lows, despite the influx of 1.6 million migrants since the start of 2015 and the introduction of the minimum wage in the same year.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

 

Germany is to raise the minimum wage to €9.19 (US$10.64) per hour next year and to €9.35 (US$10.83) the year after, its labour minister has said.

Hubertus Heil said the two-stage increase reflected the country’s robust economy and strong labour market, which have led unions and employees to agree generous pay increases this year.

The rise from the current level of €8.84 (US$10.30) is based on a complex formula that partly reflects an average wage hike of 4.8% over the last two years in Germany. The increase in the minimum wage in 2019 will amount to about 4%.

Economists welcomed the recommendations, but expressed some reservations. Alexandra Fedorets of the DIW institute told Reuters that for the pay rises to be effective, the Government must ensure employers comply with minimum wage rules.

"Many workers are still paid less than the minimum wage even though they are entitled to it," she said. "In addition, rising hourly wages don’t automatically translate into higher monthly incomes because many people, specifically the under-employed, work less hours and do so involuntarily."

Holger Schmieding of Berenberg Bank also said the pay hikes could make it harder to integrate refugees into the labour market.

“This creates more barriers to the labour market for less qualified refugees," he said. "The integration of many people with the permanent right to remain will unfortunately be made somewhat difficult."

Germany’s unemployment rate has fallen to record lows, despite the influx of 1.6 million migrants since the start of 2015 and the introduction of the minimum wage in the same year.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

 

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