The SPD’s election promise: the minimum wage should rise to 12 euros on October 1st

DFederal Labor Minister Hubertus Heil (SPD) wants the statutory minimum wage in Germany to rise to EUR 12 an hour on October 1 of this year. This results from a draft law that his ministry has now completed in order to implement the SPD’s election promise anchored in the traffic light coalition agreement. The draft is available to the FAZ.

The project is controversial and is met with resistance from employers’ associations in particular, who see it as an inadmissible interference in the work of the Minimum Wage Commission. Their increase resolution, which came into force on January 1, 2021, is actually valid until the end of this year. It provides for a minimum wage of EUR 10.45 for the period from July to December 2022. At the beginning of the year, the lower limit had risen to EUR 9.82.

In Heil’s draft law, the justification for the planned unscheduled increase is that the German minimum wage is “below the average in comparison to other European countries, measured by the percentage of the national median wage”. In addition, reference is made to the recently sharply accelerated inflation: “Increasing living expenses, especially housing costs, also call into question the suitability of the minimum wage to be able to guarantee an adequate livelihood on the basis of full-time employment.”

Wage increase for 6.2 million workers

According to the draft, Heil assumes that with the planned increase to 12 euros, a total of 6.2 million employees can expect an unscheduled wage increase on October 1st. He puts the additional wage costs for their employers at 1.63 billion euros this year alone, i.e. in the three months from October to December.

Extrapolated for the year, this would even be a sum of up to 6.5 billion euros. However, without the current special law on January 1, 2023, the minimum wage would probably have been increased by a further step above the 10.45 euro mark. If you take this into account, the effective additional burden on companies due to the unscheduled increase to 12 euros is correspondingly lower. For social security, the ministry expects additional income of 700 million euros by the end of the year.

However, it is not entirely clear what will happen next with the minimum wage commission: the employers had announced that they would question their participation in the commission in the event of such a special law. The committee consists of three representatives each from the employers’ associations and the trade unions. According to the previous minimum wage law, the commission was mandated to present its next increase proposal by June 30 of this year, which would then have applied for the period from January 2023 to December 2024.

In Heil’s current draft law, however, it is now envisaged that after the statutory increase to 12 euros, the commission will continue in principle as before – albeit with a time delay: It should therefore only present its next proposal by June 30, 2023, then with effect for the years 2024 and 2025.

“The Minimum Wage Commission will continue to decide on future adjustments to the amount of the minimum wage,” it says. With the unscheduled increase in the minimum wage to 12 euros, “the instrument will be further developed in such a way that in future the aspect of social participation will be given greater consideration when determining the minimum wage.”