Is the increase in the minimum wage actually disadvantageous?

Minimum wage adjusted to 9.50 euros

The statutory minimum wage rose from 9.35 euros to 9.50 euros on January 1, 2021. It is to be increased gradually to 10.45 euros by July 1, 2022. The political debate about the minimum wage continues nonetheless. While employers are warning of excessive increases due to the burdens on many companies in the corona crisis, the unions are calling for a further increase. Federal Labor Minister Hubertus Heil also wants to quickly achieve a minimum wage of 12 euros. To this end, he plans to change the minimum wage law.

Minimum wage: increase in four stages until 2022

On October 28, 2020, the Federal Cabinet passed the Third Minimum Wage Adjustment Ordinance. The cabinet thus implemented the proposal of the minimum wage commission. The independent minimum wage commission responsible for setting the minimum wage unanimously decided on June 30, 2020 to raise the minimum wage in four stages:

on 01/01/2021 9.50 euros
as of July 1st, 2021 9.60 euros
on 01/01/2022 9.82 euros
as of July 1st, 2022 10.45 euros

each gross per hour.

When setting the level of the statutory minimum wage, the minimum wage commission based itself on the recent development of collective bargaining agreements and took into account current economic forecasts as well as the current employment and competitive situation.

The statutory minimum wage in January 2021 is 9.50 euros

The statutory minimum wage was introduced on January 1, 2015 at an amount of EUR 8.50 gross per hour and was most recently EUR 9.35. As of January 1, 2021, it was increased to EUR 9.50. The minimum wage commission, which is supposed to make decisions free of political influence, sets the amount anew every two years. In addition to the chairman, the committee includes three representatives from the trade unions and three representatives from the employers, as well as two advisory scientists. The proposal of the minimum wage commission is then made binding by the government by ordinance.

The minimum wage does not bring any competitive disadvantages

The statutory minimum wage applies to all employees of legal age - except for the long-term unemployed after starting work in the first six months. It also does not apply to trainees, people with compulsory internships or internships under three months. In addition, there are collectively agreed minimum wages in several sectors that are above the statutory lower wage limit.

The increase in the minimum wage is intended to contribute to fair and functioning competitive conditions by setting a lower wage limit to counter cutthroat competition through the lowest wages. For companies that employ workers with wages at the minimum wage level, a higher statutory minimum wage means rising wage and thus production costs. Experience to date with the minimum wage shows, however, that the majority of the companies have succeeded in adapting to the higher wage cost level and that this has not resulted in any fundamentally disadvantageous effects on the overall economic competitive situation.

Heil is planning changes to the setting of the minimum wage

Federal Minister of Labor Heil the rise in the minimum wage is not going fast enough. He would therefore like to introduce an additional criterion for setting the minimum wage in the future. In order to quickly achieve a minimum wage of 12 euros, the minimum wage commission should be based on the average wage in Germany from 2022 and not just on the previous collective wage development. The EU Commission is also currently working on a legal framework for European minimum wages and has recommended an orientation towards the average wages in the respective EU country.

Orientation towards the average wage

Heil pointed out that the minimum wage is currently only 46 percent of the median income. "That is not enough for me in the long term. And I do not want the 12 euros to be reached at some point on Christmas Day. And that is why we will continue to develop the criteria for determining the minimum wage by the minimum wage commission." The minimum wage should then correspond to 60 percent of the median income and thus 12 euros. Heil intends to present an amendment to the law shortly.

On the other hand, the employers refuse to allow politicians to interfere in the work of the minimum wage commission. They were satisfied with the fixed increase in small steps. "With the lower, staggered adjustment steps for 2021, we are creating more air, especially for small and medium-sized companies, as they have been hit particularly hard by the corona crisis and have to fight for their economic existence," said Steffen Kampeter, General Manager of the Federal Association of Employers' Associations ( BDA).

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