Minimum wage: Significant increases in most EU countries - Germany lagging behind
- From Sonja Hennen
- Reading duration 3 min
The statutory minimum wage was raised significantly in most EU countries at the turn of the year. Germany clearly lags behind. According to the WSI Minimum Wage Report 2024, minimum wages in the 22 EU countries with a general minimum wage rose by a median of 9.7% due to high inflation rates. Particularly strong nominal increases were recorded in many Eastern European countries, but Ireland (+12.4%) and the Netherlands (+12.9%) also raised their minimum wages significantly. In Germany, on the other hand, the increase was much smaller, with a nominal rise of just 3.4 % to 12.41 euro. Only in Belgium did the minimum wage rise more slowly (+2.0%).
The momentum on minimum wages has also been boosted by the European Minimum Wage Directive. Many Member States are striving to reach the Directive's reference values of 60% of the median wage or 50% of the average wage. Currently, only Portugal, Slovenia and France have reached this threshold.
Germany is well below this target due to the small increase in the minimum wage and the general trend in wage levels. According to calculations based on the latest Eurostat data, a minimum wage of €13.61 would be required to meet the 60% criterion as early as 2023, and around €14 in the current year. In its latest decision, the German Minimum Wage Commission disregarded the requirements of the European Minimum Wage Directive and announced that in future it would only take into account the criteria explicitly mentioned in the Minimum Wage Act.
Recent increases in minimum wages are put into perspective when the rise in the cost of living is taken into account. The WSI minimum wage report uses the annual inflation rate of the Harmonised Index of Consumer Prices (HICP) as a benchmark. In real terms, minimum wages rose by 1% or more in 14 EU countries compared with the same time last year, and by at least 5% in seven. The average increase in purchasing power of the minimum wage in the EU was 2.5%. Germany is one of a small group of countries where the minimum wage has fallen by 1 per cent or more in real terms.
Austria, the Nordic countries and Italy have no statutory minimum wage. However, in these countries there is a very high level of collective bargaining coverage, which is also strongly supported by the state. Collective agreements therefore effectively set a general floor. According to the EU directive, countries where less than 80 per cent of employees are covered by collective agreements must submit action plans to increase coverage. This also applies to Germany, where only about half of the workforce is covered by collective agreements.
In most countries, statutory minimum wages serve as a central institution for regulating the labour market. Adequate minimum wages stabilise incomes at the lowest end of the income distribution and thus protect groups of employees with little bargaining power in particular. They are therefore seen as a building block for reducing the income gap and thus inequality.