Germany’s minimum wage legislation - Gesetz zur Regelung eines allgemeinen Mindestlohns - was introduced, on January 1, 2015, by Merkel’s third cabinet, composed of a coalition between the SPD – the social democratic party - and the CDU – the conservative party. The implementation of a minimum wage was the SPD’s main request during the coalition’s negotiations. Indeed, it was its central electoral promise during the 2013 federal elections’ campaign, to replace negotiated wages within branches that were previously set below the current minimum wage. The minimum hourly wage began at 8.50€ in 2015, and is adjusted at least every two years. As of 2020, it is 9.35€.
In order to adjust the amount of the minimum wage, the German government implemented a permanent commission, which is composed of nine commissioners: a president, three workers’ representatives, three employers’ representatives and two economist advisors that do not have voting rights within the commission. It assesses Germany’s overall economic performance to find a suitable minimum wage level. The first minimum wage adjustment was made in June 2016, and was followed two years later by another adjustment, in June 2018, that raised the minimum wage to 9.19€.
Controversy of a minimum wage in Germany
The minimum wage was one of the most controversial topics during the 2013 legislative election campaign. While the social democratic party - SPD, the green party - die Grünen and the left-wing party - die Linke, were in favor of a general minimum wage, the liberal party – FDP, and the conservative party – CDU, remained skeptical. Leading economic research institutions, such as the CESifo Group Munich, advocated against the introduction of a minimum wage of 8.50€. According to a study of the Center for Economic Studies of the Ifo Institute in 2014, the minimum wage was predicted to risk around 900,000 jobs, especially in the eastern part of Germany. However, a study from the London School of Economics and Political Science contradicted it by demonstrating that the minimum wage did not actually lead to job losses. Indeed, the Economic Policy Research Discussion Paper, which analyzed employment levels in Germany across different regions from 2011 to 2016, showed that the unemployment rate decreased in regions with previously lower wage levels. Besides, a study of the German Institute for Economic Research showed that the minimum wage increased the hourly wage, but not the total income of people who work in the low-wage sector. Since hourly wages increased slightly, working hours decreased simultaneously to offset higher costs.
