Cabinet raises minimum wage and mini-job limit
02/23/2022, 2:55 p.m
According to the federal government, more than six million people in Germany only get the minimum wage for their work. East Germans and women are particularly affected. Their income is expected to increase noticeably by October. Studies show, however, that the increase does not necessarily mean more money.
The statutory minimum wage is to rise to twelve euros on October 1, and the 450-euro jobs will become 520 euros. This is provided for in a draft law that the federal government has launched. “More than six million hard-working people will benefit from the increase in the minimum wage, especially in East Germany and above all women,” said Labor Minister Hubertus Heil. His party and the Greens had promised the increase in the Bundestag election campaign. In the coalition agreement, the FDP pushed through higher earnings limits for the controversial mini-jobs. While the unions welcomed the increase in the minimum wage, the employers spoke of a “system change towards a state wage development”.
Trade unions advocate higher minimum wages as “an expression of appreciation for the work of many millions of people,” as the German Trade Union Confederation (DGB) explained. The DGB rated the extension of the mini-job limits as a mistake. For women in particular, mini-jobs are “often the sure ticket to poverty in old age”.
Employer President Rainer Dulger, on the other hand, accused the federal government of making the “minimum wage a political pawn”. The employers insist on changes in the deliberations of the Bundestag. They have kept legal steps open and justify this by saying that the minimum wage commission made up of trade unions and employers was ignored.
Studies question benefit for low-wage sector
According to the draft law, around 6.2 million employees can expect a salary increase as a result of the higher minimum wage. Employers are therefore faced with additional costs of around 5.6 billion euros per year for which social security contributions are incurred. Additional income of 2.2 billion euros is therefore expected for social insurance. The minimum wage is currently €9.82. On July 1, the lower wage limit will increase to EUR 10.45 according to current law.
The earnings limit for mini-jobs, currently €450 a month, was last increased in 2013. While they are tax and duty-free for employees, employers pay a flat rate to the social security funds and the tax office. In June 2021 there were around 7.4 million mini-jobbers. For a good three million of them, this was a part-time job alongside their main job.
However, a higher minimum wage does not automatically mean more money in the account. Studies show that in the past, working hours were reduced to avoid higher costs from wage increases. This was pointed out by the Kiel Institute for the World Economy (IfW) and the DIW in Berlin.