Response to higher minimum wage
Majority of affected companies want to raise prices
9/9/2022, 2:05 p.m
On October 1st, the gross minimum wage in Germany will rise to twelve euros per hour. Millions of low-income earners can look forward to receiving more money soon. But the increase will probably also become a new “inflation driver”, fears the Ifo Institute.
Many of the companies directly affected by the increase in the minimum wage on October 1 want to react with price increases. This emerges from a survey by the Munich Ifo Institute. According to this, a good 30 percent of companies in Germany are directly affected because some of them currently pay less than twelve euros per hour. 58.3 percent of them now want to raise prices.
Price increases are by far the most frequently mentioned reaction to the new minimum wage. 21.3 percent of the companies directly affected are also planning cuts in investments. Around 18 percent each want to cancel special payments and bonuses or reduce the working hours of their employees. Only 12.2 percent of companies are planning layoffs, while 5.1 percent even want to hire more people despite the minimum wage.
According to the Ifo Institute, the renewed increase in the minimum wage should “further drive up inflation, which is already high.” According to the survey, 29 percent of companies that are not directly affected by the minimum wage increase still expect their purchase prices to increase. However, they are not planning any changes in employment.
Eastern Germany particularly affected
The extent to which companies are affected by the increase in the minimum wage varies greatly by region. In western Germany, 29.1 percent of companies pay less than twelve euros an hour, in eastern Germany it is almost 40 percent.
There are also strong industry differences: Most low-income people are in the catering and food and beverages industry. This is where prices are most likely to increase. In total, more than six million employees will benefit from the increase. The minimum wage is currently €10.45 per hour.