This week saw the agreement of a coalition to form a new government in Germany. Central to the coming together of the three political parties was the agreement on an inflation busting pay rise for German workers affecting nearly two million workers.
The coalition, which will see left-leaning Social Democrat Olaf Scholz succeed Angela Merkel as chancellor, has agreed to raise the minimum wage from €9.60 to €12 an hour. The coalition have yet to announce when the increase will take place with around five percent of the workforce set to benefit. It is also not know whether the change will come at the same time as the increase already agreed which will see the minimum wage rise to €10.45 in July 2022.
The announcement has not been welcomed by everyone with the country already experiencing its highest inflation rate in nearly 30 years and at a time when the economy is struggling to recover from the pandemic. Unusually the Bundesbank (German Central Bank) has criticised the move which it believes will contribute to wider wage pressures and inflation.
Worldwide inflation is being driven in part by inflation busting pay rises as skills shortages bite. Germany’s inflation in October stood at nearly 4.5%, the highest in nearly three decades, with energy prices and supply chain issues contributing to the higher figures.
Germany has not long had a minimum wage with the first being agreed to in 2015. According to the European Union, the rise in the number of countries implementing a minimum wage is in response to the decline in the number of collective bargain agreements across the continent.
The EU’s role
Despite the increase in the number of countries implementing a minimum wage, the EU has announced it plans to bring in laws to bolster these efforts. EU Parliament member Agnes Jongerius has said that in the past crises have led to lower wages and the dismantling of collective bargaining schemes and that it was important to improve the situation for workers.
The inflation busting pay rise for German workers will raise a minimum wage that is already among the highest in the European Union.