The German government has cleared the path for a phased increase to the national minimum wage, a decision attracting criticism and highlighting divisions within the governing coalition. The Federal Cabinet, in a meeting held in Berlin on Wednesday, formally approved the plan, setting a new hourly rate of €13.90 beginning January 1, 2026, followed by a further increase to €14.60 the following year. Currently, the minimum wage stands at €12.82.
The decision follows a unanimous recommendation from the Minimum Wage Commission, a body comprising representatives from both employer and employee organizations. This recommendation, however, falls significantly short of the previously demanded €15 hourly rate, a figure that had garnered considerable political momentum earlier this year.
The compromise, while presented as a pragmatic step, exposes a discernible reluctance, particularly within the Social Democratic Party (SPD), to fully embrace a more substantial wage increase. Critics argue the current proposal doesn’t adequately address the escalating cost of living pressures faced by low-income workers and that a more ambitious increase would have provided a more significant boost to purchasing power and potentially stimulate economic activity.
Furthermore, the relatively modest increase is expected to fuel debate regarding the power dynamics within the Minimum Wage Commission itself. Suggestions are already circulating regarding the need for reform to ensure a more equitable balance between employer and employee voices, preventing the influence of business representatives from unduly moderating wage demands.
The government’s decision also raises broader questions about the prioritization of social welfare versus economic competitiveness. While proponents argue the gradual increase minimizes potential negative impacts on businesses, dissenting voices contend that a bolder approach is necessary to tackle pre-existing inequalities and ensure a fairer distribution of economic gains. Public discourse will likely intensify as the implementation date approaches, putting pressure on the government to justify its choices and potentially revisit the issue in the future.
