Germany plans to raise the minimum wage to €9.19 per hour next year and to €9.35 in 2020, the labour minister said, paving the way for a possible boost to private consumption in Europe’s biggest economy.
Chancellor Angela Merkel’s government introduced a national minimum wage of €8.50 for more than 3 million workers in 2015. It was last raised in 2017, to the current €8.84.
In Ireland, the minimum wage for experienced adult workers is €9.55.
The German increase, proposed by a commission, is likely to help lift household spending as US President Donald Trump’s protectionist trade policies pose a threat to Germany’s export growth.
The IMF and the Organisation for Economic Co-operation and Development have both urged Germany to raise wages and invest more to boost domestic demand and reduce its large current account surplus.
Labour Minister Hubertus Heil welcomed the recommendations and said the two-stage rise reflected the robust economy and vibrant labor market, which have led unions and employees to agree generous pay increases this year.
The German government was following the commission’s previous recommendation when it raised the minimum wage in 2017.
The commission based its calculation on a complex formula that partly reflected an average wage rise of 4.8% over the last two years in Germany. The increase in the minimum wage in 2019 would amount to about 4%.
The introduction of the wage floor in 2015 was a key demand of Ms Merkel’s junior coalition partner, the Social Democrats (SPD).
Senior SPD members, including Finance Minister Olaf Scholz, have called for a higher minimum wage of up to €12 per hour. Economists welcomed the recommendations, albeit with reservations.
Alexandra Fedorets of the DIW institute said that for the pay hikes to be effective the government must ensure employers comply with minimum wage rules.
Holger Schmieding of Berenberg Bank said the hikes could inadvertently hinder the integration of refugees into the labour market.