Germany's new government plans to give millions of people a 25% pay rise by hiking the minimum wage

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Germany's new government plans to give millions of people a 25% pay rise by hiking the minimum wage
Olaf Scholz, chancellor candidate for the SPD, is pictured during a statement the day after the federal election and the elections in Mecklenburg-Vorpommern and the state of Berlin on September 27, 2021 in Berlin, Germany.Florian Gaertner/Photothek/Getty Images
  • Germany plans to increase its minimum wage by the equivalent of nearly $3, or a 25% rise.
  • It's part of a deal agreed by a three-party coalition to form a new government.

As many as 10 million workers could receive a pay rise in Germany under plans unveiled by the country's incoming government.

On Wednesday, a three-party coalition agreed a deal to form a new government to replace longstanding chancellor Angela Merkel. As part of the agreement, they want to increase the minimum wage from €9.60 ($10.70) an hour to €12 ($13.46) an hour, per CNN. A rise of 25%.

In the text of the deal, Olaf Scholz, leader of the Social Democratic Party, said that the increase would lead to salary increases for 10 million people, but didn't specify when the changes would be implemented.

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There are around 1.4 million people earning the minimum wage in Germany. A further seven million are counted as low earners, according to national statistics.

Scholz's 10 million figure could reflect the fact that some sectors link the lower range of wage settlements to the minimum wage, said Carsten Brzeski, the global head of macro for ING.

The move is an increase on a raise of €10.45 ($11.72), which is scheduled for July 2022.

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Following weeks of uncertainty since the September general election, Scholz has agreed to form a coalition government with the Greens and the Free Democratic party. Alongside the minimum wage increase, they also proposed legalizing cannabis and to stop burning coal by 2030.

Economists pay close attention to wage increases, which can be one sign of rising inflation.

Pay for American workers increased at its highest rate since 2004 during the third quarter of the year — lower wage earners, in particular, have received above-average gains.

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Prices have also risen, cancelling out the benefits for many.

President Biden agreed to increase minimum pay for federal workers $15 an hour. It will be implemented from January 2022.

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