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COST OF LIVING

A quarter of workers in Germany ‘earn less than €14 an hour’

Almost every fourth employed person in Germany earns less than €14 per hour. Could low wages be putting a squeeze on pension funds - and should salaries rise to keep up with inflation?

Published: 26 July 2023 16:29 CEST
Updated: 27 July 2023 09:13 CEST
A wallet filled with euro coins.
A wallet filled with euro coins. Photo: picture alliance / dpa | Daniel Karmann

A total of 23.35 percent of people employees Germany, or 9.3 out of 39.8 million, earn less than €14 an hour, according to new figures published at the request of the Die Linke (Left Party) faction in the Bundestag. 

Around 14.8 percent of employees in Germany are particularly low earners, as they only bring in the minimum wage of €12 an hour.

In light of the figures, Linke chairman Dietmar Bartsch called for an increase in Germany’s minimum wage.

“If every fourth person in Germany earns less than €14 per hour, the wage level in Germany is clearly too low,” he said. “A €14 minimum wage would now be necessary – also to compensate for inflation.”

Though the steep rises in the cost of living have slowed slightly in recent months, inflation is currently at around 6.1 percent and peaked at over 10 percent last year. 

A new minimum wage for Germany?

Fulfilling an electoral pledge of the Social Democrats (SPD), Germany’s coalition government increased the minimum wage to €12 last year. 

At the end of June, the Minimum Wage Commission proposed increasing the minimum wage to €12.41 per hour as of January 1st, 2024 and to €12.82 at the beginning of 2025. 

But in the face of inflation and rising costs of living, Bartsch called such an increase a “dramatic loss in real wages”.

In June, Stefan Körzell, a board member of the German Trade Union Confederation (DGB) and a member of the Minimum Wage Commission, criticised the proposed minimum wage increase, stating that a “mere cent-range adjustment” was unacceptable.

Körzell argued that the nearly six million minimum wage workers would suffer a significant real wage loss and emphasised that the minimum wage should have been raised to at least €13.50 to provide adequate protection and to offset inflation.

READ ALSO: Why Germany’s proposed minimum wage increase has been called a scandal 

A pension problem?

Bartsch added that low wages will mean than many people don’t have enough to live on when they reach retirement age, which currently varies based on age. For those born after 1967, it’s set to go up to 67 years.  

“The low wage level will also backfire on us when it comes to pensions,” he said.

There is a risk of “millions of cases of old-age poverty”, said Bartsch, pointing out that Germany’s pension fund is already losing many billions due to low wages.

There are currently around 21 million pensioners in Germany, making up a quarter of the population – and according to the Federal Office of Statistics, the largest cohort of workers is currently aged 55-60. By 2035, most of these working adults will be 70 or over.

While working-age people currently outnumber pensioners by a ratio of three to one, this is expected to narrow to three to two by 2060. 

Soon more people than ever will be withdrawing from the pension pot, and it’s unclear whether the contributions of working-age people will be able to keep up.

READ ALSO: How long do you have to work to receive a German pension?

Vocabulary

Minimum wage – (der) Mindestlohn 

Low wages – (die) geringe Löhne

Old-age poverty – (die) Altersarmut

Inflation – (die) Inflation/(die) Teuerung

Pension fund – (die) Rentenkasse

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

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For members

HEALTH

How much more residents in Germany might have to pay for health insurance

People in Germany saw an increase in health insurance costs at the start of the year. It's now expected that they will be hiked up again next year.

Published: 20 June 2024 13:49 CEST
How much more residents in Germany might have to pay for health insurance

Health insurance organisations are warning that costs will be hiked up again soon due to concerns over funding. 

Doris Pfeiffer, CEO of the National Association of Statutory Health Insurance Funds (GKV-Spitzenverband), told Germany’s Tagesschau that insurance funds are expecting a billion-euro deficit.

She said it was a tough year “because we don’t have particularly good prospects”.

For people paying statutory health insurance, things could become more expensive next year. Around 90 percent of people in Germany are covered by statutory health insurance.

The contribution rate is fixed by law and stands at 14.6 percent. The additional contribution that the health insurance funds set for their members was raised to 1.7 at the start of this year. 

The latest increase gave statutory insurance funds the ability to charge up to 1.7 percent on top of the standard 14.6 precent contrinution, though not all insurance funds chose to do so.

The costs are split between the employer and employee, so workers in Germany would pay half of any increase. 

READ ALSO: Reader question: How can I change my German health insurance provider?

How much could additional costs rise next year?

Due to the funding issues, health insurers expect an increase of up to 0.6 percentage points to the additional contribution threshold. What this would mean for the insured depends on a few variables such as their income and their insurer.

Someone earning €2,000 gross per month, for example, would have to pay €6 extra per month if their insurer opted to increase additional contributions by this amount. Meanwhile, a gross income of €4,000 would mean €12 extra per month. The employer’s share would be added to this. 

health insurance cards

Many health insurance cards in Germany double as a European Health Insurance Card (EHIC), meaning that they can be used across Europe. Photo: picture alliance/dpa | Jens Kalaene

“That may not sound like much at first glance,” said Pfeiffer. “But there are people who earn very little for whom this is a lot – supermarket cashiers, lorry drivers.”

It comes following a rise in fees at the start of the year. From the start of 2024, additional contributions for statutory health insurance rose by around 0.1 percent in Germany.

Why are costs increasing?

The German healthcare system is one of the most expensive in the world.

As German society ages more, costs continue to rise – and the Covid pandemic didn’t help matters. The National Association of Statutory Health Insurance Funds estimates that this year alone it will cost around €314 billion to provide care for everyone who is insured. 

The money is mainly spent on hospitalisation costs and medical treatment.

READ ALSO: Why long-term care insurance fees are likely to rise in Germany next year

Health Minister Karl Lauterbach (SPD) has so far not presented any concrete proposals on how he intends to relieve the burden on health insurance funds in future.

Instead, the system is likely to face further expenditure. Lauterbach’s hospital reform is expected to drive up costs, while proposals to pay GPs more in order to combat the shortage of doctors would also push up expenses. 

READ ALSO: German ministers greenlight plan to improve healthcare at GPs

Pfeiffer called for a plan to tackle the rising costs.

“We now finally need an approach that puts this healthcare system on a new footing,” she said.

In the coalition government’s initial agreement back in 2021, the parties vowed to support health insurance funds with more tax revenue.

But as difficult budget negotiations take place, it doesn’t look like this will happen. 

This is causing friction among the coalition made up of the Social Democrats (SPD), Greens and Free Democrats (FDP). 

Green budget politician Paula Piechotta, for instance, is unhappy about this.

The opposition CDU/CSU also taken the opportunity to swipe at the government.

“This is not acceptable,” said CDU health politician Sepp Müller. “The tense situation in the social security system cannot continue to be ignored.”

However, it should be noted that there was no plan to help provide more money to statutory health insurance under the previous Health Ministry headed by the CDU’s Jens Spahn. 

When the SPD’s Lauterbach took over in 2021, there was already a funding gap of billions of euros. 

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