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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?

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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COST OF LIVING

German inflation edges up, as do real wages

German inflation edged up in May, data showed Wednesday, but analysts said it was due to one-off factors and would not deter the European Central Bank from starting to cut interest rates.

German inflation edges up, as do real wages

Consumer prices in Europe’s largest economy rose 2.4 percent from a year ago, according to preliminary data from federal statistics agency Destatis.

The figure, in line with analyst expectations, was up from 2.2 percent in April, and the first increase in six months.

At the same time, however, German real wages – which account for purchasing power – went up in the first quarter of 2024. With a 3.8 percent rise, that marks the highest jump in Germany over a single quarter since 2008.

Closely watched core inflation — which excludes volatile energy and food prices — was unchanged at three percent, despite expectations of a slight increase.

Observers said the uptick in the headline figure was caused mainly by the introduction of a flat-rate public transport ticket, costing just 49 euros ($53), in May 2023, which distorted the year on year comparison.

The rise is not expected to deter the central bank for the 20 countries that use the euro from beginning to cut rates at its meeting on June 6, with analysts predicting a quarter-point reduction.

Elmar Voelker from LBBW bank said the German data suggested inflation across the whole eurozone had ticked up in May.

But he added that this “will not change anything for the ECB’s decision next Thursday — (policymakers) had already anticipated that the inflation trend would be bumpier from now on,” and they will push ahead with starting to cut.

But they will be keenly watching inflation over the summer months to decide when to push ahead with further reductions, he added.

Beginning in mid-2022, the central bank aggressively hiked borrowing costs to tame inflation that soared following Russia’s invasion of Ukraine and amid pandemic-linked supply chain woes.

For the past few months, it has held its key deposit rate steady at a record high of four percent, as it awaits the right moment to start cutting.

In May’s German inflation figures, energy prices continued to fall, dropping 1.1 percent, Destatis said.

Services inflation rose to 3.9 percent, from 3.4 percent in April.

The German government forecasts inflation at 2.4 percent this year, following a 5.9-percent rate in 2023.

READ ALSO: The important money and tax changes in Germany in 2024

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