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WORKING IN GERMANY

Inflation wipes out high wage increases in Germany last year

Germany's Federal Employment Agency (BA) recorded a significant rise in wages last year - but not enough to compensate for high inflation.

Published: 25 July 2024 15:20 CEST
Euro notes and coins
Euro notes and coins. Photo: picture alliance/dpa | Monika Skolimowska

The median salary of all full-time employees subject to social security contributions in Germany was €3,796 per month in 2023.

Compared to 2022, wages and salaries have therefore risen by an average of €150 euros – or 4.1 percent.

According to BA, this rise can partly be explained by a spate of strike actions and collective bargaining last year. With the cost of living rising significantly, workers across several industries fought for high pay increases to compensate for inflation. 

However, despite some wins for Germany’s major unions, significant inequalities in earnings still remain, particularly when it comes to gender and location. 

While the median salary for men was just over €3,930 in 2023, women earned around €3,563 – a difference of €367. This was a slight increase compared to 2022, but shows an improvement compared to 2019, when the difference was €443.

READ ALSO: Five things to know about salaries in Germany

In terms of regional differences, the northern port city of Hamburg had the highest-earning residents while just down the coast in Mecklenburg Western-Pomerania, people earned the lowest. 

The highest median salaries were achieved by full-time employees in Hamburg at €4,304, followed by well-heeled Baden-Württemberg at €4,134 and Hesse at €4,087.

On the other end of the spectrum, three former East German states had the lowest-paid employees. In Mecklenburg-Western Pomerania, the median salary was €3,098, in Thuringia it was €3,109 and Saxony-Anhalt it was €3,152.

How much employees earned also depended heavily on their qualifications.

While people without a vocational qualification earned €2,831 on average, employees with a recognised vocational qualifications earned €3,658. Graduates were among the highest earners, taking home a median salary of €5,688 per month.

READ ALSO: The best-paid jobs you can get without a university degree in Germany

Pay also tends to increase as employees get older, BA reported.

Employees under 25 earned €2,897 on average, while 25 to 54-year-olds earned €3,860. Median salaries for employees over the age of 55, meanwhile, stood at €3,954 per month.

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For members

RETIREMENT

What is Germany’s planned ‘cash bonus’ for later retirement?

Germany is trying to deal with a severe worker shortage. Now a new plan is being drawn up to lure people approaching retirement to work longer.

Published: 29 August 2024 16:32 CEST
What is Germany's planned 'cash bonus' for later retirement?

Under the plans put together by the government, people who work at least one year longer than the standard retirement age will receive a “pension deferral bonus”.

The idea is that anyone who postpones the start of their pension and is employed for at least 12 months is to be rewarded with a one-off payment in the amount of the pension payments he or she has missed out on.

The coalition government foresees that this would be paid out in one go when retirement actually begins.

In addition there is a premium because the pension insurance company did not have to pay health insurance contributions on the pension during this time – currently this is 8.15 percent. The factor depends on the current contribution rates and employees can accumulate the premium for a maximum of three years.

This is “a new benefit of its own kind from the statutory pension insurance scheme”, according to a government draft paper.

When is it set to come into force – and why?

Currently this change is in the draft stages but the government wants to introduce the regulation in January 2027, giving time for organisations to prepare. 

The aim is to encourage more people to work and pay into the social security system amid the worker shortage. As the baby-boomer generation retires, workplaces are struggling to fill vacancies.

Coins lie on a pension information sheet from the German pension insurance organisation.

Coins lie on a pension information sheet from the German pension insurance organisation. Photo: picture alliance/dpa | Fernando Gutierrez-Juarez

Labour Minister Hubertus Heil (SPD) announced at the beginning of June that people beyond retirement age should receive financial benefits if they continue to work.

Four measures to provide more incentives for working in retirement are planned in total, and the cabinet is to decide on these in September. However, some of them are not to come into effect until 2027, including the newly planned bonus.

Germany has also been easing immigration laws to help get more skilled workers from outside the EU into the workforce.

The Opportunity Card, which was introduced in June, is one of those policies. 

READ ALSO: How many skilled workers will immigrate to Germany with the opportunity card?

What’s the reaction?

Criticism of Heil’s plans came from both unions and employers.

Anja Piel, head of the German Trade Union Confederation (DGB), told the Süddeutsche Zeitung the decision was a “billion-dollar grab at the social security system”.

Piel also added that the plan was unfair to workers who struggle with health conditions. “Many employees can’t work any longer because working conditions are too strenuous and they simply can’t cope in terms of their health,” she said. 

Steffen Kampeter, Managing Director of the Confederation of German Employers’ Associations (BDA), called for an end to the retirement age of 63. Removing incentives for early retirement would be “much more effective”,” he said.

People of retirement age “do not usually go to work for financial reasons”, he added. What is more important is enjoying their work, their interest in their job and the contact with colleagues.

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