Germany plans to increase wages for nearly two million workers a 25%

As part of government formation, Germany is giving nearly two million workers a 25% pay rise. As per reports, about 2 million workers in Europe’s largest economy will be able to avail this. The decision came after three German political parties agreed to form a new government 2 days back. With left-leaning Social Democrat Olaf Scholes becoming Chancellor Angela Merkel’s successor after lengthy coalition talks in the country.

Meanwhile, Economists and policymakers around the world are closely watching rising wages as a major factor in inflation. In October, the inflation rate stood at 4.5%, the highest in almost three decades, as energy prices soared and the cost of food soared.  In 2015, Germany introduced the national minimum wage of € 8.50 for the first time.

As part of the coalition agreement, the country plans to raise its minimum wage to €12 an hour, from the current rate of €9.60 an hour. The inflation in Germany has increased as compared to last year and it was reported by experts. 

According to an economist at ING, the move could boost the income of nearly 2 million people in Germany who earn minimum wage salaries, or about 5% of workers. 

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The minimum wage was already set to rise to €10.45 ($11.72) in July 2022. According to UBS economist Felix Huefner, this move has to “boost overall wage growth” across the German economy and also warned that it could “lead to broader wage pressures”.
Moreover, Germany’s minimum wage is already among the highest in the European Union.