Tue, 25 Jan 2022

BERLIN, Germany: Almost 2 million workers in Germany, Europe's largest economy, are set for a major pay increase, as part of the coalition agreement between three German political parties.

On Wednesday, the parties agreed to form a new government after lengthy negotiations, with left-leaning Social Democrat Olaf Scholz likely succeeding Angela Merkel as chancellor.

The agreement stipulates that Germany might raise its minimum wage from the current rate of $10.77 an hour, already among the highest in the European Union, to $13.46 an hour, which will boost the incomes of nearly 2 million minimum wage earners, or some 5 percent of the workforce, according to ING economist Carsten Brzeski.

However, while the increase will support overall national wage growth, it could also "contribute to broader wage pressures," said UBS economist Felix Huefner, according to CNN.

In an usual step, Germany's hawkish central bank publicly criticized the measure, calling it "worrying," as it will have an effect on the wages of higher earners.

Germany first introduced a national minimum wage in 2015, at $9.54 per hour.

With the decline of trade unions, support for minimum wage increases in Europe has grown.

The European Commission has noted a drop in the number of EU workers covered by collective bargaining agreements between 2000 and 2015, especially in central and eastern Europe.

Earlier this month, a new draft EU law was announced aimed at increasing minimum wages across the union.

In a statement, EU Parliament member Agnes Jongerius, who sponsored the draft law, said, "During the previous crisis, lowering minimum wages and dismantling sectoral collective bargaining was the harsh medicine prescribed to many member states. Now, we are fighting to increase statutory minimum wages and to strengthen collective bargaining in Europe," as quoted by CNN.

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