Germany’s federal government has confirmed a major rise in the statutory minimum wage, aiming to support low-income workers and reduce inequality in the labor market. The minimum hourly rate — currently €12.82 — will be raised in two stages over the next two years.
From 1 January 2026, workers will earn at least €13.90 per hour. A further increase to €14.60 will follow in January 2027. The measure was formally adopted by the cabinet, based on recommendations from the Minimum Wage Commission, which consists of representatives from labor unions and employer associations.
Millions stand to gain
According to estimates by the Federal Statistical Office, up to 6.6 million jobs could benefit from the new wage levels. German Labour Minister Bärbel Bas described the decision as a crucial step toward fairer salaries and social recognition for essential workers across the country.
Bas emphasized that the overall increase is almost 14%, marking the largest collectively negotiated improvement since Germany introduced the minimum wage in 2015 at €8.50.
Political promises adjusted
During coalition talks, the Social Democrats initially hoped to push the minimum wage above €15 already in 2026. Instead, the government chose a phased approach — a compromise that balances stronger purchasing power for workers with economic stability concerns.
Employers voice caution over rising labor costs
While unions welcomed the change, parts of the business sector warn that the adjustment could lead to job cuts, especially in industries with high numbers of low-wage positions.
To mitigate risks, the increase will be gradual, allowing companies to spread additional labor costs across two financial years — estimated at €2.18 billion in 2026 and €3.44 billion in 2027.
Roughly 10 to 12 percent of German employment relationships currently fall into the minimum wage category, according to the Institute for Employment Research (IAB).
The IAB expects the higher wage to reduce the size of the low-wage sector and help close gaps in income distribution — but it also warns that businesses may need to make structural adjustments, which could result in isolated negative effects.
Balancing fairness and competitiveness
The government argues that better pay will strengthen domestic consumption and help safeguard social cohesion. Nevertheless, analysts stress that Germany must ensure its industry remains competitive while adapting to structural change — from digitalization to shortages of skilled labor.
The coming years will show whether the new wage floor delivers long-term employment security — or if the concerns of employers prove justified.
