Germany’s Minimum Wage Hike In Accordance With The European Minimum Wage Directive

With its latest recommendation in June 2025, the German Minimum Wage Commission has, for the first time, recognised 60 percent of the median wage as a formal reference point for setting the statutory minimum. The move marks a decisive policy shift and brings Germany into line with the European Minimum Wage Directive, which seeks to ensure adequate pay for low-wage workers across the European Union.

Under the German Minimum Wage Act, the Commission — made up of three employer representatives, three trade union delegates, and an independent chair — is required to recommend adjustments every two years. On 27 June 2025, it announced its latest proposal: the minimum wage should rise to €13.90 per hour on 1 January 2026, and then to €14.60 on 1 January 2027.

This two-step increase represents a cumulative rise of nearly 14 percent from the current level of €12.82, the largest hike recommended by the Commission since the minimum wage’s introduction in 2015. With inflation now back to around two percent, the decision promises significant gains in real purchasing power for more than five million low-wage workers.

Statutory Minimum Wage in Germany, 2015-2027 in Euro per hour

A Record of Low Adjustments

From its inception, the Commission’s decisions have been shaped by compromise: employers pushing for the smallest possible increases, and trade unions seeking larger ones. In its early years, both sides agreed to base adjustments on the development of collectively agreed wages — a criterion written into the Minimum Wage Act itself.

The outcome was that the Commission never confronted a core structural flaw in the system: the low starting point of the German minimum wage. Introduced in 2015, it stood at only about 48 percent of the median wage, according to OECD data. By 2021, this share — known as the Kaitz Index — had fallen to 45 percent, and the minimum wage had barely preserved its purchasing power against inflation.

This failure to raise the wage floor to a more adequate level exposed a key weakness in the legislation: the absence of clear, binding criteria for what constitutes an “adequate” minimum wage.

The Impact of the European Minimum Wage Directive

A turning point came with the European Minimum Wage Directive, which recommends that member states use a benchmark of 60 percent of the median wage when setting their pay floors.

When the Commission proved unable to agree on a structural increase, the German government took the unusual step of introducing an extraordinary increase in October 2022, raising the minimum wage by 15 percent to €12 per hour. In presenting the bill to Parliament, ministers explicitly cited the impending adoption of the EU directive as a primary justification.

However, soaring inflation meant that this extraordinary increase lost much of its real value before it even took effect. Subsequent rises in 2024 and 2025 were relatively small — and, for the first time, were adopted without consensus. Instead, the decision was pushed through by the votes of the employer representatives and the independent chair, against the opposition of the trade union members.

This backdrop provided renewed political momentum for a structural shift. Calls for a €15 minimum wage — equivalent to roughly 60 percent of Germany’s median wage according to OECD figures — grew louder. In the 2025 election campaign, three centre-left parties — the Social Democrats, the Greens, and the Left Party — all pledged to deliver that level. As opinion polls have shown, the demand for a minimum wage of €15 also enjoys broad public support. In response to growing political pressure the Commission revised its rules of procedure in January 2025, adding the 60 percent median wage benchmark to its decision-making criteria. This addition would now sit alongside the traditional practice of tracking collectively bargained wage growth.

A New Orientation for the Minimum Wage

As the Commission prepared its June 2025 recommendation, political expectations were running high. Even conservative Chancellor Friedrich Merz had described a €15 minimum wage as “desirable.”

Viewed against this backdrop, the final decision may seem underwhelming at first glance. The initial increase to €13.90 for 2026 largely follows the trajectory of collectively agreed wages. The second step, to €14.60 in January 2027, is designed to align with 60 percent of the median wage — at least when measured against preliminary April 2025 figures compiled for the Commission by the German Federal Statistical Office. These figures are slightly lower than OECD projections.

The adoption of the EU benchmark represents a major policy breakthrough. But the timing of its implementation carries a flaw: there is a 20-month delay between the April 2025 median wage calculation and the January 2027 adjustment. By then, nominal wages will have risen, and the new minimum wage will once again fall short of the 60 percent benchmark. One way to avoid this would be to incorporate wage forecasts into the Commission’s decisions — a step it has so far explicitly declined to take.

Nonetheless, the significance of the change is undeniable. By embedding the 60 percent median wage reference into its decision-making, the Commission has aligned German policy with one of the EU’s most important social-policy instruments. The decision also sends a political signal to the European Court of Justice, underscoring the directive’s role as a key achievement in European social protection.