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Minimum Wage Increase to 15 Euros: The Taxi Industry Faces a Cost Shock
Millions of workers with very low incomes could earn better starting next year. CDU/CSU and SPD mention in their exploratory paper a possible minimum wage of 15 euros as of 2026. The downside: consumers may have to prepare for the possibility that a haircut or a restaurant visit could become more expensive as a result. However, nothing has been definitively decided yet.
Why should the minimum wage be increased?
During the election campaign, SPD Chancellor Olaf Scholz advocated for raising the statutory minimum wage from the current 12.82 euros per hour to 15 euros. The Greens, Left, and BSW had this target in their election programs, and the unions are also in favor. Their argument: the recent increases in this statutory wage floor have been too small compared to the sometimes very high inflation.
Furthermore, Germany is failing to meet the requirements of an EU directive. According to this directive, the minimum wage should not be less than 60 percent of a country's so-called median wage - a statistical calculation also referred to as the "middle" wage. The Economic and Social Research Institute of the union-affiliated Hans Böckler Foundation calculates that according to these EU guidelines, the minimum wage should already be 15.12 euros.
How many people would benefit from a 15-euro minimum wage?
In around 9.5 million jobs, the hourly wage in April 2024 was below 15 euros - these are the latest figures from the Federal Statistical Office in response to a query from the Left Party. Thus, about one in four jobs nationwide is affected. Jobs in the hospitality industry were compensated with less than 15 euros per hour in almost three-quarters of cases. The German Trade Union Confederation assumes a total of six million people with minimum wages.
How is the minimum wage determined?
The so-called Minimum Wage Commission of the Federal Government is responsible. In addition to the chairwoman, Christiane Schoenefeld, and two scientists, three members each from the employer and the employee sides are represented. The goal is for the collective bargaining partners to reach an agreement, not for the government to decide. Most recently, however, the employee side was outvoted.
The Union and SPD are relying on the commission to reach a consensus again for the years 2026 and 2027. A recommendation is due by June 30. The exploratory paper states:
«For the further development of the minimum wage, the Minimum Wage Commission will, within an overall consideration, orient itself both to the collective bargaining trend and to 60 percent of the gross median wage of full-time employees. In this way, a minimum wage of 15 euros in 2026 is achievable.»
What does a minimum wage of 15 euros mean for employees?
The DGB calculates that single full-time minimum wage employees would have around 2,700 euros more net per year with an increase to 15 euros than now. The result would be: People could spend more and thus boost the economy in Germany. And:
"With around six million minimum wage employees, this could mean well over six billion euros annually through direct additional income in income tax," says DGB board member Stefan Körzell. "Social security systems would also benefit from the overall higher wages."
What do the employers say?
The Confederation of German Employers' Associations resists. The commission also considers the impact on prices and employment in an overall assessment.
"The employers will take care to prevent a wage-price spiral in the minimum wage commission," explains the association. Political directives are an unacceptable interference in the work of the commission.
Rising wages, higher fares: What the new minimum wage means for taxi companies
In a letter to the CDU/CSU parliamentary group, the Taxi and Rental Car Association vehemently argues that the Union should absolutely prevent the politically motivated increase in the minimum wage during negotiations with the SPD. The letter states:
"A nationwide minimum wage of 15 euros would accelerate the death of the taxi industry like a death turbo."
What would be the consequences for customers?
Various business associations warn of price increases, including the bakery and hairdressing trades.
"The increase in the general minimum wage is causing personnel costs to rise rapidly in many companies, making price adjustments necessary," says Friedemann Berg, managing director of the Central Association of German Bakers.
Since the bakery trade is in strong competition with goods from the baking industry, this could possibly lead to a change in customer behavior and ultimately to a decline in sales.
"In short: immense cost increases threaten businesses and, in connection, jobs."
The German Hairdressing Association explains that in order to compensate for the additional costs, salons would be forced to significantly increase their prices. This could lead many customers to forego visits to the hairdresser or turn to undeclared work. The president of the German Farmers' Association, Joachim Rukwied, even warned that raising the minimum wage to 15 euros could mean the end for fruit, vegetable, and wine growing in Germany.
What do economic institutes say?
According to Holger Schäfer from the employer-affiliated Institute of the German Economy (IW), especially consumer-related services such as restaurants, hairdressers, or retail could see price increases.
"If customers are not willing or able to pay the higher prices, the demand for the respective service will decrease. This could in turn affect jobs and may lead to customers having to do without the consumption or service."
Labor market researcher Johannes Seebauer from the German Institute for Economic Research (DIW) says:
"For affected businesses, it is to be expected that company profits will decline as a result of the higher wage costs due to the minimum wage increase. To counter this, price increases are a possible adjustment reaction."
Whether this is possible depends on how sensitive consumers are to price changes.
Content automatically translated.
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