German government should increase the minimum wage to €9.19 per hour in 2019, and to €9.35 per hour in 2020, recommended by a government commission, which paves the way to an increase of private consumption in Europe’s biggest economy.

Chancellor Angela Merkel’s government introduced in 2015 a national minimum wage of €8.50 per hour for over 3 million workers. The last increase was last year, also recommended by the commission, to the current €8.84 per hour.

The calculation was based on a complex formula which partially reflects the average wage increases in Germany by 4.8 percent over the last two years. The average increase in 2019 would be by approximately four percent.

The government is expected to accept the recommendation.

The introduction of minimum wage was a key demand by the Social Democratic Party (SPD), a junior coalition partner in Angela Merkel’s government. Senior SPD officials, including Finance Minister Olaf Scholz, called for an increase of up to €12 per hour.
Scholz is planning to increase the number of inspectors by 1,400 to 8,600. They would look into whether the companies were respecting the wages rule or trying to bend the rules.

The minimum wage increase is likely to boost household spending at a time when German exports growth is jeopardised by US President Donald Trump’s protectionist measures.

The International Monetary Fund (IMF) and the Organisation for European Cooperation and Development (OECD) have already called on Germany to raise wages and increase investments in order to increase domestic demand and reduce an enormous current account surplus, Reuters reported.

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