The German Cabinet has delivered on a key election promise and approved a higher minimum wage of €12 ($13.61), as Labour Minister Hubertus Heil rejected the idea that it would reduce the power of collective bargaining by workers.
The current national minimum wage is €9.82, with a hike to €10.45 from July 2022 already legislated.
The increase to €12 was promised by Chancellor Olaf Scholz before his election victory last autumn, and will now take effect from October 1.
The minimum wage level in Germany is recommended by a commission, which includes representatives of both employers and employees. The politicians then legislate on the basis of these recommendations.
The increase to €12 is intended as a one-off adjustment to this system.
Some employers have criticized the move, arguing that the government is interfering in a well-established process, damaging trust and threatening to upset the balance that the commission tries to maintain between minimum and standard wages.
However, unions and politicians have rejected this criticism.
"I want us to have more collective bargaining in Germany," Social Democrat Heil told broadcaster ZDF.
"We will raise the minimum wage to €12 to make it more poverty-proof." This step would also increase purchasing power in Germany, he said.
In future, increases will once again be established by a commission, with the next decision on an increase for January 1, 2024 due by June 30, 2023.
Some 6.2 million workers are expected to benefit from the higher minimum wage.
Germany's minimum wage is already one of the highest in the EU. At the current rate of €9.82, a full time employee would earn €1,621 gross a month, just behind Belgium (€1,658), the Netherlands (€1,725), Ireland (€1,775), and Luxembourg (€2,257).
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