Startling disparity in wages is most pronounced in the United Kingdom, with the average earning standing at approximately €2,750 annually.
In Germany, a significant portion of full-time employees are earning wages that fall below the average mark. According to recent statistics, around 40% of full-time employees earn less than €3,500 per month, equating to approximately 9.2 million people. This figure rises to over 20% when considering those earning less than €2,750 per month, amounting to around 4.6 million individuals.
The eastern federal states of Germany appear to be particularly affected, with around 60% of full-time employees earning less than €3,500 per month. Mecklenburg-Western Pomerania, in particular, has almost every third person earning less than €2,750 per month. On the other hand, Baden-Württemberg has the lowest proportion of people in the lower wage group, with 33.6% of full-time employees earning less than €3,500 per month.
The consequences of low wages become even more apparent when considering retirement. Due to the pension system being based on years worked and contributions made, the expected pension level for low-wage earners is often quite low. There is no fixed minimum pension, and the amount depends strongly on the individual's contributions and earnings history.
To prevent poverty among pensioners, Germany provides a basic income support, acting as a minimum subsistence level. This includes approximately €563 per month for single pensioners and about €1,000 per month for couples (though the exact figure for couples is not fully detailed). However, the poverty risk threshold for eligibility for this basic income support is if the pensioner's monthly income falls below around €1,062 per month. This figure roughly represents the threshold below which individuals might be considered at risk of poverty and may qualify for additional social welfare support.
This means that many low-wage earners, upon retirement, could end up with pensions below the poverty risk threshold unless they receive basic income support funded by taxes. The statutory pension only accounts for 53% of the gross incomes of those aged 65 and over in 2023, further highlighting the issue.
In an effort to address this, the government has decided that the minimum wage in Germany will rise in two stages to €14.60 per hour by January 1, 2027, from the current €12.82 to €13.90 at the beginning of next year. However, criticism has been levelled at the current government for not setting a minimum wage of €15 as the lowest wage limit, with some arguing that this harms the overall wage level.
The high cost of living, particularly in terms of rental costs, food, and energy, also poses a significant challenge for millions of people in Germany to cover the necessary costs of daily life. It is a concern that people in retirement are disproportionately affected by poverty, with 19% at risk.
In summary, low wages and the resulting low pensions are a growing concern for millions of people in Germany. The social security system provides minimum income assistance to prevent outright poverty in old age, but more needs to be done to address the root causes of low wages and ensure a decent standard of living for all.
- Many people in the wealth-management business predict that the raise in the minimum wage in Germany will have an impact on personal-finance for a significant number of individuals.
- The education-and-self-development sector has seen an increase in courses and workshops focusing on career-development strategies to help individuals earn more and avoid falling into low-wage groups.
- Politics and public discourse in Germany have been heavily influenced by the issue of low wages, with many politicians advocating for higher minimum wages and better wage equality.
- General-news outlets have covered the implications of low wages extensively, especially in relation to the high cost of living and the struggle of low-wage earners to make ends meet.
- Crime-and-justice experts have suggested that poverty, exacerbated by low wages and inadequate pensions, may contribute to higher crime rates and social instability in some areas of Germany.
