Why more Germans can't afford life on their wages – DW – 06/27/2025

DW

3 days ago

German politicians are fond of saying, "Work must be worth it." But ever more people who work full-time need state benefits. And the new minimum wage hike is seen as disappointing.
Chancellor Friedrich Merz took to the Bundestag lectern this week to deliver — in his characteristically forthright manner — the government's position on what he called of the next major priorities for his government: His plans to reform the unemployment benefit, or Bürgergeld ("citizen's income").
He rang a familiar tune on the subject of work: Work, he argued, needs to be worth it. He wanted "to ensure that people in Germany as a whole can once again see that their efforts are paying off and that the principle of performance-related pay will once again be applied."
But his remark was somewhat undercut by a statistic that emerged a few days earlier: In 2024, some 826,000 working people were dependent on benefits, or Bürgergeld ("citizen's income") as it is called in Germany.
That represents an increase of around 30,000 since 2023 — the first time that the number of employed people receiving a top-up had increased since 2015.
That, perhaps not coincidentally, was also the year that Germany introduced its first basic minimum wage — at the time, over a million workers were still dependent on state benefits, a number that has steadily decreased since. These extra benefits cost the state nearly €7 billion ($8.1 billion) in 2024 — over a billion more than the €5.7 billion the state paid for such cases in 2022.
The government revealed the figures in response to a parliamentary question from Bundestag member Cem Ince of the socialist Left Party, who told DW: "It is unacceptable that hundreds of thousands of people are dependent on state aid despite being in work. This means we are supporting low wages and perpetuating the exploitation of labor."
Ince believes that these figures show that Germany's minimum wage is simply too low. Though it was raised substantially by the last government — to €12 at the start of 2023 — it has only risen minimally since then, to the current €12,82 per hour.
On Friday, the German minimum wage commission — which consists of representatives of employers' associations and trade unions — announced that the minimum wage would increase in two stages: To €13,90 on January 1, 2026, and then €14,60 a year later, falling short of the €15 the center-left Social Democrats (SPD) had been campaigning on.
Helena Steinhaus, founder of the campaign group Sanktionsfrei ("Sanction-Free"), which supports people living on benefits, says the small rises in recent years have not kept up with increases in rent and cost of living in the past couple of years. The average rent in Germany, for example, rose by 4.7% last year alone, and by as much as 8.5% in Berlin. "I'd say that's our answer as to why more people have to top up their earnings, because the minimum wage — even if you work full time — doesn't cover what it is supposed to cover."
But some economists argue that the minimum wage has little to do with the number of working people who need benefits. "You have to recognize that most of these people don't work full-time — most of them are in training or working part-time," said Holger Schäfer, senior economist for labor market economics at the German Economic Institute in Cologne (IW). "The minimum wage won't be any use there, because the reason that people can't earn a living from their income is not down to the low hourly wage, but the low number of hours."
The figures back this up: According to the latest figures from the Federal Employment Agency, of the 826,000 workers who receive benefits, only around 81,000 were working full-time.
But that is no excuse for paying low wages, according to Cem Ince: "The fact is: the current minimum wage is a poverty wage! Employers cannot talk their way out of this," he said. "The number of people receiving supplementary benefits depends to a large extent on low wages. One of my recent inquiries revealed that people earning the minimum wage for full-time work cannot afford adequate housing in half of Germany's major cities and are dependent on financial support."
In any case, as Steinhaus argued, the reason why many people only work part-time is simple: They have children or other dependents who need care, and many cities in Germany lack childcare infrastructure. The IW calculated last year that 306,000 children in Germany under the age of three don't have a kindergarten place — even though they are legally entitled to one.
A 2021 study by the Institute for Employment Research (IAB) found that the more children working people have, the more likely they are to need benefits. If the state invested more in childcare places, Cem Ince argued, "it would enable many people to escape the trap of part-time work."
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Nevertheless, Schäfer argues that raising the minimum wage is not the answer, and could be counterproductive: "It could make the situation worse if companies restrict their demand for work because of the higher cost," he told DW.
Steinhaus is not convinced: "The employers' associations have made that argument for the last ten years, but in the last ten years that has not been proven true even once," said Steinhaus. "Of course, there are some companies that struggle when the minimum wage is raised, but a lot of companies profit from the fact that they can employ people cheaply."
Schäfer also believes that the recent rise in the number of people requiring a top-up is relatively small and that the overall downward trend since 2015 remains intact. Last year's rise, he said, probably had more to do with general economic conditions on the labor market than anything else.
Merz, meanwhile, is likely to stick to his plans to reform the unemployment benefit system in an attempt to get more people onto the labor market — even if then some of those workers need state help anyway.
"Unfortunately, Merz's arguments about work are the wrong way round," said Steinhaus. "When he says, 'work needs to be worth it,' he means that unemployment benefits should be reduced. But the minimum you need to live on is independent of what poor workers earn. They should earn more, no question. But simply reducing benefits is counterproductive, and it plays the poorest off against each other."While you're here: Every Tuesday, DW editors round up what is happening in German politics and society. You can sign up here for the weekly email newsletter, Berlin Briefing.