Since the introduction of citizens’ money, there has been the assertion that social assistance is more worthwhile than working. Instead of cutting aid, a significant increase in the minimum wage would make full-time jobs more worthwhile again, at least the SPD is convinced.
The standard rate for single recipients of citizens’ benefit is 563 euros, plus subsidies for rent, heating costs, broadcasting fees and many other costs. Even a single person can easily get almost 1,300 euros in aid from the state per month, and families with two children can easily get more than 3,000 euros. Since citizens’ money was introduced in 2023, but at the latest since the hefty 12 percent increase at the beginning of this year, many citizens have found this to be unfair. This position is also represented by employer associations such as the German Chamber of Commerce and Industry (DIHK), as well as the CDU as the largest opposition party, which would like to quickly abolish citizens’ money.
In fact, economic institutes have also proven that in certain situations it can be cheaper to collect citizen’s money than to go to work. We ourselves had calculated this in the event that a parent with a minimum wage job has to support a family with two children. The Ifo Institute, for example, had calculated scenarios in which certain state benefits would be lost as a result of taking up work, meaning that the worker would end up with less money than before, when they were still collecting citizen’s benefit and unemployed.
In order to create a greater gap between citizen’s benefit and work again, cutting social benefits would only be one of two options. Since the amount of the citizen’s benefit is currently based on the calculated subsistence minimum, people who want to reduce the citizen’s benefit are basically demanding nothing other than that current recipients of the benefit should live below this minimum in order to increase the suffering on them so much that they would accept any job. Since other benefits also depend on the calculated minimum subsistence level, such as the basic allowance for income tax and basic security in old age, a reduction in citizen’s benefit would also be equivalent to an income tax increase and a pension cut.
Instead, social associations, trade unions and parties like the Left have been calling for the subsistence level to be raised further for years. Federal Chancellor Olaf Scholz (SPD) is now following suit. In an interview with Stern he said he would be in favor of raising the minimum wage from 12 euros today to 14 and then 15 euros. He doesn’t give an exact timetable for this, but since the minimum wage is usually adjusted annually, the 15 euros per hour would be reached in 2026.
15 euros is not just a round number, but has a system. A full-time position with an hourly wage of 15 euros would pay a gross salary of almost 2,600 euros per month. This in turn is currently exactly 60 percent of the average wage for full-time workers, which, according to the Federal Statistical Office, was 4,323 euros gross last year. 60 percent is the limit above which a worker is considered to be at risk of poverty. A minimum wage of 15 euros would mean that no one with a full-time job would be at risk of poverty – a situation that should actually be self-evident.
This would then draw a clear distinction between the subsistence level of citizen’s money and the barely non-poverty threat of the minimum wage. We have calculated this for four scenarios as examples. With a minimum wage of 12 euros, a single person would have 1,510 euros available at the end of the month, with which they have to pay rent, heating, food and all other things in life. A citizen’s benefit recipient would currently receive 1,281 euros. Of this, only the standard rate of 563 euros is paid out directly to him; the remaining 718 euros consist of payments for rent, heating and broadcasting fees. A single person with work would already be 229 euros better off, but with an hourly wage of 15 euros this gap would more than double – to 524 euros per month.
Things look even better for single parents. They already receive more help through citizen’s benefit and end up with around 2,100 euros per month for one child, but with a minimum wage of 12 euros, the income from work only exceeds this amount by a meager 70 euros on average, despite child benefit and maintenance advances – in many cases probably not a lot Incentive to work 40 hours a week and raise a child at the same time. However, if the minimum wage were increased to 15 euros, single parents would have an increase of 363 euros through work, more than five times as much as before.
The situation for couples is already less precarious today. With two minimum wage incomes, a childless couple already receives around 3,000 euros in net salary, while they would only receive 1,940 euros through citizen’s benefit. The difference is 1077 euros. With an increase in the minimum wage to 15 euros, it would be 1,665 euros. Families with two children where both parents work would see their surplus through work improve from 561 to 1,184 euros.
A change would also have an impact on the extreme case described above, in which a minimum wage recipient has to support a family of four – but not on the incentive to work. If the advantage of the citizen’s benefit here is 12 euros minimum wage at 1222 euros per month, it is reduced to 859 euros by increasing it to 15 euros. That’s still a lot of money.
The minimum wage is usually set by the Minimum Wage Commission. The federal government appoints this nine-member, voluntary body every five years. Three representatives for the employee side, who are currently represented by the trade unions IG Bau, ver.di and DGB, are entitled to vote, three representatives for the employer side, currently from the Food and Beverage Employers’ Association, the Federal Association of German Employers’ Associations and the Central Association of German Crafts, as well the chairwoman Christiane Schönefeld, who formerly worked at the Federal Employment Agency. It adjusts the minimum wage every two years.
However, the federal government can intervene in this process by law. This happened for the first time in 2022, when the traffic light coalition unexpectedly increased the minimum wage from 10.45 to 12 euros. That was an election promise of the SPD at the time. Such an intervention would now also be possible to further increase the minimum wage to 15 euros. However, as with all laws, a majority vote of the Bundestag is required. While the Greens would vote for an increase, the FDP and CDU are against it. In order for the minimum wage to actually rise to 15 euros, the Chancellor would have to convince his junior partner.
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