Critical perspective taken by IHK Saxony on the proposed minimum wage increase - IHK Saxony advocates against increasing the minimum wage.
The Saxon Chamber of Commerce (IHK) views the proposed hike in the minimum wage to 15 euros by 2026 with trepidation, especially considering the economic challenges faced by many businesses in the region. Max Jankowsky, President of the IHK Chemnitz and the spokesperson for the Saxon IHK Association, highlights the unsuitability of the current economic conditions to absorb such a surge without significant drawbacks.
Currently, the minimum wage stands at 12.82 euros per hour. By the end of June, the Minimum Wage Commission, composed of employer associations and trade unions, is set to offer recommendations for the next adjustments. According to the coalition agreement between the Union and the SPD, a minimum wage of 15 euros is "achievable."
East German Economy's Compelling Crisis
The IHK warns that the East German economy has been battling a severe cyclical and structural crisis for years. High energy costs and restrained consumption are wreaking havoc on local businesses. Jankowsky points out that a 17% increase in the minimum wage would represent a near insufferable added strain on Eastern German businesses, many of which are already stretched thin.
Mind the gap: On a broader scale, the German minimum wage is already high compared to Europe, especially when considering purchasing power-adjusted income and productivity differences.
Considering the Broader Context: Minimum Wage, IHK, and Economic Uncertainties
In the eurozone, including Germany, the economy has recently shown modest growth, with a 0.3% increase in the first quarter of 2025 and unemployment at a 23-year low of 6.2% in April 2025 [1]. Despite the promising outlook, external factors such as trade conflicts, global uncertainty, and a strengthening euro pose risks to exports and investments [1][3].
In 2026 and beyond, economic activity is projected to be propelled by government spending on infrastructure and defense, primarily in Germany, bolstering domestic demand [1]. Wage growth is expected to remain steady, with rising real wages and employment fueling the growth of private consumption [3].
Implications for Businesses in Eastern Germany
If the minimum wage rises to 15 euros, labor costs would soar significantly for Eastern German businesses, thereby compressing margins unless they can pass the costs onto customers or boost productivity. The higher labor costs could lead some businesses to cut back on hiring or reduce working hours, potentially hurting employment levels.
Competitiveness concerns are also looming, as the increased labor costs could make the region's businesses less attractive, possibly resulting in closures or relocations. However, higher wages might stimulate local consumption, partially offsetting some negative impacts on businesses [3].
The IHK's Perspective: Balancing Act Needed
While the IHK has not explicitly commented on the €15 minimum wage, the mention of an "ongoing crisis" signifies heightened sensitivity to cost increases. It's likely that the IHK alerts policymakers to the delicate state of struggling businesses, particularly small- and medium-sized enterprises, which form the backbone of the Eastern German economy.
The IHK may advocate for a measured and cautious approach to wage increases, coupled with supportive measures such as subsidies or tax relief to help mitigate any negative effects on businesses.
In conclusion, raising the minimum wage to €15 in Eastern Germany would come with risks, including straining businesses, hitting employment levels, and potentially causing further competition issues. However, moderate wage growth could ultimately help low-wage workers, stimulating local consumption and partially offsetting negative impacts. To strike the right balance and protect both employment and economic stability, careful management will be crucial.
- The Saxon Chamber of Commerce (IHK) may, in light of the current economic challenges in East Germany, advocate for employment policy measures that take into account the potential adverse effects of excessive wage growth, such as a significant increase in the minimum wage, on businesses.
- In their cautious approach toward the proposed rise in the minimum wage, East German businesses, primarily small- and medium-sized enterprises, may seek finance solutions to manage increased labor costs, including subsidies or tax relief, to maintain competitiveness and protect employment levels in their communities.
