A recent study by the German Economic Institute (IW) found that the minimum wage has failed to curb income poverty in Germany. After the largest increase-to €12 per hour in 2022-no reduction in poverty risk was observed. In fact, the overall poverty‑risk rate rose to 16.3 % the following year. Only workers who earned below the €12 threshold before the hike saw a 5.5‑percentage‑point drop in poverty risk. Under the prevailing definition, a person is considered at risk of poverty if their income falls below 60 % of the median net household income in Germany.
Proponents of the wage floor cite higher earnings for those who previously earned below the threshold. Critics argue that higher wage costs discourage firms from hiring new employees. Thus the minimum wage’s efficacy as a social‑policy tool is called into question. The IW also notes that impacts on full‑time workers’ pension entitlements could be “very small” because any incremental wage gains would largely be offset by lower basic pension supplements. In other words, costs shift to businesses while the net effect on social benefits remains limited, with benefits potentially falling or taxes rising.
Economists remain wary of future increases. Simulations suggest that a planned 2027 rise to €14.60-representing a 13.9 % jump from last year’s €12.82-might yield only modest benefits. Even a €15 minimum wage would reduce the overall poverty rate by just 0.2 percentage points, according to the IW.