WHERE AUSTRIAN ECONOMICS MEETS REAL WORLD ACTION

Make work dearer by law and less of it gets bought. Germany's government says its studies see no harm. The harm was never going to be where studies look.

You run a bakery in a small town in Saxony. Four staff, early starts, thin margins.

Last week a 19-year-old came in asking for work. Keen, polite, never worked a till. You could use help on Saturdays, and she could use a start. In a few months she'd be worth her pay. On her first day she isn't, not at the rate the law sets.

So you said you'd think about it. You haven't called her back. You'll do Saturdays yourself, again.

No one will ever record that conversation. She won't be counted as a job lost, because the job never existed. That is what a minimum wage costs, and it's the cost nobody in Berlin has to see.

Germany's statutory minimum wage rose from €12.82 to €13.90 an hour on 1 January 2026. On 1 January 2027 it rises again, to €14.60. Both steps were set in one regulation, dated 5 November 2025 and signed by Chancellor Friedrich Merz and Labour Minister Bärbel Bas. Under the Minimum Wage Act every employee is entitled to it, with a few exceptions written into the Act.

The number comes from the Minimum Wage Commission, which has an employer side, an employee side and a chair. By law it decides every two years, in an "overall assessment" that follows collective-wage growth. In June 2025 it agreed unanimously, on the chair's proposal, to raises of 8.42% for 2026 and 5.04% for 2027. The government could adopt that figure unchanged or not at all. Doing nothing would have left €12.82, which it said would not be compatible with protecting employees, given rising prices.

Germany's wage floor, 2026 and 2027

Two steps take the floor up about 14% in two years. The mini-job limit moves with it, and the government's estimate of what employers pay on top rises with each step.

The case for the rise, as the commission and government make it:

—       It tracks the middle of the pay scale. The commission cites 60% of the gross median wage, which was €24.18 an hour in April 2025. €14.60 is about 60% of that.

—       Pay has risen fastest at the bottom. Wages in the minimum-wage segment rose 30% between 2022 and 2024, and the number of low-paid jobs fell by about 1.3 million in a year.

—       The jobs haven't gone. Most studies the commission cites find "no or no significant effect on employment".

—       The cost is manageable. The government estimates extra wage costs to employers of about €2.18 billion in 2026 and €3.44 billion in 2027, and expects prices of some goods and services to "rise moderately".

Put at its strongest: the floor stops the worst-placed workers being paid less than it costs to live, raises pay fastest where pay is lowest, and, on the government's evidence, has done so without visible job losses.

Take every word of that as true. What follows is unaffected.

A wage is a price

A wage is what an employer pays for an hour of someone's work. Like any price, it decides whether a deal happens. If the hour is worth more to the employer than it costs, she hires. If it isn't, she doesn't. A law can forbid an employer to pay less than a set amount. It can't make anyone's work worth that amount to the employer. All it can do is make it illegal to hire the people whose work isn't.

A wage floor above the market wage (original, drawn for this issue; illustration, not to scale)

That chart is the whole argument. Where the jobs employers will offer meet the people wanting work, there is a wage at which everyone who wants work at that pay can find it. Set a legal floor above it and two things happen at once. More people want work, because it pays more. Fewer jobs are offered, because each costs more. The gap between them is work people want and can't get.

The law doesn't create a single job. It decides that every job worth less than €14.60 an hour to an employer may not exist.

The burden of proof is on the other side

This isn't a forecast. It's logic. When something costs more, people buy less of it, unless something else changes. Nobody argues that a tax on cigarettes won't cut smoking, or that dearer fuel won't cut driving. Work is no exception because the buyer is an employer.

So we don't need to prove that a €14.60 floor costs work. Those who say it costs none need to show what else changed to stop it.

There are many ways for the cost to be paid without a headline job loss. An employer can cut hours rather than heads, train less, ask more of each worker, raise prices, open later, put in a self-service till, or leave the next vacancy unfilled. Each is a real cost. None shows up as a job lost.

What a study can't see

The commission leans on studies finding "no or no significant effect on employment". Studies count jobs that exist. They compare people in work before and after. They can't count the Saturday job never advertised, the second shop never opened, the apprentice the bakery decided it couldn't carry. These are the unseen costs: real, but with no one to report them.

"No significant effect" in the data is not the same as no effect in the world. And a study is a claim like any other. Its methods and choices are open to challenge, and studies cited by the body that sets the wage, to support the wage it set, deserve the scrutiny we'd give any interested party.

Counts can mislead in another way. The commission reports that low-paid jobs fell by about 1.3 million in a year. A low-paid job leaves that count when its pay rises past the line. It also leaves when the job ends. The count alone can't tell you which.

Their own evidence makes the point

Read on in the commission's report and the logic shows through. On mini-jobs, Germany's small jobs paid up to a monthly limit, it says this:

"For marginal employment, most studies find a decline after the introduction of the minimum wage and the subsequent increases. For the increase to €12 that no longer applies."

It puts the change down to the mini-job limit, which now moves up with the minimum wage. The limit is set at ten hours a week at the minimum wage. At €14.60 it becomes €633 a month, and the hours stay where they were: about 43 a month.

Note what that concedes. Where the studies looked at the smallest, most price-sensitive jobs, most found fewer of them after each rise. The finding stopped after the law tied the mini-job limit to the minimum wage. Moving a line on a form changes what gets counted. It doesn't change what an hour costs.

Then there is the Act itself. The floor doesn't apply to under-18s without completed vocational training, to apprentices, or to the long-term unemployed in their first six months back in work. If a floor cost no jobs, why exempt anyone? The exemptions cover the people whose work is, for now, worth least to an employer. Our reading: the exemptions only make sense if the floor prices those workers out, and the Act is written as if it does.

A number assessed, not discovered

In a market, a wage is found, not decided: offers made and refused by people who know their own shop, their own town and their own staff. A commission meeting every two years can't know what an hour of work is worth to a bakery in Saxony and a bank in Frankfurt at once. Ludwig von Mises showed that without market prices, planners can't calculate. One national wage set by committee is a small case of the same problem.

Look at what the number rests on. The collective-wage index alone pointed to €14.02. The commission also looked to 60% of the median wage. Why 60%, and not 50% or 70%? Nothing in economics says 60. When the floor began in 2015, at €8.50, it was oriented to a different line altogether: the threshold that protects wages from garnishment. Each anchor is a choice, not a finding.

Even the commission doesn't claim one right answer. In its own words, "individual aspects were discussed and assessed differently". Its 2023 decision was carried by the chair and the employer side, against the employee side.

Why the number only goes one way

If the logic is this plain, why do governments keep raising the floor? Because the incentives point that way. A higher minimum wage is visible and popular, and employers pay for it, not the budget. The jobs it costs are invisible, spread thinly across people who don't know they lost anything. A voter can thank a politician for a pay rise. Nobody writes in about a job they were never offered.

Germany shows it. In 2021 the SPD campaigned for "a minimum wage of 12 euros". In 2022, with the SPD leading the government, Parliament set €12 directly, once, by statute, outside the commission's usual process. That isn't a charge against any person. It's what the incentive rewards. By January 2027 the floor will have risen from €8.50 in 2015 to €14.60, about 72%.

"But employers have too much power"

Some argue that where one or a few employers dominate a town, they can hold pay below what work is worth, so a floor is needed to correct them. It doesn't follow.

If an employer really is paying less than people's work is worth, that gap is a profit waiting to be taken. Any rival who hires those people for a little more still gains. In a free market, a real opportunity draws competitors in, and their bidding lifts pay. The answer to too few employers is more employers, and the way to get more is to make starting a business and hiring easier. A minimum wage does the opposite: it raises the cost of every new employer's first hire. And the firms the commission says are most affected are small firms, firms in the East, service firms and firms without a collective agreement. Those are the many small employers who compete for staff, not one dominant buyer.

This is no small floor

A floor close to what the market already pays binds few people, so it does limited damage. Germany's floor is no longer that. By January 2027 it will be up about 72% on 2015, and it is now aimed at 60% of the median wage. The further a floor climbs into the pay scale, the more jobs sit beneath it.

This is analysis, not legal, tax or employment advice. Check your own position with an adviser.

Repeal the statutory minimum wage, for everyone. Let pay be agreed between employer and worker, like every other price in the economy.

Same rule for every age, sector and firm. No exemptions for teenagers or the long-term unemployed, because no one needs an exemption from a floor that doesn't exist. No commission, no "overall assessment", no 60% target.

That doesn't leave low-paid workers with nothing. It leaves them with the first rung: the job that builds the skills that earn the next raise. The Act's own exemptions admit that's how a start works. The alternative extends that admission to everyone.

Stay free,

Jean-Pierre

The Austrian Actor

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