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Nominal wages in Germany recorded a remarkable 6.6% year-on-year increase in Q2 2023, the Federal Statistical Office (Destatis) announced today. This marks the highest increase in nominal wages for a reporting quarter since records began in 2008, while consumer prices rose by 6.5% over the same period. As a result, real wages posted a modest 0.1% year-over-year increase, marking the first increase since Q2 2021.
This development was made possible by a combination of factors. A decisive contribution came from the inflation compensation premium, which can amount to up to 3,000 euros and is tax- and duty-free. Employers pay this premium on a voluntary basis. Likewise, the increase in the minimum wage to 12 euros per hour in October 2022 contributed to this positive trend.
The nominal wage increase for marginally employed persons was particularly impressive, at 9.7% compared with the same period last year. This is largely due to the increase in the mini-job earnings threshold from €450 to €520 per month from October 1, 2022, as well as the minimum wage increase. Part-time workers (+7.2%) and apprentices (+8.4%) also recorded above-average wage increases. By contrast, nominal wages of full-time employees rose slightly below average by 6.3%. Within full-time employees, however, the bottom fifth of the wage scale recorded the strongest increases, averaging +11.8%.
An interesting finding from the data is also the wage growth in sectors heavily affected by the Corona crisis. In the hospitality sector, nominal wages increased by an impressive 12.6% compared to Q2 2022, while similarly large increases were seen in the arts, entertainment and recreation (+11.9%) and transportation and warehousing (+10.0%) sectors. These increases can largely be viewed as catch-up effects, as these sectors were hit hard by lockdowns and short-time work during the pandemic.
A closer analysis of the various sectors shows that pre-crisis wage levels - as measured by the nominal wage index in Q2 2019 - have been regained almost everywhere. A few exceptions are motor vehicle manufacturing, other transport equipment manufacturing, and aerospace.
The new earnings indexes beginning with the 2023 reporting year are based on the improved earnings survey, which provides more comprehensive coverage of employment types and economic sectors. As a result, the data provide a more accurate and comprehensive representation of wage growth and its interrelationships in the German economy as a whole.
In the aggregate, the new earnings indices indicate that the German economy is growing at a faster pace.
Overall, the current data suggest that German workers have experienced a slight increase in their purchasing power despite general inflation and economic uncertainties. This could have positive implications for consumption and economic stability, while the sustainability of this development should continue to be monitored.