Despite being a longtime opponent, German Chancellor Angela Merkel signed off on the country’s first national minimum wage law that will go into effect in just a few days on January 1.
German workers will now receive a minimum pay of 8.50 euros ($10.32) per hour before taxes, which is significantly higher than the national minimum wage of $7.25 per hour in America.
So why did Merkel have a change of heart over a set minimum wage?
It was all politics. While Merkel held the belief that individual industries should have separate pay deals in order to prevent financial struggles for small and medium-sized businesses, she had to change her tune during the last election when her coalition partners, the Social Democrats (SPD), would only enter into a power-sharing deal if she and her Christian Democrats (CDU) party agreed to the national wage.
There are mixed feelings among businesses and workers though, with many wondering if the positives will outweigh any of the negative effects. The increased cost in paying higher salaries may causes some smaller businesses to raise the prices of their goods. If that trend follows into a majority of businesses, it could easily erase the extra spending money workers will see as the cost of living would increase.
Only time will tell, and Germany could see itself becoming an example, good or bad, for countries constantly debating minimum wage increases like the United States.