Germans’ real wages rise record 2.5% in 2015, figures show

Germans are heading into the Christmas holidays with a spring in their step and a jingle in the pockets thanks to low inflation, record pay rises and a new minimum wage.

Statistics published this week show that real wages in Europe’s largest economy have risen a record 2.5 per cent this year, signalling an end to a long era of stagnant wages and pay restraint that throttled domestic consumption.

Data from Germany’s first three quarters suggest the year-end earnings rise will top the previous record of 1.8 per cent from last year. The federal statistics office pointed to low oil prices and an inflation rate of just 0.1 per cent as key in lifting the numbers.

Another factor was higher pay agreements and the introduction of a statutory minimum wage of €8.50. The minimum wage has put on average 3.9 per cent more in the pockets of unskilled workers and 2.6 per cent in pay packets of skilled workers, federal statistics show.

Opponents of the minimum wage predicted it would bring economic disaster. Instead the economy will grow 1.7 per cent this year, according to the Bundesbank, and 1.8 per cent next year. In its monthly report, published on Monday, the Bundesbank warned that Germany economic growth was so steady that, despite record immigration, growing skilled labour shortages were likely to continue to drive up salaries.

According to the Bundesbank, higher disposable incomes and additional spending on about one million migrants have contributed to continued steady growth. Economic growth in the fourth quarter was in line with earlier quarters, the Bundesbank said, after quarterly growth rates of 0.3 per cent in the third and 0.4 per cent in the second quarter.

“Private consumption continued to be supported by significant increases in employment and wages,” said the report. The HDE retailer association is forecasting a rise in Christmas trade of about 2 per cent.

For Bundesbank president Jens Weidmann, the bounce in the German economy is one reason to be optimistic about the wider euro zone economic prospects this year.

"The upswing in the euro area may even pick up slightly," wrote Dr Weidmann in the Wirtschaftswoche business weekly, citing falling oil prices and expansive monetary policy that is allowing cheaper investment, not forgetting a lower euro exchange rate.