Increased Minimum Wage Yields Additional Hundreds of Euros Compared to Citizens' Income Benefits
In a recent study conducted by the Institute for Economic and Social Research (WSI) of the Hans Böckler Foundation, it was revealed that full-time minimum wage employment in Germany offers a substantial net income advantage over unemployment benefits. The study considered various household scenarios, including single individuals, single parents with a child, and couples with two children and one employed person.
The minimum wage in Germany, as of 2025, is €12.82 per hour. A full-time job, approximated at 40 hours per week, results in a gross monthly income of roughly €2,200. On the other hand, the average unemployment benefit type relevant to this discussion is Arbeitslosengeld II (ALG II), which is means-tested and depends on personal and household circumstances. For a single adult, the standard ALG II benefit is typically around €450 per month (net), to cover living needs.
A person working full-time at minimum wage earns significantly higher than the standard ALG II payment. However, once taxes, social contributions, and potential housing and childcare benefits are accounted for, net income from minimum wage work will be lower than the gross figure but still generally superior to unemployment benefits. ALG II benefits taper off as income from work rises, but employees also gain access to social security benefits like pension credits and unemployment insurance that unemployment benefit recipients typically do not.
Regional differences affect living costs, notably housing, which influences unemployment benefits because ALG II covers reasonable housing costs. High-rent regions, such as Munich and its surroundings or Hamburg, may see higher benefit levels. Household composition also greatly influences total income advantage. Single individuals see a clear income gain from minimum wage jobs due to low ALG II rates. Families with children may receive higher unemployment benefits, potentially reducing the relative income advantage of minimum wage employment if childcare costs or other expenses are high.
The study found that the income advantage for a single person working full-time at the minimum wage is 557 euros per month, on average. In Munich, the income advantage is 379 euros, and in Hamburg, it is 493 euros. The height of the income advantage varies regionally, but the differences from the national average are generally small in many cities and districts.
The study did not mention any changes in the wage gap between full-time work at the minimum wage and unemployment benefits for the new household scenarios. Additionally, the study did not mention any differences in the income advantage between East and West Germany for the new household scenarios.
Political action is urgently needed, according to Bettina Kohlrausch, in the area of creating affordable housing to relieve both the public purse and lower incomes. The smaller gap between unemployment benefits and minimum wage in regions with high rents is due to the high cost of living.
In conclusion, full-time minimum wage employment in Germany offers a substantial net income advantage over unemployment benefits, with the magnitude of the advantage influenced by household composition and regional cost-of-living variations. This income advantage incentivizes labor market participation, although real disposable income depends on taxes, social security, and benefit interaction rules.
- Despite regional differences in living costs, particularly in high-rent cities like Munich and Hamburg, the study shows that a single person working full-time at the minimum wage still enjoys a significant net income advantage over unemployment benefits, with average differences from the national average being relatively small in many cities and districts.
- The study underscores the importance of policy considerations in areas such as financing affordable housing, business operations, and politics to bridge the gap between unemployment benefits and minimum wage, thereby providing a more balanced financial landscape and promoting general news of economic stability and growth.
