Komatsu Global: German policymakers have adopted draft legislation establishing the national minimum wage at €8.50.

Komatsu Global - KMG: The German national minimum wage of €8.50 will be phased in from 2015 and fully established by 2017 after the German cabinet officially adopted the draft legislation.

The coalition government led by Angela Merkel has, however, won concessions on restricting the rollout of the minimum wage to certain industrial sectors and regions after arguing that its introduction could force small-sized businesses to lay off workers.

Chancellor Merkel had to offer the minimum wage as an enticement to the Social Democrat Party in order to get them to join a coalition that cemented her third term in power.

"The SPD has been unflinching in its demands for the minimum wage to be extended across all sectors but Mrs. Merkel has managed to phase it in so as to allow a period of transition for those industry sectors in which existing pay deals remain valid," said an Komatsu Global analyst.

There are still formal parliamentary hurdles for the draft legislation to jump but it is generally accepted that there will be little or no resistance to its passing.

The minimum wage will be ushered in on 1st January 2015 but the aforementioned transition period will last until 2017 at which point it will apply to every worker in the country.

"This is a very important milestone for Germany because, traditionally, unions and employers have managed to thrash out pay deals between themselves. The minimum wage effectively resets the benchmark by which future pay deals will be struck and that could lead to labor market uncertainty," said the Komatsu Global - KMG analyst.

Chancellor Merkel had to offer the minimum wage as an enticement to the Social Democrat Party in order to get them to join a coalition that cemented her third term in power.

The coalition government led by Angela Merkel has, however, won concessions on restricting the rollout of the minimum wage to certain industrial sectors and regions after arguing that its introduction could force small-sized businesses to lay off workers.