Germany and the UK raised their minimum wages a lot. What happened?

If you argue against minimum wages, you will eventually be handed two countries. Germany had no national minimum wage until 2015 and now has one of Europe's higher ones. The United Kingdom has raised its floor so quickly since 2016 that it now sits at two-thirds of the typical worker's hourly pay. In both places, the large job losses predicted by the simple supply-and-demand model are hard to find in the aggregate data.

This is the strongest evidence the other side has, and it deserves a fair hearing. Below we set out what each country did, what the best research found, and what the official monitors concluded, using the governments' own figures. Then we draw the lesson, which is not the one usually drawn.

Germany: from no floor to €13.90

Germany's statutory minimum wage took effect on January 1, 2015, at €8.50 an hour. Before that, pay floors came from sector-by-sector collective agreements, much as they still do in the countries without a minimum wage. As union coverage shrank, so did those implied floors, and that is the backdrop to the 2015 law.

Germany built a commission into the system from the start. Under the Minimum Wage Act, the Mindestlohnkommission, made up of employer and union representatives with academic advisers, proposes an adjustment every two years. The federal government can adopt the proposal by regulation, but only as proposed. By law, the commission takes its cue from past growth in collectively agreed wages, weighed against protecting workers, fair competition and employment. Through mid-2022 it rose in small steps, reaching €10.45 that July.

Then politics took over. A one-off law passed in June 2022 bypassed the commission and set the minimum at €12.00 from October 1, 2022, a 14.8 percent jump in three months and 22 percent above the €9.82 rate in force that January. According to the government, the €12 figure was oriented to 60 percent of the gross median wage. The Federal Statistical Office (Destatis) estimated that about 5.8 million jobs, 14.8 percent of the total, paid less than €12 just before the increase.

After that the commission resumed control. It set €12.41 for 2024 and €12.82 for 2025, and on June 27, 2025, it voted unanimously for €13.90 from January 1, 2026 and €14.60 from January 1, 2027. The government adopted both steps. The commission's rules of procedure, revised in January 2025, now also judge the minimum against a reference value of 60 percent of the gross median wage, a benchmark taken from the 2022 EU directive on adequate minimum wages.

The reallocation finding

The most influential study of the 2015 introduction is "Reallocation Effects of the Minimum Wage" by Christian Dustmann, Attila Lindner, Uta Schönberg, Matthias Umkehrer and Philipp vom Berge, published in the Quarterly Journal of Economics in 2022. Comparing more and less exposed workers and regions, they report that the minimum wage, which affected 15 percent of all employees, "raised wages but did not lower employment."

The paper's more interesting finding is how the economy absorbed the shock. Low-wage workers moved "from smaller to larger, from lower- to higher-paying, and from less to more productive establishments." The authors estimate that this upgrading accounts for up to 17 percent of the wage gain, and that average establishment quality rose in the regions where the minimum bit hardest.

This is the strongest version of the case for a minimum wage: a floor that pushes labor toward firms that use it better. A free-market reader should not wave it away.

The same paper documents the other side of that reallocation: "clear evidence of increased exit of small businesses," with the sharpest decline among the very smallest firms, those with no more than two employees. Commuting distance for low-wage workers rose by 1.8 kilometers, or 10 percent, relative to higher-wage workers. And the conclusion says directly that the results "do not imply that there are no establishments or workers who lost out."

For the €12 step, the best early evidence is an IAB employer survey. Among establishments directly affected, 53.4 percent raised prices, 16.7 percent held back on hiring and 7.7 percent laid workers off. Destatis also reports that the share of low-wage jobs fell from 19 percent in April 2022 to 16 percent in April 2023, and names the rise from €9.82 to €12 as one explanation.

The UK: from £3.60 to £12.71

Britain's National Minimum Wage took effect on April 1, 1999, at £3.60 an hour for adults. The Low Pay Commission (LPC), an independent body of employer, union and independent members, advises on the rate. For 17 years its job was to find "the level that will help as many low-paid workers as possible, without any significant negative effect on employment or the economy."

In April 2016 the government changed the question. It created the National Living Wage (NLW), initially £7.20 for workers aged 25 and over, and gave it an explicit target: 60 percent of median earnings by 2020. The target was later raised to two-thirds of median hourly earnings, and the NLW now covers everyone 21 and over.

Since April 1, 2026, the NLW has been £12.71 an hour, up 4.1 percent from £12.21. The 18-to-20 rate is £10.85. The LPC says the £12.71 rate meets the government's two-thirds-of-median target for workers 21 and over. That target is not automatic: the LPC later found that the April 2024 rate of £11.44 fell short of two-thirds of the median, which would have required £11.76.

The current remit, published March 16, 2026, keeps two-thirds of median hourly earnings as "the key reference point" for future rates. The LPC must advise by the end of October 2026 on rates for April 1, 2027. Its spring consultation put the rate needed to hold the target at £13.02 to £13.34, with a central estimate of £13.18, and called those figures "indicative only."

What the UK evidence says

The most cited review is Arindrajit Dube's Impacts of Minimum Wages: Review of the International Evidence, published by HM Treasury in November 2019. Dube concluded that research from the U.S., the UK and other developed countries "points to a very muted effect of minimum wages on employment, while significantly increasing the earnings of low paid workers." Across 48 estimates, he put the median own-wage elasticity at about −0.16. He recommended "exploring a more ambitious NLW remit," in the range of 60 percent to two-thirds of median hourly earnings.

Dube's caveats are as important as his conclusion, and they are usually left out. He wrote that "the evidence base on the effects of high minimum wage levels is still developing." He cited the LPC's own 2016 finding of "some evidence that it has led to small reductions in hours" and a UK study that found larger job losses among part-time women. And he made his recommendation conditional: any more ambitious minimum should come with "a clear mandate for the LPC to pause and reconsider if the evidence suggests significant losses in jobs."

The LPC's recent reports have mostly backed the optimistic reading. Its 2025 report judged that "recent NLW increases have not had a significant negative impact on employment," and found that areas with more minimum-wage workers generally had smaller falls in employment. It also said hospitality and retail "continue to struggle" and that NLW workers' hours "remain below pre-pandemic levels." In its advice on the 2026 rates, the LPC conceded that "greater job losses in low-paying sectors may suggest a minimum wage effect," and flagged "a concerning rise" in young people not in education, employment or training.

Side by side

The table compares the two systems with the U.S. federal minimum. The bite column uses the OECD's series on minimum wages relative to the median wage of full-time workers, so it will not match the UK's own two-thirds measure, which covers all workers aged 21 and over.

The costs that did show up

The honest summary of Germany and the UK is not "no effect." It is that the costs moved to places a headcount does not capture.

• Small firms. Reallocation toward larger, more productive firms is the flip side of small firms closing. Dustmann and coauthors found exactly that, and noted that fewer small businesses could mean less competition and higher prices. In the UK, the LPC's 2024 evidence summary reported that small firms in particular were cutting investment to keep operating.
• Regions. A national floor bites hardest where wages are lowest. Destatis found that 18.2 percent of jobs in eastern Germany paid under €12 before the 2022 increase, against 14.3 percent in the west. In the UK, 9.0 percent of jobs in the North East and Northern Ireland are covered by the minimum wage, against 3.7 percent in London. The workers who lose out in a reallocation are disproportionately in places with fewer large, productive employers to move to.
• Hours and entry. The UK's own evidence points to small cuts in hours and weaker outcomes for some groups. Germany's 2015 losses, where researchers find them, came through fewer hires rather than layoffs. Those are the margins that hit people trying to get a first job, which is the subject of our article on whether the minimum wage causes unemployment.
• Prices. More than half of the German establishments directly affected by the €12 step raised prices. That cost falls on all customers, including low-income ones.

None of these dominates the aggregate statistics. All of them fall on identifiable people: the owner of a two-person shop, the worker who now commutes further, the young person whose application never gets a reply.

Why a U.S. federal number is different

Suppose you accept the optimistic reading of both countries. The lesson still does not justify the way the United States sets its federal minimum, for three reasons.

First, both floors are anchored to their own country's median wage; the U.S. federal floor is anchored to nothing. The U.S. minimum is a dollar figure Congress last changed in 2009. It does not move with wages or prices, and when it moves, it moves by political bargain.

Second, both are monitored by commissions that are meant to slow down when the evidence turns. Germany's includes the employers and unions who pay and earn the wage; the UK's publishes its evidence every year. Dube's recommendation to HM Treasury was explicitly conditional on a mandate to "pause and reconsider." Congress has no equivalent body and no built-in review. Germany's one break from its commission, the €12 law, is also the step whose employment effects IAB researchers called an open question before it took effect.

Third, the U.S. is far more varied than either country. Even Germany and the UK show sharp regional gaps in bite. America's gaps in wages and living costs are larger still, which is why our state-by-state guide stresses the bite ratio over headline dollar figures. A federal number high enough to matter in Boston or Seattle would sit far closer to the local median in the lowest-wage parts of the South, the exact setting the German and British evidence does not cover.

The European experience is an argument for setting any wage floor locally, in small steps, under constant review. It is not an argument for one large national number set by Congress.

Where we come down

We take the German and British evidence seriously. Moderate, monitored minimum wages, anchored to national pay and raised in steps, did not cause the mass unemployment a simple textbook model predicts. Anyone who says otherwise is not reading the studies.

But the same studies show who pays. Small firms close, workers commute further, hours and hiring slip, prices rise, and the burden is heaviest in the poorest regions. The most favorable research was conducted under exactly the conditions a U.S. federal increase would lack: a median anchor, regular review, and a commission empowered to slow down. And if the goal is higher incomes for low-wage workers, tools such as the EITC raise take-home pay without closing the small shop or raising the cost of a first hire. We compare those options in Minimum wage vs. EITC, and the Dustmann and Dube studies are summarized in our research tracker.