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The short- and medium-term distributional effects of the German minimum wage reform

Author

Listed:
  • Marco Caliendo

    (University of Potsdam, IZA, DIW, IAB)

  • Alexandra Fedorets

    (German Institute for Economic Research)

  • Malte Preuss

    (German Council of Economic Experts)

  • Carsten Schröder

    (SOEP at DIW and Free University Berlin)

  • Linda Wittbrodt

    (University of Potsdam)

Abstract

This study quantifies the distributional effects of the minimum wage introduced in Germany in 2015. Using detailed Socio-Economic Panel survey data, we assess changes in the hourly wages, working hours, and monthly wages of employees who were entitled to be paid the minimum wage. We employ a difference-in-differences analysis, exploiting regional variation in the “bite” of the minimum wage. At the bottom of the hourly wage distribution, we document wage growth of 9% in the short term and 21% in the medium term. At the same time, we find a reduction in working hours, such that the increase in hourly wages does not lead to a subortionate increase in monthly wages. We conclude that working hours adjustments play an important role in the distributional effects of minimum wages.

Suggested Citation

  • Marco Caliendo & Alexandra Fedorets & Malte Preuss & Carsten Schröder & Linda Wittbrodt, 2023. "The short- and medium-term distributional effects of the German minimum wage reform," Empirical Economics, Springer, vol. 64(3), pages 1149-1175, March.
    • Handle: RePEc:spr:empeco:v:64:y:2023:i:3:d:10.1007_s00181-022-02288-4
    DOI: 10.1007/s00181-022-02288-4
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    Cited by:

    1. Laszlo Goerke & Markus Pannenberg, 2023. "Minimum Wage Non-compliance: The Role of Co-determination," IAAEU Discussion Papers 202304, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    2. Goerke, Laszlo & Pannenberg, Markus, 2023. "Minimum Wage Non-compliance: The Role of Co-determination," IZA Discussion Papers 16621, Institute of Labor Economics (IZA).
    3. Laszlo Goerke & Markus Pannenberg, 2023. "Minimum Wage Non-Compliance: The Role of Co-Determination," CESifo Working Paper Series 10797, CESifo.
    4. Laszlo Goerke & Markus Pannenberg, 2023. "Minimum Wage Non-compliance: The Role of Co-determination," SOEPpapers on Multidisciplinary Panel Data Research 1199, DIW Berlin, The German Socio-Economic Panel (SOEP).

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    More about this item

    Keywords

    Minimum wage; Wage distribution; Hourly wages; Inequality;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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