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When the minimum wage bites back: Quantile treatment effects of a sectoral minimum wage in Germany

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  • Gregory, Terry

Abstract

In this study we investigate the minimum wage (MW) effects for a German sub-construction sector where the MW bites extraordinary hard by international standards. Within a quasiexperiment we estimate the Quantile Treatment Effects of the MW on the conditional and unconditional distribution of earnings. For Eastern Germany, the results indicate significant real (nominal) wage increases that ripple up to about the 0.6th quantile. However, the MW also led to declining real wages (stagnating nominal wages) among upper-decile workers, thus reducing the average pay reward for high-skilled labour in the sector. We provide evidence that a rising labour cost burden for firms together with an increased bargaining power of employers over workers still employed in the sector led to wage moderation at the upper decile, particularly among smaller East German firms. Overall this paper demonstrates how a MW geared towards the lower rank may render unexpected side effects for other workers located higher up in the wage distribution and who are mostly assumed to be unaffected by such policy interventions.

Suggested Citation

  • Gregory, Terry, 2014. "When the minimum wage bites back: Quantile treatment effects of a sectoral minimum wage in Germany," ZEW Discussion Papers 14-133, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:14133
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    Cited by:

    1. Schank, Thorsten & Bossler, Mario, 2020. "Wage inequality in Germany after the minimum wage introduction," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224543, Verein für Socialpolitik / German Economic Association.
    2. Mario Bossler, 2017. "Employment expectations and uncertainties ahead of the new German minimum wage," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 327-348, September.
    3. Thomas, Tobias & Berger, Johannes & Strohner, Ludwig, 2017. "Mindestlohn - Beschäftigungsbremse ohne Konsumwirkung," Policy Notes 17, EcoAustria – Institute for Economic Research.
    4. E. Gautier & D. Fougère & S. Roux, 2016. "The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France," Working papers 587, Banque de France.
    5. repec:hal:spmain:info:hdl:2441/4dha0uhh68df8q5or96ol4inu is not listed on IDEAS
    6. Garloff, Alfred, 2016. "Side effects of the new German minimum wage on (un-)employment : first evidence from regional data," IAB-Discussion Paper 201631, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    7. Gürtzgen, Nicole & Blömer, Maximilian & Pohlan, Laura & Stichnoth, Holger & van den Berg, Gerard, 2016. "Estimating an Equilibrium Job Search Model for the German Labour Market," VfS Annual Conference 2016 (Augsburg): Demographic Change 145950, Verein für Socialpolitik / German Economic Association.
    8. Katalin Bodnár & Ludmila Fadejeva & Stefania Iordache & Liina Malk & Desislava Paskaleva & Jurga Pesliakaitė & Nataša Todorović Jemec & Peter Tóth & Robert Wyszyński, 2018. "How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-30, December.
    9. repec:hal:spmain:info:hdl:2441/3mjt8d63i195voq228mf1sr91q is not listed on IDEAS
    10. Denis Fougère & Erwan Gautier & Sébastien Roux, 2016. "The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France," Working Papers hal-03469977, HAL.
    11. Fougère, Denis & Gautier, Erwan & Roux, Sébastien, 2016. "Understanding Wage Floor Setting in Industry-Level Agreements: Evidence from France," IZA Discussion Papers 10290, Institute of Labor Economics (IZA).
    12. Schmitz, Sebastian, 2017. "The effects of Germany's new minimum wage on employment and welfare dependency," Discussion Papers 2017/21, Free University Berlin, School of Business & Economics.
    13. Bofinger, Peter & Schnabel, Isabel & Feld, Lars P. & Schmidt, Christoph M. & Wieland, Volker, 2015. "Zukunftsfähigkeit in den Mittelpunkt. Jahresgutachten 2015/16 [Focus on Future Viability. Annual Report 2015/16]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201516.
    14. Denis Fougère & Erwan Gautier & Sébastien Roux, 2016. "The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France," SciencePo Working papers Main hal-03469977, HAL.
    15. Blömer, Maximilian J. & Guertzgen, Nicole & Pohlan, Laura & Stichnoth, Holger & van den Berg, Gerard J., 2018. "Unemployment effects of the German minimum wage in an equilibrium job search model," ZEW Discussion Papers 18-032, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    Keywords

    unconditional quantile regression; minimum wages; wage effects; wage moderation; labour shortages;
    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
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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