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Fiscal Effects of Minimum Wages: An Analysis for Germany

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  • Thomas K. Bauer
  • Jochen Kluve
  • Sandra Schaffner
  • Christoph M. Schmidt

Abstract

. Against the background of the current discussion of statutory minimum wages in Germany, this paper analyzes the potential employment and fiscal effects of such a policy. Based on estimated labor demand elasticities obtained from a structural labor demand model, the empirical results imply that minimum wages in Germany will be associated with significant employment losses among marginal and low‐ and semi‐skilled full‐time workers. Even though minimum wages will lead to increased public revenues from income taxes and social security benefits, they will result in a significant fiscal burden, due to increased unemployment benefits and decreased revenues from corporate taxes.

Suggested Citation

  • Thomas K. Bauer & Jochen Kluve & Sandra Schaffner & Christoph M. Schmidt, 2009. "Fiscal Effects of Minimum Wages: An Analysis for Germany," German Economic Review, Verein für Socialpolitik, vol. 10(2), pages 224-242, May.
    • Handle: RePEc:bla:germec:v:10:y:2009:i:2:p:224-242
    DOI: 10.1111/j.1468-0475.2009.00467.x
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    More about this item

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy

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