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The Causal Effects of the Minimum Wage Introduction in Germany – An Overview

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  • Marco Caliendo
  • Carsten Schröder
  • Linda Wittbrodt

Abstract

In 2015, Germany introduced a statutory hourly minimum wage that was not only universally binding but also set at a relatively high level. We discuss the short‐run effects of this new minimum wage on a wide set of socioeconomic outcomes, such as employment and working hours, earnings and wage inequality, dependent and self‐employment, as well as reservation wages and satisfaction. We also discuss difficulties in the implementation of the minimum wage and the measurement of its effects related to non‐compliance and suitability of data sources. Two years after the minimum wage introduction, the following conclusions can be drawn: while hourly wages increased for low‐wage earners, some small negative employment effects are also identifiable. The effects on aspired goals, such as poverty and inequality reduction, have not materialised in the short run. Instead, a tendency to reduce working hours is found, which alleviates the desired positive impact on monthly income. Additionally, the level of non‐compliance was substantial in the short run, thus drawing attention to problems when implementing such a wide reaching policy.

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  • Marco Caliendo & Carsten Schröder & Linda Wittbrodt, 2019. "The Causal Effects of the Minimum Wage Introduction in Germany – An Overview," German Economic Review, Verein für Socialpolitik, vol. 20(3), pages 257-292, August.
  • Handle: RePEc:bla:germec:v:20:y:2019:i:3:p:257-292
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    File URL: https://doi.org/10.1111/geer.12191
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    Cited by:

    1. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo Group Munich.
    2. Bonin, Holger & Isphording, Ingo E. & Krause-Pilatus, Annabelle & Lichter, Andreas & Pestel, Nico & Rinne, Ulf, 2019. "The German Statutory Minimum Wage and Its Effects on Regional Employment and Unemployment," IZA Policy Papers 145, Institute of Labor Economics (IZA).
    3. Clemens, Jeffrey, 2019. "Making Sense of the Minimum Wage: A Roadmap for Navigating Recent Research," MPRA Paper 94324, University Library of Munich, Germany.
    4. Clemens, Jeffrey & Strain, Michael R., 2019. "Understanding "Wage Theft": Evasion and Avoidance Responses to Minimum Wage Increases," IZA Discussion Papers 12167, Institute of Labor Economics (IZA).

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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • 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

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