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Minimum Wages as a Barrier to Entry: Evidence from Germany

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  • Ronald Bachmann
  • Thomas K. Bauer
  • Hanna Frings

Abstract

This study analyses employers' support for the introduction of industry-specific minimum wages as a cost-raising strategy in order to deter market entry. Using a unique data set consisting of 800 firms in the German service sector, we show that high-productivity employers support minimum wages. We further find some evidence that minimum wage support is higher in industries and regions with low barriers to entry. This is particularly the case in East Germany, where the perceived threat of low-wage competition from Central and Eastern European countries is relatively high. In addition, firms paying collectively agreed wages are more strongly in favour of minimum wages.

Suggested Citation

  • Ronald Bachmann & Thomas K. Bauer & Hanna Frings, 2014. "Minimum Wages as a Barrier to Entry: Evidence from Germany," LABOUR, CEIS, vol. 28(3), pages 338-357, September.
  • Handle: RePEc:bla:labour:v:28:y:2014:i:3:p:338-357
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    File URL: http://hdl.handle.net/10.1111/labr.12034
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    Cited by:

    1. repec:zbw:rwirep:0358 is not listed on IDEAS
    2. Bachmann, Ronald & Frings, Hanna, 2014. "Monopsony competition and the minimum wage: Evidence from Germany," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100367, Verein für Socialpolitik / German Economic Association.
    3. Philipp vom Berge & Hanna Frings & Alfredo R. Paloyo, 2013. "High-Impact Minimum Wages and Heterogeneous Regions," Ruhr Economic Papers 0408, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    4. Bachmann, Ronald & König, Marion & Schaffner, Sandra, 2012. "Lost in Transition? Minimum Wage Effects on German Construction Workers," IZA Discussion Papers 6760, Institute for the Study of Labor (IZA).
    5. vom Berge, Philipp & Frings, Hanna & Paloyo, Alfredo R., 2013. "High-Impact Minimum Wages and Heterogeneous Regions," Ruhr Economic Papers 408, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Bachmann, Ronald & Penninger, Marion & Schaffner, Sandra, 2015. "The effect of minimum wages on labour market flows: Evidence from Germany," Ruhr Economic Papers 598, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    7. Bossler, Mario & Gerner, Hans-Dieter, 2016. "Employment effects of the new German minimum wage: Evidence from establishment-level micro data," Annual Conference 2016 (Augsburg): Demographic Change 145926, Verein für Socialpolitik / German Economic Association.
    8. Ronald Bachmann & Marion König & Sandra Schaffner, 2012. "Lost in Transition? – Minimum Wage Effects on German Construction Workers," Ruhr Economic Papers 0358, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    9. Bossler, Mario & Gerner, Hans-Dieter, 2016. "Employment effects of the new German minimum wage : evidence from establishment-level micro data," IAB Discussion Paper 201610, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    10. Micheli, Martin, 2016. "Minimum wage: Redistributive or discriminatory policy?," Annual Conference 2016 (Augsburg): Demographic Change 145830, Verein für Socialpolitik / German Economic Association.
    11. repec:zbw:rwirep:0408 is not listed on IDEAS
    12. Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung (ed.), 2014. "Mehr Vertrauen in Marktprozesse. Jahresgutachten 2014/15," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201415.

    More about this item

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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