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

Author

Listed:
  • Caliendo Marco

    (University of Potsdam, Am Neuen Palais 10,Potsdam, Germany)

  • Wittbrodt Linda

    (University of Potsdam, Am Neuen Palais 10,Potsdam, Germany)

  • Schröder Carsten

    (SOEP at DIW, Mohrenstraße 58,Berlin, Germany)

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 shortrun 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 selfemployment, 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 noncompliance was substantial in the short run, thus drawing attention to problems when implementing such a wide reaching policy.

Suggested Citation

  • Caliendo Marco & Wittbrodt Linda & Schröder Carsten, 2019. "The Causal Effects of the Minimum Wage Introduction in Germany – An Overview," German Economic Review, De Gruyter, vol. 20(3), pages 257-292, August.
    • Handle: RePEc:bpj:germec:v:20:y:2019:i:3:p:257-292
    DOI: 10.1111/geer.12191
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    Keywords

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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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