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Employment effects of introducing a minimum wage: The case of Germany

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  • Holtemöller, Oliver
  • Pohle, Felix

Abstract

Income inequality has been a major concern of economic policy makers for several years. Can minimum wages help to mitigate inequality? In 2015, the German government introduced a nationwide statutory minimum wage to reduce income inequality by improving the labour income of low-wage employees. However, the employment effects of wage increases depend on time and region specific conditions and, hence, they cannot be known in advance. Because negative employment effects may offset the income gains for low-wage employees, it is important to evaluate minimum-wage policies empirically. We estimate the employment effects of the German minimum-wage introduction using panel regressions on the state-industry-level. We find a robust negative effect of the minimum wage on marginal and a robust positive effect on regular employment. In terms of the number of jobs, our results imply a negative overall effect. Hence, low-wage employees who are still employed are better off at the expense of those who have lost their jobs due to the minimum wage.

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  • Holtemöller, Oliver & Pohle, Felix, 2020. "Employment effects of introducing a minimum wage: The case of Germany," Economic Modelling, Elsevier, vol. 89(C), pages 108-121.
    • Handle: RePEc:eee:ecmode:v:89:y:2020:i:c:p:108-121
    DOI: 10.1016/j.econmod.2019.10.006
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    Cited by:

    1. Friedrich Martin, 2020. "Using Occupations to Evaluate the Employment Effects of the German Minimum Wage," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(2-3), pages 269-294, April.
    2. Marco Caliendo & Nico Pestel & Rebecca Olthaus, 2023. "Long-Term Employment Effects of the Minimum Wage in Germany: New Data and Estimators," Papers 2310.15964, arXiv.org.
    3. Liu, Guangqiang & Lv, Lingli, 2022. "Government regulation on corporate compensation and innovation: Evidence from China's minimum wage policy," Finance Research Letters, Elsevier, vol. 50(C).
    4. Ahlfeldt, Gabriel M. & Roth, Duncan & Seidel, Tobias, 2022. "Optimal minimum wages," LSE Research Online Documents on Economics 117750, London School of Economics and Political Science, LSE Library.
    5. Pestel, Nico & Bonin, Holger & Isphording, Ingo E. & Gregory, Terry & Caliendo, Marco, 2020. "Auswirkungen des gesetzlichen Mindestlohns auf Beschäftigung und Arbeitslosigkeit," IZA Research Reports 95, Institute of Labor Economics (IZA).
    6. Moritz Drechsel-Grau, 2023. "Employment and Reallocation Effects of Higher Minimum Wages," CESifo Working Paper Series 10412, CESifo.
    7. Seok, Byoung Hoon & You, Hye Mi, 2022. "Macroeconomic impacts of increasing the minimum wage: The case of Korea," Economic Modelling, Elsevier, vol. 113(C).
    8. repec:iab:iabjlr:v:53:i:1:p:art.10 is not listed on IDEAS
    9. 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.
    10. Laetitia Lebihan, 2023. "Minimum wages and health: evidence from European countries," International Journal of Health Economics and Management, Springer, vol. 23(1), pages 85-107, March.
    11. Bruttel, Oliver, 2019. "The effects of the new statutory minimum wage in Germany: a first assessment of the evidence," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 53(1), pages .10(1-13).
    12. Bruttel, Oliver, 2019. "The effects of the new statutory minimum wage in Germany: a first assessment of the evidence," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 53(1), pages 1-10.
    13. Roupakias, Stelios, 2022. "Employment and distributional effects of Greece’s national minimum wage," MPRA Paper 114244, University Library of Munich, Germany.
    14. Oliver Bruttel, 2019. "The effects of the new statutory minimum wage in Germany: a first assessment of the evidence," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 53(1), pages 1-13, December.
    15. Artur Sikora, 2021. "The minimum wage in Poland and its connection to unemployment: Evaluating causality," Zeszyty Naukowe Małopolskiej Wyższej Szkoły Ekonomicznej w Tarnowie / The Malopolska School of Economics in Tarnow Research Papers Collection, Malopolska School of Economics in Tarnow, vol. 50(2), pages 65-77, June.
    16. Alfred Garloff, 2019. "Did the German Minimum Wage Reform Influence (Un)employment Growth in 2015? Evidence from Regional Data," German Economic Review, Verein für Socialpolitik, vol. 20(3), pages 356-381, August.
    17. Friedrich Martin, 2020. "Using Occupations to Evaluate the Employment Effects of the German Minimum Wage," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(2-3), pages 269-294, April.

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    More about this item

    Keywords

    Minimum wage; Employment effects; Panel model;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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