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The Impact of the German Minimum Wage on Individual Wages and Monthly Earnings

Author

Listed:
  • Burauel Patrick

    () (SOEP Department, German Institute for Economic Research (DIW Berlin), Mohrenstr. 58, 10117Berlin, Germany)

  • Caliendo Marco

    () (Chair of Empirical Economics, Potsdam University, August-Bebel-Str. 89, 14482Potsdam, Germany)

  • Grabka Markus M.

    () (SOEP Department, German Institute for Economic Research (DIW Berlin), Mohrenstr. 58, 10117Berlin, Germany)

  • Obst Cosima

    () (Chair of Empirical Economics, Potsdam University, August-Bebel-Str. 89, 14482Potsdam, Germany)

  • Preuss Malte

    () (School of Business and Economics, Free University Berlin, Boltzmannstr. 20, 14195Berlin, Germany)

  • Schröder Carsten

    () (SOEP Department, German Institute for Economic Research (DIW Berlin), Mohrenstr. 58, 10117Berlin, Germany)

  • Shupe Cortnie

    () (SOEP Department, German Institute for Economic Research (DIW Berlin), Mohrenstr. 58, 10117Berlin, Germany)

Abstract

This paper evaluates the short-run impact of the introduction of a statutory minimum wage in Germany on the hourly wages and monthly earnings of workers targeted by the reform. We first provide detailed descriptive evidence of changes to the wage structure in particular at the bottom of the distribution and distinguish between trends for regularly employed and marginally employed workers. In the causal analysis, we then employ a differential trend adjusted difference-in-differences (DTADD) strategy to identify the extent to which these changes in wages and earnings can be attributed to the minimum wage introduction. We find that the minimum wage introduction can account for hourly wage growth in the order of roughly 6.5 % or €\euro0.45/hour and an increase in monthly earnings of 6.6 % or €\euro53/month. Despite finding wage growth at the bottom of the distribution, the paper documents widespread non-compliance with the mandated wage floor of €\euro8.50/hour.

Suggested Citation

  • Burauel Patrick & Caliendo Marco & Grabka Markus M. & Obst Cosima & Preuss Malte & Schröder Carsten & Shupe Cortnie, 2020. "The Impact of the German Minimum Wage on Individual Wages and Monthly Earnings," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(2-3), pages 201-231, April.
  • Handle: RePEc:jns:jbstat:v:240:y:2020:i:2-3:p:201-231:n:4
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    More about this item

    Keywords

    minimum wage; wage and earnings structure; inequality;

    JEL classification:

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

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