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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
    DOI: 10.1515/jbnst-2018-0077
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    Cited by:

    1. Caliendo, Marco & Wittbrodt, Linda, 2022. "Did the minimum wage reduce the gender wage gap in Germany?," Labour Economics, Elsevier, vol. 78(C).
    2. Burauel Patrick & Grabka Markus M. & Schröder Carsten & Caliendo Marco & Obst Cosima & Preuss Malte, 2020. "The Impact of the Minimum Wage on Working Hours," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(2-3), pages 233-267, April.
    3. Gerlinde Titelbach & Martin Ertl & Susanne Forstner, 2024. "Allgemeine Lohnuntergrenzen für Österreich, Betroffene, Verteilungswirkungen und makroökonomische Konsequenzen," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 251, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    4. Heiko Stüber & Markus M. Grabka & Daniel D. Schnitzlein, 2023. "A tale of two data sets: comparing German administrative and survey data using wage inequality as an example," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 57(1), pages 1-18, December.
    5. Schank, Thorsten & Bossler, Mario, 2020. "Wage inequality in Germany after the minimum wage introduction," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224543, Verein für Socialpolitik / German Economic Association.
    6. Marco Caliendo & Alexandra Fedorets & Malte Preuss & Carsten Schröder & Linda Wittbrodt, 2023. "The short- and medium-term distributional effects of the German minimum wage reform," Empirical Economics, Springer, vol. 64(3), pages 1149-1175, March.
    7. Ayaita, Adam, 2022. "Does Money Change Who You Are? Quasi-Experimental Evidence on the Effects of Wage Increases on Personality," EconStor Preprints 256931, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    Keywords

    minimum wage; wage and earnings structure; inequality;
    All these keywords.

    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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