IDEAS home Printed from https://ideas.repec.org/a/sae/ilrrev/v73y2020i5p1070-1094.html
   My bibliography  Save this article

Employment Effects of the New German Minimum Wage: Evidence from Establishment-Level Microdata

Author

Listed:
  • Mario Bossler
  • Hans-Dieter Gerner

Abstract

The authors present the first evidence on the consequences of the new statutory minimum wage in Germany, which was implemented on January 1, 2015. Using the IAB Establishment Panel, they identify employment effects from variation in the extent that establishments are affected by the minimum wage. A difference-in-differences estimation reveals an increase in average wages between 3.8% and 6.3% and an employment loss by approximately 1.7% in establishments affected by the minimum wage. These estimates imply a labor demand elasticity with respect to wages ranging between −0.2 and −0.4. The authors also observe a transitory reduction of the working hours in the first year after the introduction and that the employment effect seems mostly driven by a reduction in hires rather than by an increase in layoffs.

Suggested Citation

  • Mario Bossler & Hans-Dieter Gerner, 2020. "Employment Effects of the New German Minimum Wage: Evidence from Establishment-Level Microdata," ILR Review, Cornell University, ILR School, vol. 73(5), pages 1070-1094, October.
    • Handle: RePEc:sae:ilrrev:v:73:y:2020:i:5:p:1070-1094
    DOI: 10.1177/0019793919889635
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0019793919889635
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0019793919889635?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Henry Hyatt & James Spletzer, 2013. "The recent decline in employment dynamics," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-21, December.
    2. Jonathan Meer & Jeremy West, 2016. "Effects of the Minimum Wage on Employment Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 51(2), pages 500-522.
    3. Arindrajit Dube & T. William Lester & Michael Reich, 2016. "Minimum Wage Shocks, Employment Flows, and Labor Market Frictions," Journal of Labor Economics, University of Chicago Press, vol. 34(3), pages 663-704.
    4. Burgess, Simon & Lane, Julia & Stevens, David, 2000. "Job Flows, Worker Flows, and Churning," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 473-502, July.
    5. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    6. Sylvia A. Allegretto & Arindrajit Dube & Michael Reich, 2011. "Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(2), pages 205-240, April.
    7. Pierre Brochu & David A. Green, 2013. "The Impact of Minimum Wages on Labour Market Transitions," Economic Journal, Royal Economic Society, vol. 123(12), pages 1203-1235, December.
    8. van den Berg, Gerard J, 1999. "Empirical Inference with Equilibrium Search Models of the Labour Market," Economic Journal, Royal Economic Society, vol. 109(456), pages 283-306, June.
    9. Charles Brown & Curtis Gilroy & Andrew Kohen, 1982. "The Effect of the Minimum Wage on Employment and Unemployment: A Survey," NBER Working Papers 0846, National Bureau of Economic Research, Inc.
    10. Philipp Berge & Hanna Frings, 2020. "High-impact minimum wages and heterogeneous regions," Empirical Economics, Springer, vol. 59(2), pages 701-729, August.
    11. Aretz Bodo & Arntz Melanie & Gregory Terry, 2013. "The Minimum Wage Affects Them All: Evidence on Employment Spillovers in the Roofing Sector," German Economic Review, De Gruyter, vol. 14(3), pages 282-315, August.
    12. David Neumark & J. M. Ian Salas & William Wascher, 2014. "Revisiting the Minimum Wage—Employment Debate: Throwing Out the Baby with the Bathwater?," ILR Review, Cornell University, ILR School, vol. 67(3_suppl), pages 608-648, May.
    13. Pedro Portugal & Ana Rute Cardoso, 2006. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 988-1013, September.
    14. John Addison & McKinley Blackburn & Chad Cotti, 2015. "On the robustness of minimum wage effects: geographically-disparate trends and job growth equations," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-16, December.
    15. Machin, Stephen & Manning, Alan & Rahman, Lupin, 2002. "Where the minimum wage bites hard: the introduction of the UK national minimum wage to a low wage sector," LSE Research Online Documents on Economics 20070, London School of Economics and Political Science, LSE Library.
    16. Arindrajit Dube & Suresh Naidu & Michael Reich, 2007. "The Economic Effects of a Citywide Minimum Wage," ILR Review, Cornell University, ILR School, vol. 60(4), pages 522-543, July.
    17. Mark B. Stewart, 2004. "The employment effects of the national minimum wage," Economic Journal, Royal Economic Society, vol. 114(494), pages 110-116, March.
    18. Vom Berge, Philipp & Kaimer, Steffen & Copestake, Silvina & Croxton, Daniela & Eberle, Johanna & Klosterhuber, Wolfram & Krüger, Jonas, 2016. "Arbeitsmarktspiegel: Entwicklungen nach Einführung des Mindestlohns (Ausgabe 2)," IAB-Forschungsbericht 201612, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    19. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
    20. Alan B. Krueger & David Card, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply," American Economic Review, American Economic Association, vol. 90(5), pages 1397-1420, December.
    21. Thomas R. Michl, 2000. "Can Rescheduling Explain the New Jersey Minimum Wage Studies?," Eastern Economic Journal, Eastern Economic Association, vol. 26(3), pages 265-276, Summer.
    22. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
    23. David Neumark & William Wascher, 2004. "Minimum Wages, Labor Market Institutions, and Youth Employment: A Cross-National Analysis," ILR Review, Cornell University, ILR School, vol. 57(2), pages 223-248, January.
    24. Bernhard Boockmann & Raimund Krumm & Michael Neumann & Pia Rattenhuber, 2013. "Turning the Switch: An Evaluation of the Minimum Wage in the German Electrical Trade Using Repeated Natural Experiments," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 316-348, August.
    25. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
    26. Hanna Frings, 2013. "The Employment Effect of Industry-Specific, Collectively Bargained Minimum Wages," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 258-281, August.
    27. Mark B. Stewart & Joanna K. Swaffield, 2008. "The Other Margin: Do Minimum Wages Cause Working Hours Adjustments for Low‐Wage Workers?," Economica, London School of Economics and Political Science, vol. 75(297), pages 148-167, February.
    28. William Wascher & David Neumark, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment," American Economic Review, American Economic Association, vol. 90(5), pages 1362-1396, December.
    29. Boris Hirsch & Michael Oberfichtner & Claus Schnabel, 2014. "The levelling effect of product market competition on gender wage discrimination," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-14, December.
    30. Sara Connolly & Mary Gregory, 2002. "The National Minimum Wage and Hours of Work: Implications for Low Paid Women," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(supplemen), pages 607-631, December.
    31. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 1-22, January.
    32. Connolly, Sara & Gregory, Mary, 2002. "The National Minimum Wage and Hours of Work: Implications for Low Paid Women," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(0), pages 607-631, Supplemen.
    33. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805, Elsevier.
    34. Mario Bossler, 2017. "Employment expectations and uncertainties ahead of the new German minimum wage," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 327-348, September.
    35. David Neumark & DMark Schweitzer & DaWilliam Wascher, 2004. "Minimum Wage Effects throughout the Wage Distribution," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
    36. 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.
    37. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section..
    38. Vom Berge, Philipp & Kaimer, Steffen & Copestake, Silvina & Eberle, Johanna & Klosterhuber, Wolfram & Krüger, Jonas & Trenkle, Simon & Zakrocki, Veronika, 2016. "Arbeitsmarktspiegel: Entwicklungen nach Einführung des Mindestlohns (Ausgabe 1)," IAB-Forschungsbericht 201601, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    39. 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.
    40. R. Kaj Gittings & Ian M. Schmutte, 2016. "Getting Handcuffs on an Octopus," ILR Review, Cornell University, ILR School, vol. 69(5), pages 1133-1170, October.
    41. Marion König & Joachim Möller, 2009. "Impacts of minimum wages: a microdata analysis for the German construction sector," International Journal of Manpower, Emerald Group Publishing Limited, vol. 30(7), pages 716-741, November.
    42. Stephen Machin & Alan Manning & Lupin Rahman, 2003. "Where the Minimum Wage Bites Hard: Introduction of Minimum Wages to a Low Wage Sector," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 154-180, March.
    43. repec:fth:prinin:300 is not listed on IDEAS
    44. Dolton, Peter & Bondibene, Chiara Rosazza & Stops, Michael, 2015. "Identifying the employment effect of invoking and changing the minimum wage: A spatial analysis of the UK," Labour Economics, Elsevier, vol. 37(C), pages 54-76.
    45. Gabriele Fischer & Florian Janik & Dana Müller & Alexandra Schmucker, 2009. "European Data Watch: The IAB Establishment Panel - Things Users Should Know," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(1), pages 133-148.
    46. Kenneth A. Couch & David C. Wittenburg, 2001. "The Response of Hours of Work to Increases in the Minimum Wage," Southern Economic Journal, John Wiley & Sons, vol. 68(1), pages 171-177, July.
    47. repec:zbw:rwirep:0408 is not listed on IDEAS
    48. Marcus Dittrich & Andreas Knabe & Kristina Leipold, 2014. "Spillover Effects of Minimum Wages in Experimental Wage Negotiations," CESifo Economic Studies, CESifo, vol. 60(4), pages 780-804.
    49. Stephen Machin & Joan Wilson, 2004. "Minimum wages in a low-wage labour market: Care homes in the UK," Economic Journal, Royal Economic Society, vol. 114(494), pages 102-109, March.
    50. Zavodny, Madeline, 2000. "The effect of the minimum wage on employment and hours," Labour Economics, Elsevier, vol. 7(6), pages 729-750, November.
    51. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bossler, Mario & Gürtzgen, Nicole & Lochner, Benjamin & Betzl, Ute & Feist, Lisa & Wegmann, Jakob, 2018. "Auswirkungen des gesetzlichen Mindestlohns auf Betriebe und Unternehmen," IAB-Forschungsbericht 201804, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Schumann, Mathias, 2017. "The effects of minimum wages on firm-financed apprenticeship training," Labour Economics, Elsevier, vol. 47(C), pages 163-181.
    3. David Neumark & Peter Shirley, 2021. "Myth or Measurement: What Does the New Minimum Wage Research Say about Minimum Wages and Job Loss in the United States?," NBER Working Papers 28388, National Bureau of Economic Research, Inc.
    4. Mario Bossler & Sandra Broszeit, 2017. "Do minimum wages increase job satisfaction? Micro-data evidence from the new German minimum wage," LABOUR, CEIS, vol. 31(4), pages 480-493, December.
    5. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," NBER Working Papers 12663, National Bureau of Economic Research, Inc.
    6. David Neumark, 2019. "The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns," German Economic Review, Verein für Socialpolitik, vol. 20(3), pages 293-329, August.
    7. Micheli, Martin, 2016. "Minimum wage: Redistributive or discriminatory policy?," VfS Annual Conference 2016 (Augsburg): Demographic Change 145830, Verein für Socialpolitik / German Economic Association.
    8. Laporsek, Suzana & Orazem, Peter F. & Vodopivec, Matija & Vodopivec, Milan, 2019. "Long-Term Responses to Large Minimum Wage Shocks: Sub-Minimum and Super-Minimum Workers in Slovenia," IZA Discussion Papers 12123, Institute of Labor Economics (IZA).
    9. Philipp Berge & Hanna Frings, 2020. "High-impact minimum wages and heterogeneous regions," Empirical Economics, Springer, vol. 59(2), pages 701-729, August.
    10. Brewer, Mike & Crossley, Thomas F. & Zilio, Federico, 2019. "What Do We Really Know about the Employment Effects of the UK's National Minimum Wage?," IZA Discussion Papers 12369, Institute of Labor Economics (IZA).
    11. Mark B. Stewart & Joanna K. Swaffield, 2008. "The Other Margin: Do Minimum Wages Cause Working Hours Adjustments for Low‐Wage Workers?," Economica, London School of Economics and Political Science, vol. 75(297), pages 148-167, February.
    12. Filiz Gülal & Adam Ayaita, 2020. "The Impact of Minimum Wages on Well-Being: Evidence from a Quasi-experiment in Germany," Journal of Happiness Studies, Springer, vol. 21(7), pages 2669-2692, October.
    13. David Neumark & Peter Shirley, 2022. "Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 384-417, October.
    14. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    15. Roy E. Bailey & Timothy J. Hatton & Kris Inwood, 2016. "Atmospheric Pollution and Child Health in Late Nineteenth Century Britain," CEH Discussion Papers 052, Centre for Economic History, Research School of Economics, Australian National University.
    16. Loukas Karabarbounis & Jeremy Lise & Anusha Nath, 2022. "Minimum Wages and Labor Markets in the Twin Cities," Working Papers 793, Federal Reserve Bank of Minneapolis.
    17. Seltzer, Andrew & Borland, Jeff, 2016. "The Impact of the 1896 Factory and Shops Act on Victorian Labour Markets," IZA Discussion Papers 10388, Institute of Labor Economics (IZA).
    18. David Slichter, 2023. "The employment effects of the minimum wage: A selection ratio approach to measuring treatment effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(3), pages 334-357, April.
    19. Tomas Kucera, 2020. "Are Employment Effects of Minimum Wage the Same Across the EU? A Meta-Regression Analysis," Working Papers IES 2020/2, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2020.
    20. Brian Bell & Stephen Machin, 2018. "Minimum Wages and Firm Value," Journal of Labor Economics, University of Chicago Press, vol. 36(1), pages 159-195.

    More about this item

    Keywords

    minimum wage; employment evaluation; difference-in-differences; Germany;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ilrrev:v:73:y:2020:i:5:p:1070-1094. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.ilr.cornell.edu .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.