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The effects of the new statutory minimum wage in Germany: a first assessment of the evidence

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  • Oliver Bruttel

    (Geschäfts- und Informationsstelle für den Mindestlohn (Coordination and Information Office for the Minimum Wage), c/o Bundesanstalt für Arbeitsschutz und Arbeitsmedizin)

Abstract

Germany did not establish a statutory minimum wage until 2015. The new wage floor was set at an initial level of €8.50 per hour. When it was introduced, about 11 percent of German employees earned less than that amount. Based on descriptive figures, qualitative research and difference-in-differences analyses, we provide an overview of the available evidence regarding some of the topics that have attracted the most attention in international research and policy debates: the effects on wages and the wage distribution including issues of compliance in relation to the implementation of the new minimum wage, on the risk of poverty, on employment and the impact on businesses for instance with respect to productivity, prices or profits. The evidence shows that the minimum wage has increased hourly wages significantly, while the effect on monthly salaries has been far less substantial, as companies have partly reduced contractually agreed-upon working hours. Besides reductions in working hours or increases in work intensity, companies highly affected by the introduction of the minimum wage have used price increases and have had to accept profit reductions as a response to the new wage floor. If studies found any employment effects, they were—whether positive or negative—rather small in relation to the overall number of jobs. As in other countries, the minimum wage has not helped to reduce welfare dependency and the risk of poverty. Non-compliance remains a challenge for the implementation of the new statutory minimum wage.

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  • 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.
  • Handle: RePEc:spr:jlabrs:v:53:y:2019:i:1:d:10.1186_s12651-019-0258-z
    DOI: 10.1186/s12651-019-0258-z
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    2. Bossler, Mario & Liang, Ying & Schank, Thorsten, 2024. "The Devil Is in the Details: Heterogeneous Effects of the German Minimum Wage on Working Hours and Minijobs," IZA Discussion Papers 16964, Institute of Labor Economics (IZA).
    3. Clemens Ohlert, 2024. "Minimum Wage Effects on Gender Gaps in Working Hours and Earnings in Germany," Working Papers 663, ECINEQ, Society for the Study of Economic Inequality.
    4. 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.
    5. 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].
    6. Mario Bossler & Michael Oberfichtner & Claus Schnabel, 2020. "Employment Adjustments Following Rises and Reductions in Minimum Wages: New Insights From a Survey Experiment," LABOUR, CEIS, vol. 34(3), pages 323-346, September.
    7. Haapanala, Henri & Marx, Ive & Parolin, Zachary, 2022. "Decent Wage Floors in Europe: Does the Minimum Wage Directive Get It Right?," IZA Discussion Papers 15660, Institute of Labor Economics (IZA).
    8. Ingwersen, Kai & Thomsen, Stephan L., 2022. "Minimum Wage in Germany: Countering the Wage and Employment Gap between Migrants and Natives?," IZA Discussion Papers 15823, Institute of Labor Economics (IZA).
    9. Skedinger, Per, 2022. "The Economics behind the Directive on Adequate Minimum Wages in the EU: A Critical Assessment," Working Paper Series 1438, Research Institute of Industrial Economics.
    10. Mario Bossler & Martin Popp, 2022. "Labor Demand on a Tight Leash," Papers 2203.05593, arXiv.org, revised Feb 2024.
    11. Arnd Kölling, 2022. "Monopsony power and the demand for low-skilled workers," The Economic and Labour Relations Review, , vol. 33(2), pages 377-395, June.

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    More about this item

    Keywords

    Germany; Minimum wage; Evaluation; Survey; Wages; Employment; Business;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • 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
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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