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The Causal Effects of the Minimum Wage Introduction in Germany: An Overview

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  • Marco Caliendo
  • Carsten Schröder
  • Linda Wittbrodt

Abstract

In 2015, Germany introduced a statutory hourly minimum wage that was not only universally binding but also set at a relatively high level. We discuss the short-run effects of this new minimum wage on a wide set of socio-economic outcomes, such as employment and working hours, earnings and wage inequality, dependent and selff-employment, as well as reservation wages and satisfaction. We also discuss diffculties in the implementation of the minimum wage and the measurement of its effects related to non-compliance and suitability of data sources. Two years after the minimum wage introduction, the following conclusions can be drawn: while hourly wages increased for low-wage earners, some small negative employment effects are also identifiable. The effects on aspired goals, such as poverty and inequality reduction, have not materialized in the short run. Instead, a tendency to reduce working hours is found, which alleviates the desired positive impact on monthly income. Additionally, the level of non-compliance was substantial in the short run, thus drawing attention to problems when implementing such a wide reaching policy.

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  • Marco Caliendo & Carsten Schröder & Linda Wittbrodt, 2018. "The Causal Effects of the Minimum Wage Introduction in Germany: An Overview," SOEPpapers on Multidisciplinary Panel Data Research 1018, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp1018
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    1. 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.
    2. 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.
    3. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    4. 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].
    5. Bachmann, Ronald & Bonin, Holger & Boockmann, Bernhard & Demir, Gökay & Felder, Rahel & Isphording, Ingo & Kalweit, René & Laub, Natalie & Vonnahme, Christina & Zimpelmann, Christian, 2020. "Auswirkungen des gesetzlichen Mindestlohns auf Löhne und Arbeitszeiten: Studie im Auftrag der Mindestlohnkommission," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 222998, September.
    6. Clemens, Jeffrey, 2019. "Making Sense of the Minimum Wage: A Roadmap for Navigating Recent Research," MPRA Paper 94324, University Library of Munich, Germany.
    7. Bonin, Holger & Pestel, Nico, 2020. "Der Mindestlohn birgt nach wie vor Beschäftigungsrisiken," IZA Standpunkte 98, Institute of Labor Economics (IZA).
    8. 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.
    9. 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.
    10. Clemens, Jeffrey & Strain, Michael R., 2019. "Understanding "Wage Theft": Evasion and Avoidance Responses to Minimum Wage Increases," IZA Discussion Papers 12167, Institute of Labor Economics (IZA).
    11. Bonin Holger & Isphording Ingo E. & Krause-Pilatus Annabelle & Pestel Nico & Rinne Ulf & Lichter Andreas, 2020. "The German Statutory Minimum Wage and Its Effects on Regional Employment and Unemployment," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(2-3), pages 295-319, April.
    12. 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," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 201-231.
    13. Mr. Christian H Ebeke & La-Bhus Fah Jirasavetakul & Ms. Yu Shi & Florian Misch & Mr. Davide Malacrino & Koralai Kirabaeva & Hyun Woo Park & Ms. Enrica Detragiache, 2020. "A European Minimum Wage: Implications for Poverty and Macroeconomic Imbalances," IMF Working Papers 2020/059, International Monetary Fund.
    14. 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).
    15. Daniel Cooper & María José Luengo‐Prado & Jonathan A. Parker, 2020. "The Local Aggregate Effects of Minimum Wage Increases," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(1), pages 5-35, February.
    16. Bachmann, Ronald & Bonin, Holger & Boockmann, Bernhard & Demir, Gökay & Felder, Rahel & Isphording, Ingo E. & Kalweit, René & Laub, Natalie & Vonnahme, Christina & Zimpelmann, Christian, 2020. "Auswirkungen des gesetzlichen Mindestlohns auf Löhne und Arbeitszeiten," IZA Research Reports 96, Institute of Labor Economics (IZA).
    17. Schröder Carsten & König Johannes & Fedorets Alexandra & Goebel Jan & Grabka Markus M. & Lüthen Holger & Metzing Maria & Schikora Felicitas & Liebig Stefan, 2020. "The economic research potentials of the German Socio-Economic Panel study," German Economic Review, De Gruyter, vol. 21(3), pages 335-371, September.
    18. 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.
    19. Alan Manning, 2021. "Monopsony in Labor Markets: A Review," ILR Review, Cornell University, ILR School, vol. 74(1), pages 3-26, January.

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    15. Backhaus, Teresa & Müller, Kai-Uwe, 2019. "Does the German minimum wage benefit low income households?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203585, Verein für Socialpolitik / German Economic Association.
    16. Schumann, Mathias, 2017. "The effects of minimum wages on firm-financed apprenticeship training," Labour Economics, Elsevier, vol. 47(C), pages 163-181.
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    More about this item

    Keywords

    Minimum wage; Evaluation; Earnings; Working hours; Employment;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • 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

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