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The Short-Term Distributional Effects of the German Minimum Wage Reform

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Listed:
  • Marco Caliendo
  • Alexandra Fedorets
  • Malte Preuss
  • Carsten Schröder
  • Linda Wittbrodt

Abstract

This study quantifies the short-term distributional effects of the new statutory minimum wage in Germany. Using detailed survey data (German Socio-Economic Panel), we assess changes in the distributions of hourly wages, contractual and actual working hours, and monthly earnings. Our descriptive results indicate growth at the bottom of the hourly wage distribution in the post-reform year, but also considerable noncompliance among eligible employees. In a second step, we employ a difference-in-differences analysis and exploit regional variation in the "bite" of the intervention, measured by the share of employees in a geographical region with wages below the minimum wage prior to the reform. We document the reform's positive effect at the bottom of the wage distribution. However, we find a negative effect of the reform on contractual hours worked, which explains why there is no effect on monthly earnings. Given that actual hours worked decrease less than contractual hours, our evidence suggests an increase in unpaid overtime.

Suggested Citation

  • Marco Caliendo & Alexandra Fedorets & Malte Preuss & Carsten Schröder & Linda Wittbrodt, 2017. "The Short-Term Distributional Effects of the German Minimum Wage Reform," SOEPpapers on Multidisciplinary Panel Data Research 948, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp948
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    References listed on IDEAS

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    Cited by:

    1. Caliendo, Marco & Fedorets, Alexandra & Preuss, Malte & Schröder, Carsten & Wittbrodt, Linda, 2018. "The short-run employment effects of the German minimum wage reform," Labour Economics, Elsevier, vol. 53(C), pages 46-62.
    2. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo Group Munich.
    3. repec:iab:iabfob:201804 is not listed on IDEAS
    4. Marco Caliendo & Alexandra Fedorets & Malte Preuss & Carsten Schröder & Linda Wittbrodt, 2017. "The Short-Term Distributional Effects of the German Minimum Wage Reform," SOEPpapers on Multidisciplinary Panel Data Research 948, DIW Berlin, The German Socio-Economic Panel (SOEP).
    5. Bargain, Olivier & Doorley, Karina & Van Kerm, Philippe, 2018. "Minimum Wages and the Gender Gap in Pay: New Evidence from the UK and Ireland," IZA Discussion Papers 11502, Institute of Labor Economics (IZA).
    6. repec:bla:germec:v:20:y:2019:i:3:p:257-292 is not listed on IDEAS
    7. repec:esr:resser:rs86 is not listed on IDEAS
    8. Filiz Gülal & Adam Ayaita, 2018. "The Impact of Minimum Wages on Well-Being: Evidence from a Quasi-Experiment in Germany," SOEPpapers on Multidisciplinary Panel Data Research 969, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. Marco Caliendo & Carsten Schröder & Linda Wittbrodt, 2019. "The Causal Effects of the Minimum Wage Introduction in Germany – An Overview," German Economic Review, Verein für Socialpolitik, vol. 20(3), pages 257-292, August.
    10. Bonin, Holger & Isphording, Ingo E. & Krause-Pilatus, Annabelle & Lichter, Andreas & Pestel, Nico & Rinne, Ulf, 2019. "The German Statutory Minimum Wage and Its Effects on Regional Employment and Unemployment," IZA Policy Papers 145, Institute of Labor Economics (IZA).
    11. repec:nea:journl:y:2018:i:40:p:137-156 is not listed on IDEAS
    12. Ahlfeldt, Gabriel M. & Roth, Duncan & Seidel, Tobias, 2018. "The regional effects of Germany’s national minimum wage," Economics Letters, Elsevier, vol. 172(C), pages 127-130.
    13. Alexandra Fedorets & Alexey Filatov & Cortnie Shupe, 2018. "Great Expectations: Reservation Wages and the Minimum Wage Reform," SOEPpapers on Multidisciplinary Panel Data Research 968, DIW Berlin, The German Socio-Economic Panel (SOEP).
    14. repec:ces:ifodic:v:16:y:2019:i:4:p:50000000004802 is not listed on IDEAS
    15. repec:ces:ifodic:v:16:y:2019:i:04:p:14-18 is not listed on IDEAS
    16. Teresa Backhaus & Kai-Uwe Müller, 2019. "Does the German Minimum Wage Help Low Income Households?: Evidence from Observed Outcomes and the Simulation of Potential Effects," Discussion Papers of DIW Berlin 1805, DIW Berlin, German Institute for Economic Research.
    17. 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).

    More about this item

    Keywords

    minimum wage; wage distribution; hourly wages; 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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