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Work Incentives and Labor Supply Effects of the 'Mini-Jobs Reform' in Germany

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  • Viktor Steiner
  • Katharina Wrohlich

Abstract

We analyze the work incentives and labor supply effects of the so-called mini-jobs reform (subsidies of social security contributions to people with low-earnings jobs) introduced in Germany in April 2003. The analysis is based on a structural labor supply model embedded in a detailed tax-benefit microsimulation model for which we use the German Socio-Economic Panel (GSOEP). Our simulation results show that the likely employment effects of the mini-jobs reform will be small. The small positive participation effect is outweighed by a negative hours effect among already employed workers. The fiscal effects of the reform are also likely to be negative. We conclude that the analyzed mini-job reform is not an effective policy to increase employment of people with low earnings capacity.

Suggested Citation

  • Viktor Steiner & Katharina Wrohlich, 2004. "Work Incentives and Labor Supply Effects of the 'Mini-Jobs Reform' in Germany," Discussion Papers of DIW Berlin 438, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp438
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    1. Moffitt, Robert A., 2002. "Welfare programs and labor supply," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 34, pages 2393-2430, Elsevier.
    2. Peter Haan, 2004. "Discrete Choice Labor Supply: Conditional Logit vs. Random Coefficient Models," Discussion Papers of DIW Berlin 394, DIW Berlin, German Institute for Economic Research.
    3. Richard Blundell & Hilary W. Hoynes, 2004. "Has 'In-Work' Benefit Reform Helped the Labor Market?," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000, pages 411-460, National Bureau of Economic Research, Inc.
    4. Blundell, Richard, 2000. "Work Incentives and 'In-Work' Benefit Reforms: A Review," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 16(1), pages 27-44, Spring.
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    Cited by:

    1. Olivier Bargain & Marco Caliendo & Peter Haan & Kristian Orsini, 2010. "“Making work pay” in a rationed labor market," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(1), pages 323-351, January.
    2. Olivier Bargain & Karina Doorley, 2009. "In-work transfers in good times and bad - simulations for Ireland," Working Papers 200930, School of Economics, University College Dublin.
    3. Ronny Freier & Viktor Steiner, 2007. ""Marginal Employment": Stepping Stone or Dead End? Evaluating the German Experience," Discussion Papers of DIW Berlin 744, DIW Berlin, German Institute for Economic Research.
    4. Katharina Wrohlich, 2004. "Child Care Costs and Mothers' Labor Supply: An Empirical Analysis for Germany," Discussion Papers of DIW Berlin 412, DIW Berlin, German Institute for Economic Research.
    5. Pfeifer, Christian, 2007. "Eine theoretische und empirische Analyse der betrieblichen Determinanten von Teilzeitarbeit, Mini- und Midi-Jobs (A theoretical and empirical analysis of the company determinants of part-time work, mi," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 40(1), pages 65-76.
    6. Charlotte Büchner & Peter Haan & Christian Schmitt & C. Katharina Spieß & Katharina Wrohlich, 2006. "Wirkungsstudie "Elterngeld": Gutachten des DIW Berlin im Auftrag des Bundesministeriums für Familie, Senioren, Frauen und Jugend, Berlin," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 18, number pbk18, January.
    7. Spermann, Alexander, 2006. "Basic Income Reform in Germany: Better Gradualism than Cold Turkey," ZEW Discussion Papers 06-064, ZEW - Leibniz Centre for European Economic Research.
    8. Michael Fertig, 2011. "Was hat die Reform der Minijobs bewirkt? Erfahrungen nach einem Jahr," Schriften des Rheinisch-Westfälischen Instituts für Wirtschaftsforschung, Duncker & Humblot GmbH, Berlin, edition 1, volume 77, number 51798.
    9. Peter Haan, 2005. "State Dependence and Female Labor Supply in Germany: The Extensive and the Intensive Margin," Discussion Papers of DIW Berlin 538, DIW Berlin, German Institute for Economic Research.
    10. Olivier Bargain & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2011. "Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency," CESifo Working Paper Series 3534, CESifo.
    11. Peter Haan & Viktor Steiner, 2007. "Mehr Beschäftigung durch Subventionierung der Sozialbeiträge? Eine empirische Evaluation aktueller Reformvorschläge," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(4), pages 378-388, November.
    12. Peichl, Andreas, 2005. "Die Evaluation von Steuerreformen durch Simulationsmodelle," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 05-1, University of Cologne, FiFo Institute for Public Economics.
    13. Pfeifer, Christian, 2005. "Betriebliche Determinanten von Teilzeitarbeit, Mini- und Midi-Jobs; Eine theoretische und empirische Analyse mit niedersächsischen Betriebsdaten," Hannover Economic Papers (HEP) dp-324, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    14. Müller, Kai-Uwe & Steiner, Viktor, 2011. "Beschäftigungswirkungen von Lohnsubventionen und Mindestlöhnen - Zur Reform des Niedriglohnsektors in Deutschland," Discussion Papers 2011/4, Free University Berlin, School of Business & Economics.
    15. Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung (ed.), 2006. "Arbeitslosengeld II reformieren: Ein zielgerichtetes Kombilohnmodell. Expertise im Auftrag des Bundesministers für Wirtschaft und Technologie," Occasional Reports / Expertisen, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, number 75364, April.
    16. Freier, Ronny & Steiner, Viktor, 2007. "‘Marginal Employment’ and the Demand for Heterogenous Labour: Empirical Evidence from a Multi-Factor Labour Demand Model for Germany," IZA Discussion Papers 2577, Institute of Labor Economics (IZA).
    17. Olivier Bargain & Marco Caliendo & Peter Haan & Kristian Orsini, 2005. "'Making Work Pay' in a Rationed Labour Market: The Mini-Job Reform in Germany," Discussion Papers of DIW Berlin 536, DIW Berlin, German Institute for Economic Research.
    18. Viktor Steiner & Katharina Wrohlich, 2006. "Die Wirkung ausgewählter familienpolitischer Instrumente auf das Arbeitsangebot von Eltern: Expertise für den Familienbericht der Bundesregierung," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 16, number pbk16, January.
    19. Freier, Ronny & Steiner, Viktor, 2007. "‘Marginal Employment’: Stepping Stone or Dead End? Evaluating the German Experience," IZA Discussion Papers 3175, Institute of Labor Economics (IZA).
    20. Ronny Freier & Viktor Steiner, 2007. "'Marginal Employment' and the Demand for Heterogenous Labour: Empirical Evidence from a Multi-factor Labour Demand Model for Germany," Discussion Papers of DIW Berlin 662, DIW Berlin, German Institute for Economic Research.
    21. Pfeifer, Christian, 2007. "Eine theoretische und empirische Analyse der betrieblichen Determinanten von Teilzeitarbeit, Mini- und Midi-Jobs (A theoretical and empirical analysis of the company determinants of part-time work, mi," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 40(1), pages 65-76.

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    Keywords

    Mini-Job;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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