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

Author

Listed:
  • Caliendo, Marco

    (University of Potsdam)

  • Fedorets, Alexandra

    (DIW Berlin)

  • Preuß, Malte

    (Freie Universität Berlin)

  • Schröder, Carsten

    (DIW Berlin)

  • Wittbrodt, Linda

    (University of Potsdam)

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

  • Caliendo, Marco & Fedorets, Alexandra & Preuß, Malte & Schröder, Carsten & Wittbrodt, Linda, 2017. "The Short-Term Distributional Effects of the German Minimum Wage Reform," IZA Discussion Papers 11246, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11246
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    References listed on IDEAS

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    More about this item

    Keywords

    hourly wages; wage distribution; minimum wage; inequality;
    All these keywords.

    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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