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Employment Adjustments Following Rises and Reductions in Minimum Wages: New Insights from a Survey Experiment

Author

Listed:
  • Bossler, Mario

    (Institute for Employment Research (IAB), Nuremberg)

  • Oberfichtner, Michael

    (Institute for Employment Research (IAB), Nuremberg)

  • Schnabel, Claus

    (University of Erlangen-Nuremberg)

Abstract

The effects of large minimum wage increases, like those planned in the UK and in some US states, are still unknown. We conduct a survey experiment that randomly assigns increases or decreases in minimum wages to about 6,000 establishments in Germany and asks the personnel managers about their expectations concerning employment adjustments. We find that employment reacts asymmetrically to positive and negative changes in minimum wages. The larger the increase in the minimum wage is, the larger the expected reduction in employment. Employment adjustments are more pronounced in those industries and plants which are more strongly affected by the current minimum wage and in those plants that have neither collective agreements nor a works council. In contrast, employment is not found to increase if the minimum wage is reduced by about 10 percent. This mainly reflects that plants with works councils and collective agreements would not cut wages.

Suggested Citation

  • Bossler, Mario & Oberfichtner, Michael & Schnabel, Claus, 2018. "Employment Adjustments Following Rises and Reductions in Minimum Wages: New Insights from a Survey Experiment," IZA Discussion Papers 11747, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11747
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    Cited by:

    1. Blömer, Maximilian J. & Guertzgen, Nicole & Pohlan, Laura & Stichnoth, Holger & van den Berg, Gerard J., 2024. "Unemployment effects of the German minimum wage in an equilibrium job search model," Labour Economics, Elsevier, vol. 91(C).
    2. Bazen, Stephen & Marimoutou, Velayoudom, 2018. "Federal minimum wage hikes do reduce teenage employment: A replication study of Bazen & Marimoutou (Oxford Bulletin of Economics and Statistics, 2002)," International Journal for Re-Views in Empirical Economics (IREE), ZBW - Leibniz Information Centre for Economics, vol. 2, pages 1-13.
    3. Bossler, Mario & Gürtzgen, Nicole & Kubis, Alexander & Küfner, Benjamin & Lochner, Benjamin, 2020. "The IAB Job Vacancy Survey: design and research potential," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 54(1), pages 1-13.
    4. Mario Bossler & Thorsten Schank, 2023. "Wage Inequality in Germany after the Minimum Wage Introduction," Journal of Labor Economics, University of Chicago Press, vol. 41(3), pages 813-857.
    5. Arne Heise & Toralf Pusch, 2021. "Die „Harmonie der Täuschungen“ muss enden, damit Politikberatung glaubwürdiger wird," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(12), pages 940-942, December.

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    Keywords

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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