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

Author

Listed:
  • Caliendo, Marco

    () (University of Potsdam)

  • Schröder, Carsten

    () (DIW Berlin)

  • Wittbrodt, Linda

    () (University of Potsdam)

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 self-employment, as well as reservation wages and satisfaction. We also discuss difficulties 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.

Suggested Citation

  • Caliendo, Marco & Schröder, Carsten & Wittbrodt, Linda, 2018. "The Causal Effects of the Minimum Wage Introduction in Germany: An Overview," IZA Discussion Papers 12043, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp12043
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    More about this item

    Keywords

    minimum wage; evaluation; earnings; working hours; employment;

    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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