Labor Market and Income Effects of a Legal Minimum Wage in Germany
In view of rising wage and income inequality, the introduction of a legal minimum wage has recently become an important policy issue in Germany. We analyze the distributional effects of a nationwide legal minimum wage of 7.50 € per hour on the basis of a microsimulation model which accounts for the complex interactions between individual wages, the tax-benefit system and net household incomes, also taking into account potential employment effects as well as indirect effects on consumption. Simulation results show that the minimum wage would be rather ineffective in raising net household incomes and reducing income inequality, even if it led to a substantial increase in hourly wages at the bottom of the wage distribution. The ineffectiveness of a minimum wage in Germany is mainly due to the existing system of means-tested income support and the position of minimum wage earners in the income distribution.
|Date of creation:||May 2010|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peter Haan & Viktor Steiner, 2008.
"Making Work Pay for the Elderly Unemployed - Evaluating Alternative Policy Reforms for Germany,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 64(3), pages 380-402, September.
- Peter Haan & Viktor Steiner, 2006. "Making Work Pay for the Elderly Unemployed: Evaluating Alternative Policy Reforms for Germany," Discussion Papers of DIW Berlin 641, DIW Berlin, German Institute for Economic Research.
- Haan, Peter & Steiner, Viktor, 2006. "Making Work Pay for the Elderly Unemployed: Evaluating Alternative Policy Reforms for Germany," IZA Discussion Papers 2424, Institute for the Study of Labor (IZA).
- repec:sae:ilrrev:v:49:y:1996:i:3:p:547-552 is not listed on IDEAS
- Johnson, William R & Browning, Edgar K, 1983. "The Distributional and Efficiency Effects of Increasing the Minimum Wage: A Simulation," American Economic Review, American Economic Association, vol. 73(1), pages 204-211, March.
- Herwig Immervoll, 2007.
"Minimum Wages, Minimum Labour Costs and the Tax Treatment of Low-Wage Employment,"
OECD Social, Employment and Migration Working Papers
46, OECD Publishing.
- Immervoll, Herwig, 2007. "Minimum Wages, Minimum Labour Costs and the Tax Treatment of Low-Wage Employment," IZA Discussion Papers 2555, Institute for the Study of Labor (IZA).
- Sutherland, H., 2001. "The National Minimum Wage and In-work Poverty," Cambridge Working Papers in Economics 0111, Faculty of Economics, University of Cambridge.
- Viktor Steiner & Katharina Wrohlich, 2005. "Work Incentives and Labor Supply Effects of the â€˜Mini-Jobs Reformâ€™ in Germany," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 32(1), pages 91-116, 03.
- Andreas Knabe & Ronnie Schöb, 2009.
"Minimum Wage Incidence: The Case for Germany,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 65(4), pages 403-441, December.
- Viktor Steiner & Katharina Wrohlich & Peter Haan & Johannes Geyer, 2008. "Documentation of the Tax-Benefit Microsimulation Model STSM: Version 2008," Data Documentation 31, DIW Berlin, German Institute for Economic Research.
- Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
- Barry Bluestone & Teresa Ghilarducci, "undated". "Making Work Pay, Wage Insurance for the Working Poor," Economics Public Policy Brief Archive ppb_28, Levy Economics Institute.
- Amanda Gosling, 1996. "Minimum wages: possible effects on the distribution of income," Fiscal Studies, Institute for Fiscal Studies, vol. 17(4), pages 31-48, November.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp4929. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.