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The effects of Germany's new minimum wage on employment and welfare dependency

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  • Schmitz, Sebastian

Abstract

In January 2015, Germany introduced a federal, statutory minimum wage of 8.50 € per hour. This study evaluates the effects of this policy on regular and marginal employment and on welfare dependency. Based on county-level administrative data, this study uses the difference-in-differences technique, exploiting regional variation in the bite of the minimum wage, i.e. the county-specific share of employees paid less than 8.50 € before the introduction of the minimum wage. The minimum wage had a considerable negative effect on marginal employment. There is also some indication that regular employment was slightly reduced. Concerning welfare dependency, the minimum wage reduced the number of working welfare recipients, with some indication that about one half of them left welfare receipt due to the minimum wage.

Suggested Citation

  • Schmitz, Sebastian, 2017. "The effects of Germany's new minimum wage on employment and welfare dependency," Discussion Papers 2017/21, Free University Berlin, School of Business & Economics.
  • Handle: RePEc:zbw:fubsbe:201721
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    Cited by:

    1. Braun Helge & Döhrn Roland & Krause Michael & Micheli Martin & Schmidt Torsten, 2020. "Macroeconomic Long-Run Effects of the German Minimum Wage when Labor Markets are Frictional," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(2-3), pages 351-386, April.
    2. Caliendo, Marco & Fedorets, Alexandra & Preuss, Malte & Schröder, Carsten & Wittbrodt, Linda, 2018. "The short-run employment effects of the German minimum wage reform," Labour Economics, Elsevier, vol. 53(C), pages 46-62.
    3. Burauel, Patrick & Caliendo, Marco & Grabka, Markus M. & Obst, Cosima & Preuss, Malte & Schröder, Carsten & Shupe, Cortnie, 2020. "The Impact of the German Minimum Wage on Individual Wages and Monthly Earnings," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 201-231.
    4. Bossler, Mario & Gürtzgen, Nicole & Lochner, Benjamin & Betzl, Ute & Feist, Lisa & Wegmann, Jakob, 2018. "Auswirkungen des gesetzlichen Mindestlohns auf Betriebe und Unternehmen," IAB-Forschungsbericht 201804, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Baptiste Françon, 2020. "Salaire minimum en Allemagne et segmentation de l’emploi," Post-Print halshs-03217241, HAL.
    6. Baptiste Françon, 2020. "Salaire minimum en Allemagne et segmentation de l’emploi," Working Papers of BETA 2020-36, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    7. Baptiste Françon, 2021. "Salaire minimum en Allemagne et segmentation de l’emploi," Working Papers halshs-03217241, HAL.
    8. Braun, Helge & Döhrn, Roland & Krause, Michael & Micheli, Martin & Schmidt, Torsten, 2020. "Macroeconomic Long-Run Effects of the German Minimum Wage when Labor Markets are Frictional," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 351-386.
    9. Bossler, Mario & Gürtzgen, Nicole & Lochner, Benjamin & Betzl, Ute & Feist, Lisa, 2018. "The German minimum wage: Effects on business expectations, profitability, and investments," FAU Discussion Papers in Economics 13/2018, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    10. Caliendo Marco & Wittbrodt Linda & Schröder Carsten, 2019. "The Causal Effects of the Minimum Wage Introduction in Germany – An Overview," German Economic Review, De Gruyter, vol. 20(3), pages 257-292, August.
    11. Oliver Bruttel, 2019. "The effects of the new statutory minimum wage in Germany: a first assessment of the evidence," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 53(1), pages 1-13, December.
    12. Burauel, Patrick & Caliendo, Marco & Grabka, Markus M. & Obst, Cosima & Preuss, Malte & Schröder, Carsten & Shupe, Cortnie, 2020. "The Impact of the German Minimum Wage on Individual Wages and Monthly Earnings," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 201-231.
    13. Koch, Andreas & Kirchmann, Andrea & Reiner, Marcel & Scheu, Tobias & Zühlke, Anne & Bonin, Holger, 2020. "Verhaltensmuster von Betrieben und Beschäftigten im Kontext des gesetzlichen Mindestlohns," IZA Research Reports 97, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    minimum wages; welfare dependency; labor supply; Germany;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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