IDEAS home Printed from https://ideas.repec.org/p/zbw/fubsbe/201721.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/167586/1/895248638.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Karl Brenke, 2012. "Geringe Stundenlöhne, lange Arbeitszeiten," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 79(21), pages 3-12.
    2. Antonczyk, Dirk & Fitzenberger, Bernd & Sommerfeld, Katrin, 2010. "Rising wage inequality, the decline of collective bargaining, and the gender wage gap," Labour Economics, Elsevier, vol. 17(5), pages 835-847, October.
    3. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 967-1015.
    4. Bachmann, Ronald & Bauer, Thomas K. & Kluve, Jochen & Schaffner, Sandra & Schmidt, Christoph M., 2008. "Mindestlöhne in Deutschland: Beschäftigungswirkungen und fiskalische Effekte," RWI Materialien 43, RWI - Leibniz-Institut für Wirtschaftsforschung.
    5. Nikolaos Askitas & Klaus F. Zimmermann, 2009. "Google Econometrics and Unemployment Forecasting," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 55(2), pages 107-120.
    6. David Card, 1990. "The Impact of the Mariel Boatlift on the Miami Labor Market," ILR Review, Cornell University, ILR School, vol. 43(2), pages 245-257, January.
    7. Gernandt Johannes & Pfeiffer Friedhelm, 2007. "Rising Wage Inequality in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 227(4), pages 358-380, August.
    8. repec:eee:labchp:v:3:y:1999:i:pb:p:2101-2163 is not listed on IDEAS
    9. Metin Akyol & Michael Neugart & Stefan Pichler, 2013. "Were the Hartz Reforms Responsible for the Improved Performance of the German Labour Market?," Economic Affairs, Wiley Blackwell, vol. 33(1), pages 34-47, February.
    10. Bert Rürup & Dirk Heilmann, 2012. "Arbeitsmarktreformen: Was noch zu tun bleibt," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 92(5), pages 339-344, May.
    11. Angrist, Joshua D. & Krueger, Alan B., 1999. "Empirical strategies in labor economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.),Handbook of Labor Economics, edition 1, volume 3, chapter 23, pages 1277-1366, Elsevier.
    12. Bodo Aretz & Melanie Arntz & Terry Gregory, 2013. "The Minimum Wage Affects Them All: Evidence on Employment Spillovers in the Roofing Sector," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 282-315, August.
    13. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, September.
    14. Steffen Henzel & Kira Engelhardt, 2014. "Arbeitsmarkteffekte des flächendeckenden Mindestlohns in Deutschland – eine Sensitivitätsanalyse," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 67(10), pages 23-29, May.
    15. Gregory, Terry, 2014. "When the minimum wage bites back: Quantile treatment effects of a sectoral minimum wage in Germany," ZEW Discussion Papers 14-133, ZEW - Leibniz Centre for European Economic Research.
    16. Hetschko, Clemens & Schöb, Ronnie & Wolf, Tobias, 2016. "Income support, (un-)employment and well-being," Discussion Papers 2016/15, Free University Berlin, School of Business & Economics.
    17. Juan Dolado & Francis Kramarz & Steven Machin & Alan Manning & David Margolis & Coen Teulings, 1996. "The Economic Impact of Minimum Wages in Europe," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00353896, HAL.
    18. Bossler, Mario & Gerner, Hans-Dieter, 2016. "Employment effects of the new German minimum wage: Evidence from establishment-level micro data," Annual Conference 2016 (Augsburg): Demographic Change 145926, Verein für Socialpolitik / German Economic Association.
    19. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.),Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163, Elsevier.
    20. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
    21. Michael C. Burda & Jennifer Hunt, 2011. "What Explains the German Labor Market Miracle in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 273-335.
    22. Bodo Aretz & Melanie Arntz & Terry Gregory & Christian Rammer, 2012. "Der Mindestlohn im Dachdeckerhandwerk: Auswirkungen auf Beschäftigung, Arbeitnehmerschutz und Wettbewerb [The minimum wage in the roofing sector: impact on employment, worker protection and competi," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 45(3), pages 233-256, December.
    23. Hermann Gartner & Sabine Klinger, 2010. "Verbesserte Institutionen für den Arbeitsmarkt in der Wirtschaftskrise," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 90(11), pages 728-734, November.
    24. Christian Dustmann & Bernd Fitzenberger & Uta Sch?nberg & Alexandra Spitz-Oener, 2014. "From Sick Man of Europe to Economic Superstar: Germany's Resurgent Economy," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 167-188, Winter.
    25. Patrick Arni & Werner Eichhorst & Nico Pestel & Alexander Spermann & Klaus F. Zimmermann, 2014. "Der gesetzliche Mindestlohn in Deutschland: Einsichten und Handlungsempfehlungen aus der Evaluationsforschung," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 134(2), pages 149-182.
    26. Bernhard Boockmann & Raimund Krumm & Michael Neumann & Pia Rattenhuber, 2013. "Turning the Switch: An Evaluation of the Minimum Wage in the German Electrical Trade Using Repeated Natural Experiments," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 316-348, August.
    27. Martin Biewen & Andos Juhasz, 2012. "Understanding Rising Income Inequality in Germany, 1999/2000–2005/2006," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(4), pages 622-647, December.
    28. Hanna Frings, 2013. "The Employment Effect of Industry-Specific, Collectively Bargained Minimum Wages," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 258-281, August.
    29. Markus M. Grabka & Jan Goebel, 2014. "Reduction in Income Inequality Faltering," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 4(1), pages 16-25.
    30. AndreasKnabe & RonnieSchöb & MarcelThum & MichaelWeber, 2016. "Mindestlohn ohne Nebenwirkungen?," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 23(03), pages 32-35, June.
    31. Thomas K. Bauer & Jochen Kluve & Sandra Schaffner & Christoph M. Schmidt, 2009. "Fiscal Effects of Minimum Wages: An Analysis for Germany," German Economic Review, Verein für Socialpolitik, vol. 10(2), pages 224-242, May.
    32. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    33. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
    34. repec:spr:inrvec:v:45:y:2012:i:3:p:233-256 is not listed on IDEAS
    35. Mario Bossler, 2017. "Employment expectations and uncertainties ahead of the new German minimum wage," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 327-348, September.
    36. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section..
    37. Dominik Groll, 2015. "Mindestlohn: erste Anzeichen für Jobverluste," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 95(6), pages 439-440, June.
    38. Pia Rattenhuber, 2014. "Building the minimum wage: the distributional impact of Germany’s first sectoral minimum wage on wages and hours across different wage bargaining regimes," Empirical Economics, Springer, vol. 46(4), pages 1429-1446, June.
    39. Wolfgang Ochel, 2005. "Hartz IV – Welfare to Work in Germany," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(2), pages 18-25, 07.
    40. repec:fth:prinin:300 is not listed on IDEAS
    41. repec:zbw:rwimat:043 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. 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, ZBW - Leibniz Information Centre for Economics, pages 201-231.
    3. Marco Caliendo & Carsten Schröder & Linda Wittbrodt, 2019. "The Causal Effects of the Minimum Wage Introduction in Germany – An Overview," German Economic Review, Verein für Socialpolitik, vol. 20(3), pages 257-292, August.
    4. 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.
    5. 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].
    6. 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).
    7. 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.
    8. 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.

    More about this item

    Keywords

    minimum wages; welfare dependency; labor supply; Germany;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:fubsbe:201721. 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: (ZBW - Leibniz Information Centre for Economics). General contact details of provider: http://edirc.repec.org/data/fwfubde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.