Work Incentives and Labor Supply Effects of the 'Mini-Jobs Reform' in Germany

Discussion Papers 438, 22 S.

Viktor Steiner, Katharina Wrohlich

2004. Sep.

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We analyze the work incentives and labor supply effects of the so-called mini-jobs reform (subsidies of social security contributions to people with low-earnings jobs) introduced in Germany in April 2003. The analysis is based on a structural labor supply model embedded in a detailed tax-benefit microsimulation model for which we use the German Socio-Economic Panel (GSOEP). Our simulation results show that the likely employment effects of the mini-jobs reform will be small. The small positive participation effect is outweighed by a negative hours effect among already employed workers. The fiscal effects of the reform are also likely to be negative. We conclude that the analyzed mini-job reform is not an effective policy to increase employment of people with low earnings capacity.

Katharina Wrohlich

Head in the Gender Economics Department

JEL-Classification: J22;H31
Keywords: Mini-Job
Frei zugängliche Version: (econstor)