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

SOEPpapers 1018, 44 S.

Marco Caliendo, Carsten Schröder, Linda Wittbrodt

2018

get_appBeitrag (PDF  0.67 MB)

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 selff-employment, as well as reservation wages and satisfaction. We also discuss diffculties 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.

Carsten Schröder

Direktorium SOEP und Bereichsleitung Angewandte Panelanalysen in der Infrastruktureinrichtung Sozio-oekonomisches Panel



JEL-Classification: J22;J23;J31;J38
Keywords: Minimum wage, Evaluation, Earnings, Working hours, Employment