The short- and medium-term distributional effects of the German minimum wage reform

This study quantifies the distributional effects of the minimum wage introduced in Germany in 2015. Using detailed Socio-Economic Panel survey data, we assess changes in the hourly wages, working hours, and monthly wages of employees who were entitled to be paid the minimum wage. We employ a differe...

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Bibliographic Details
Published in:Empirical economics 2023-03, Vol.64 (3), p.1149-1175
Main Authors: Caliendo, Marco, Fedorets, Alexandra, Preuss, Malte, Schröder, Carsten, Wittbrodt, Linda
Format: Article
Language:English
Subjects:
Econometrics
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Employees
Finance
Inequality
Insurance
Management
Minimum wage
Overtime pay
Panel data
Regional differences
Regions
Social policy
Socioeconomic factors
Statistics for Business
Variables
Wage differential
Wages & salaries
Working hours
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Summary:This study quantifies the distributional effects of the minimum wage introduced in Germany in 2015. Using detailed Socio-Economic Panel survey data, we assess changes in the hourly wages, working hours, and monthly wages of employees who were entitled to be paid the minimum wage. We employ a difference-in-differences analysis, exploiting regional variation in the “bite” of the minimum wage. At the bottom of the hourly wage distribution, we document wage growth of 9% in the short term and 21% in the medium term. At the same time, we find a reduction in working hours, such that the increase in hourly wages does not lead to a subortionate increase in monthly wages. We conclude that working hours adjustments play an important role in the distributional effects of minimum wages.
ISSN:0377-7332
1435-8921
DOI:10.1007/s00181-022-02288-4