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

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 shortrun effects of this new minimum wage on a wide set of socioeconomic outcomes, such as employment and working hours, earnings and wage inequality, dependent and selfemployment, as well as reservation wages and satisfaction. We also discuss difficulties 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 materialised 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 noncompliance was substantial in the short run, thus drawing attention to problems when implementing such a wide reaching policy.

The effects of the new statutory minimum wage in Germany: a first assessment of the evidence

“…Analyses of the German minimum wage can draw on a wide range of data sources (Mindestlohnkommission 2018;Caliendo et al 2019). The first set of data comes from administrative sources such as the employment statistics of the Bundesagentur für Arbeit (German Federal Employment Agency).…”

“…This article provides a comprehensive survey of the existing empirical evidence on the effects of what is regarded as the most important labour market reform in Germany since the Schröder government's Agenda 2010 program in the early 2000s. It attempts to provide a rather non-technical access to the findings available so far (for a more technical economics perspective, see Caliendo et al 2019) and goes beyond Bruttel et al (2018), who could only present descriptive findings that were available at that time. Our article draws on a wide range of evidence from both descriptive statistics and causal impact analyses.…”

The German Statutory Minimum Wage and Its Effects on Regional Employment and Unemployment

“…Overall, this paper contributes to the literature evaluating the employment effects of the German minimum wage (see Caliendo et al (2018b) for an overview). Our findings are consistent with Caliendo et al (2018a) who also report moderate negative effects on overall employment in the short run until 2015, which are mainly driven by a sharp decline in marginal employment.…”

The Local Aggregate Effects of Minimum Wage Increases

“…That is, the effect of the minimum wage on the economy will be differentially (nonlinearly) larger when the size of the change in the minimum wage increases or the level of the minimum wage itself grows. In contrast, Caliendo, Schröder, and Wittbrodt (2018) study the effects of a relatively high minimum wage increase in Germany in 2015 and find only a small negative effect on overall employment. Similarly, two recent papers that focus on episodes where the minimum wage rose around 40% find significant employment effects for affected groups of workers; see Clemens and Wither (2019) and Kreiner, Reck, and Skov (Forthcoming).…”

“…Similarly, two recent papers that focus on episodes where the minimum wage rose around 40% find significant employment effects for affected groups of workers; see Clemens and Wither (2019) and Kreiner, Reck, and Skov (Forthcoming). In contrast, Caliendo, Schröder, and Wittbrodt (2018) study the effects of a relatively high minimum wage increase in Germany in 2015 and find only a small negative effect on overall employment. 42 So far, states and other localities have increased their minimum wages at a gradual pace.…”