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

Abstract

This paper studies the effects of the introduction of Germany’s statutory minimum wage in 2015 on employment and unemployment on the level of regional labor markets. Using variation in the regional exposure to the new wage floor, we employ a difference-in-differences approach that compares the evolution of employment and unemployment between regions with varying minimum wage bites. Overall, we find no statistically significant effect of the introduction of the German minimum wage on regular employment subject to social insurance, but a statistically significant negative effect on marginal employment. The reduction is not accompanied by a proportional increase in unemployment.

Trade Union Cooperation in Europe

“…Another German study found rather similar results (Bonin et al 2019). After two years there had been a reduction of marginal employment, but the researchers could not confirm any significant changes in regular employment and unemployment.…”

“…Some recent research in Europe covers the relationship between statutory minimum wages and such aspects as working hours and employment (Eurofound 2019a: 34). We have access to new studies on these topics in Germany, Greece and Ireland (Bonin et al 2019;Bruttel 2019;Caliendo et al 2018;Georgiadis et al 2018;McGuiness and Redmond 2018). The general result is that the impact on employment has been small.…”

Using Occupations to Evaluate the Employment Effects of the German Minimum Wage

“…In contrast, Ahlfeldt et al (2018) and Dustmann et al (2019) do not find any discernible effects on total employment using regional-level data if they account for region-specific differences in employment trends prior to the reform. Other studies that use regional wage variation distinguish between regular and marginal employment and identify negative effects; however, usually, only the effect on marginal employment is precisely estimated (Bonin et al 2019;Caliendo et al 2018;Schmitz 2019). According to this set of studies, between 70,000 and 200,000 marginal jobs have been lost due to the introduction of the minimum wage.…”

Wage regulations and shadow economy in 28 European Countries

“…Germany from second position to the seventh one moved within three years, it means that range of regulations were wider in 2016. The drop in the ranking was the effect of introduction of statutory minimum wage as one of the most significant institutional change in Germany after ' Hartz' reforms in 2003-2005(Bonin et al, 2020.…”