The short-run employment effects of the German minimum wage reform

Abstract

SOEPpapers on Multidisciplinary Panel Data Research at DIW Berlin This series presents research findings based either directly on data from the German SocioEconomic Panel study (SOEP) or using SOEP data as part of an internationally comparable data set (e.g. CNEF, ECHP, LIS, LWS, CHER/PACO). SOEP is a truly multidisciplinary household panel study covering a wide range of social and behavioral sciences:

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

“…My study also adds to previous evidence that adverse employment effects were geographically confined to East Germany (ibid.) and concentrated among marginally employed workers (Caliendo et al 2018;Schmitz 2019). The finding that regular employment increased initially in response to the reform is in line with extant studies as well (Schmitz 2019;Garloff 2019).…”

“…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.…”

“…Theoretically, this may be rationalised by monopsonistic competition (Manning 2003). Concerning the German reform, previous studies found no discernible employment effects (Ahlfeldt et al 2018;Dustmann et al 2019) or at most moderately negative effects (Bossler/Gerner 2019;Caliendo et al 2018). Furthermore, some studies have identified a positive impact on regular employment, i. e. jobs that yield earnings above €450 per month, alongside a negative impact on marginal employment, i. e. jobs that pay below this threshold (Garloff 2019;Holtemoller/Pohle 2017;Schmitz 2019).…”

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. However, we extend the period of investigation to the medium run until the fourth quarter of 2016 and explicitly study the effects of the minimum wage on regional unemployment levels (also see Ahlfeldt et al (2018)).…”

“…This study analyzes the effects of the introduction of the German statutory minimum wage on January 1, 2015 on employment and unemployment at the level of regional labor markets in the short and medium run. To estimate the causal effect of this nationwide reform, we follow earlier work by Card (1992), Dolton et al (2015) and Caliendo et al (2018a) and exploit differences in the bite of the minimum wage across regional labor markets to apply a difference-in-differences approach that compares the evolution of aggregate employment and unemployment for labor market regions with different minimum wage bites. For each labor market region, we compute the bite of the minimum wage based on information from the Structure of Earnings Survey and link differences in the regional bite to administrative information on local employment and unemployment over the period 2013-2016. The main finding of this paper is that the introduction of Germany's statutory minimum wage did not have pronounced effects on aggregate regional employment levels in the short to medium run, i.e., over the period 2015 to 2016.…”