The Short-Term Distributional Effects of the German Minimum Wage Reform

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in SOEPpapers on Multidisciplinary Panel Data Research at DIW BerlinThis 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: economics, sociology, psychology, survey methodology, econometrics and applied statistics, educational science, political science, public health, behavioral genetics, demography, geography, and sport science.The decision to publish a submission in SOEPpapers is made by a board of editors chosen by the DIW Berlin to represent the wide range of disciplines covered by SOEP. There is no external referee process and papers are either accepted or rejected without revision. Papers appear in this series as works in progress and may also appear elsewhere. They often represent preliminary studies and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be requested from the author directly.Any opinions expressed in this series are those of the author(s) and not those of DIW Berlin.Research disseminated by DIW Berlin may include views on public policy issues, but the institute itself takes no institutional policy positions. Working Paper AbstractThis study quantifies the short-term distributional effects of the new statutory minimum wage in Germany. Using detailed survey data (German Socio-Economic Panel), we assess changes in the distributions of hourly wages, contractual and actual working hours, and monthly earnings. Our descriptive results indicate growth at the bottom of the hourly wage distribution in the post-reform year, but also considerable noncompliance among eligible employees. In a second step, we employ a difference-in-differences analysis and exploit regional variation in the "bite" of the intervention, measured by the share of employees in a geographical region with wages below the minimum wage prior to the reform. We document the reform's positive effect at the bottom of the wage distribution. However, we find a negative effect of the reform on contractual hours worked, which explains why there is no effect on monthly earnings. Given that actual hours worked decrease less than contractual hours, our evidence suggests an increase in unpaid overt...

Does the German Minimum Wage Help Low Income Households?: Evidence from Observed Outcomes and the Simulation of Potential Effects

“…In order to cope with observations with extreme (and mostly implausible) values in our sample, we censor the bottom and top percentile of the hourly wage, the total wage, and the hours distribution by replacing the values below the bottom percentile and above the top percentile with the threshold value of the respective percentile. This is in line with the censoring procedure in other studies (see, e.g., Caliendo et al, 2018Caliendo et al, , 2017…”

“…Autor et al (2016) point out that potential mechanisms behind wage spillovers are not fully understood. Applications for Germany include Brautzsch and Schultz (2015), Amlinger et al (2016), Mindestlohnkommission (2016b), Caliendo et al (2017), Bossler and Broszeit (2017), Bruttel et al (2018), and Ahlfeldt et al (2018) who all confirm wage increases at the bottom of the distribution for Germany. Another important finding is the significant degree of non-compliance.…”

“…As a consequence the minimum wage was introduced to serve as a redistributive tool for reducing inequality in earnings and income. To this date the empirical literature on the distributional impact of the minimum wage in Germany either focuses on earnings and hourly wages (Caliendo et al, 2017) only, or is based on ex ante simulation studies that rely on assumptions like full compliance or no spillovers (Müller and Steiner, 2013;Brenke and Müller, 2013).…”

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

“…Thus, they campaigned for the introduction of a minimum wage as a social policy, which, they believed, would increase earn-ings and reduce hardship (see, e. g. DGB 2015). Research shows indeed that the introduction of the policy led to higher hourly wages at the lower end of the distribution (Caliendo et al 2017). However, the pay rise for some workers may have come at the cost of less jobs in the economy, which is the topic of this investigation.…”

“…The relatively small employment effects of the German reform may be explained by several adjustment mechanisms. First, research shows a negative effect on hours worked that may have alleviated the effect on employment headcounts (Bossler/Gerner 2019;Caliendo et al 2017). Secondly, survey data suggests substantial non-compliance with the policy (Burauel et al 2017).…”