Minimum Wage

The Short-Run Employment Effects of the German Minimum Wage Reform [Labour Economics 2018;  Earlier versions: IZA DP | SOEPpapers]

with Marco Caliendo, Malte Preuss, Carsten Schröder and Linda Wittbrodt

Abstract: We assess the short-term employment effects of the introduction of a national statutory minimum wage in Germany in 2015. For this purpose, we exploit variation in the regional treatment intensity, assuming that the stronger a minimum wage ‘bites’ into the regional wage distribution, the stronger the regional labour market will be affected. In contrast to previous studies, we construct two regional bite indicators based upon detailed individual wage data from the Structure of Earnings Survey (SES) 2014 and combine it with administrative information on regional employment. Moreover, using the Socio-Economic Panel (SOEP), we are able to affirm the absence of anticipation effects and verify the assumption of a common trend in wages before the reform. In sum, we find only moderate negative effects on overall employment of about 140,000 (0.4%) jobs, which are mainly driven by a sharp decline of marginal employment (‘mini-jobs’), while we do not find pronounced significant effects for regular employment in most specifications. Our results are robust to a variety of sensitivity tests.

The Short-Term Distributional Effects of the German Minimum Wage Reform [2017: IZA DP | SOEPpapers, Submitted]

with Marco Caliendo, Malte Preuss, Carsten Schröder and Linda Wittbrodt

Abstract: This 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 overtime.

Great Expectations: Reservation Wages and the Minimum Wage Reform [R&R German Economic Review; 2018: SOEPpapers]

with Alexey Filatov and Cortnie Shupe

Abstract: This paper is the first causal study using quasi-experimental methods to identify the effect of minimum wages on reservation wages. We combine data from the German Socio-Economic Panel with a natural experiment to identify an increase of 13.8 percent in wage acceptance thresholds among the unemployed at the low end of the distribution. The introduction of a high-impact minimum wage in Germany in 2015 shifted both reservation wages and observed wages in a similar magnitude. Our findings suggest that minimum wages do not necessarily result in higher labor force participation, as the unemployed adjust their reservation wages accordingly.

Economic Aspects of Subjective Attitudes towards the Minimum Wage Reform [Conditionally Accepted Finanzarchiv; 2017: SOEPpapers]

with Carsten Schröder

Abstract: Despite some skepticism among experts about the effects of a minimum wage, there is remarkably widespread public support for such policies. Using representative survey data from 2015 and 2016, we investigate the subjective attitudes driving public support for Germany’s recent minimum wage reform. We find that socio-economic characteristics and political orientations explain a minor part of the variation in attitudes, whereas beliefs that the reform will bring positive redistributional effects and perceptions that it will help people to maintain or improve their overall economic situation (measured by living standards, income, hours worked, and job security) play a major role.