Minimum Wage Non-compliance: The Role of Co-determination

Laszlo Goerke and Markus Pannenberg ()
Additional contact information
Markus Pannenberg: Bielefeld University of Applied Sciences

No 16621, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We analyse in what way co-determination affects non-compliance with the German minimum wage, which was introduced in 2015. The Works Constitution Act (WCA), the law regulating co-determination at the plant level, provides works councils with indirect means to ensure compliance with the statutory minimum wage. Based on this legal situation, our theoretical model predicts that non-compliance is less likely in co-determined firms because works councils enhance the enforcement of the law. The economic correlates of co-determination, such as higher productivity and wages, affect non-compliance in opposite directions. The empirical analysis, using data from the German Socio-economic Panel (SOEP) for the years 2016 and 2019, demonstrates that non-compliance occurs less often for employees in co-determined establishments, while there is no impact on the difference between the minimum wage and the amount, which was actually paid. Therefore, co-determination helps to secure the payment of minimum wages.

Keywords: co-determination; labour law; minimum wages; Socio-economic Panel (SOEP); non-compliance; works councils (search for similar items in EconPapers)
JEL-codes: J30 J53 K31 K42 M54 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2023-11
New Economics Papers: this item is included in nep-iue and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - substantially revised version published online in: European Journal of Law and Economics , 14 September 2024,

Downloads: (external link)
https://docs.iza.org/dp16621.pdf (application/pdf)

Related works:
Working Paper: Minimum Wage Non-Compliance: The Role of Co-Determination (2023)
Working Paper: Minimum Wage Non-compliance: The Role of Co-determination (2023)
Working Paper: Minimum Wage Non-compliance: The Role of Co-determination (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp16621

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().