A 22 Percent Increase in the German Minimum Wage: Nothing Crazy!

Mario Bossler (), Lars Chittka () and Thorsten Schank
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Mario Bossler: Institute for Employment Research (IAB), Nuremberg
Lars Chittka: Destatis

No 17575, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We present the first empirical evidence on the 22 percent increase in the German minimum wage, implemented in 2022, raising it from € 9.82 to € 10.45 in July and to € 12 in October. Leveraging the German Earnings Survey, a large and novel data source comprising around 8 million employee-level observations reported by employers each month, we apply a difference-in-difference-in-differences approach to analyze the policy's impact on hourly wages, monthly earnings, employment, and working hours. Our findings reveal significant positive effects on wages, affirming the policy's intended benefits for low-wage workers. Interestingly, we identify a negative effect on working hours, mainly driven by minijobbers. The hours effect results in an implied labor demand elasticity in terms of the employment volume of −0.2 which only partially offsets the monthly wage gains. We neither observe a negative effect on the individual's employment retention nor the regional employment levels.

Keywords: minimum wage; labor market effects; empirical evaluation; Germany (search for similar items in EconPapers)
JEL-codes: J21 J31 J38 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2024-12
New Economics Papers: this item is included in nep-eur, nep-inv and nep-lma
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Working Paper: A 22 percent increase in the German minimum wage: nothing crazy! (2024)
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