Raising the Bar: Minimum Wages and Employers' Hiring Standards

Sebastian Butschek

American Economic Journal: Economic Policy, 2022, vol. 14, issue 2, 91-124

Abstract: Many scholars have studied the employment effects of minimum wages, but little is known about effects on the composition of hires. I investigate whether Germany's minimum wage introduction raised hiring standards, using worker fixed effects as a proxy for worker productivity. For the least productive workers hired, the minimum wage led to a 4 percentile point shift in the productivity distribution. This increase is missed using standard observable measures of worker productivity. The effects are larger with greater pre-reform screening intensity—indicating an employer response. This more selective hiring compensates about two-thirds of higher wage costs for the least productive hires.

JEL-codes: J23 J24 J31 J38 M51 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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DOI: 10.1257/pol.20190534

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