Fiscal Effects of Minimum Wages: An Analysis for Germany

Bauer Thomas K., Sandra Schaffner, Kluve Jochen and Christoph Schmidt
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Bauer Thomas K.: RWI,Essen, Germany
Kluve Jochen: RWI,Essen, Germany

German Economic Review, 2009, vol. 10, issue 2, 224-242

Abstract: Against the background of the current discussion of statutory minimum wages in Germany, this paper analyzes the potential employment and fiscal effects of such a policy. Based on estimated labor demand elasticities obtained from a structural labor demand model, the empirical results imply that minimum wages in Germany will be associated with significant employment losses among marginal and low- and semi-skilled full-time workers. Even though minimum wages will lead to increased public revenues from income taxes and social security benefits, they will result in a significant fiscal burden, due to increased unemployment benefits and decreased revenues from corporate taxes.

Keywords: Minimum wages; employment; public budget; fiscal effects (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (23)

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DOI: 10.1111/j.1468-0475.2009.00467.x

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