What Does the German Minimum Wage Do? The Impact of the Introduction of the Statutory Minimum Wage on the Composition of Low- and Minimum-Wage Labour

Dütsch Matthias (), Altun Orkun, Grundmann Luisa and Himmelreicher Ralf ()
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Dütsch Matthias: Secretariat of the German Minimum Wage Commission, c/o Federal Institute for Occupational Safety and Health (BAuA), Berlin, Germany
Altun Orkun: Secretariat of the German Minimum Wage Commission, c/o Federal Institute for Occupational Safety and Health (BAuA), Berlin, Germany
Grundmann Luisa: Secretariat of the German Minimum Wage Commission, c/o Federal Institute for Occupational Safety and Health (BAuA), Berlin, Germany
Himmelreicher Ralf: Secretariat of the German Minimum Wage Commission, c/o Federal Institute for Occupational Safety and Health (BAuA), Berlin, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2023, vol. 243, issue 3-4, 355-396

Abstract: In this article, we examine structural changes in minimum wage and low wage labor following the introduction and first increase of the German minimum wage. Changes in the impact that workers face earning gross hourly wages below the minimum-wage or low-wage thresholds are identified by comparing individual, company and sectoral characteristics based on the Structure of Earnings Surveys (SESs) 2014 and 2018. The SES is a mandatory survey of companies that provides information on wages and working hours for approximately 1 million jobs and nearly 70,000 companies across all industries. Using these rich data, we present the first systematic analysis of how structural changes in individual-, company-, and industry-level determinants affect minimum- and low-wage workers. Using descriptive analysis, we first summarize the changing pattern in jobs, companies, and industries after the introduction of minimum wage. Second, we use random intercept-only models to estimate the explanatory power at the individual, company, and industry levels in 2014 and 2018. Third, we perform logistic and linear regression estimations to assess the changing trends in having a minimum- or low-wage job and the distance between a worker’s actual earnings and the minimum- and low-wage thresholds. We conclude that the minimum wage had an elevator effect on minimum wage labor. However, compositional effects regarding the minimum-wage and low-wage workforce were evident in terms of individual and company factors. There was a selective redistribution of minimum wage employees into slightly higher wage ranges. Furthermore, convergence seems to have occurred predominantly among sectors, as their explanatory power for lower wages declined.

Keywords: low wage; minimum wage; social inequality; wage differentials (search for similar items in EconPapers)
JEL-codes: J31 J83 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:243:y:2023:i:3-4:p:355-396:n:2

DOI: 10.1515/jbnst-2022-0070

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