Evaluating the Minimum-Wage Exemption of the Long-Term Unemployed in Germany

Matthias Umkehrer and Philipp vom Berge

ILR Review, 2020, vol. 73, issue 5, 1095-1118

Abstract: The authors evaluate the exemption of long-term unemployed job seekers from Germany’s national minimum wage. Using linked survey and administrative micro data, they rely on a regression discontinuity design to identify the effects of the policy by comparing hiring rates, employment stability, and entry wages around the administrative threshold between short-term and long-term unemployment. They find that the exemption is very rarely used and that the minimum wage binds irrespective of past unemployment duration. While the minimum wage led to a relative rise in entry wages for the long-term unemployed compared to the short-term unemployed, the authors do not detect a relative deterioration in their employment prospects.

Keywords: minimum wage; long-term unemployment; minimum wage exemption; regression discontinuity; low-wage sector (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ilrrev:v:73:y:2020:i:5:p:1095-1118

DOI: 10.1177/0019793920907036

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