Minimum Wage Non-Compliance: The Role of Co-Determination

Laszlo Goerke and Markus Pannenberg

No 10797, CESifo Working Paper Series from CESifo

Abstract: We analyse in what way co-determination affects non-compliance with the German minimum wage, which was introduced in 2015. The Works Constitution Act (WCA), the law regulating co-determination at the plant level, provides works councils with indirect means to ensure compliance with the statutory minimum wage. Based on this legal situation, our theoretical model predicts that non-compliance is less likely in co-determined firms because works councils enhance the enforcement of the law. The economic correlates of co-determination, such as higher productivity and wages, affect non-compliance in opposite directions. The empirical analysis, using data from the German Socio-economic Panel (SOEP) for the years 2016 and 2019, demonstrates that non-compliance occurs less often for employees in co-determined establishments, while there is no impact on the difference between the minimum wage and the amount, which was actually paid. Therefore, co-determination helps to secure the payment of minimum wages.

Keywords: co-determination; labor law; minimum wages; Socio-Economic Panel (SOEP); non- compliance; works councils (search for similar items in EconPapers)
JEL-codes: J30 J53 K31 K42 M54 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Minimum Wage Non-compliance: The Role of Co-determination (2023)
Working Paper: Minimum Wage Non-compliance: The Role of Co-determination (2023)
Working Paper: Minimum Wage Non-compliance: The Role of Co-determination (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10797

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