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Work Incentives and Labor Supply Effects of the 'Mini-Jobs Reform' in Germany

Viktor Steiner and Katharina Wrohlich ()

No 438, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We analyze the work incentives and labor supply effects of the so-called mini-jobs reform (subsidies of social security contributions to people with low-earnings jobs) introduced in Germany in April 2003. The analysis is based on a structural labor supply model embedded in a detailed tax-benefit microsimulation model for which we use the German Socio-Economic Panel (GSOEP). Our simulation results show that the likely employment effects of the mini-jobs reform will be small. The small positive participation effect is outweighed by a negative hours effect among already employed workers. The fiscal effects of the reform are also likely to be negative. We conclude that the analyzed mini-job reform is not an effective policy to increase employment of people with low earnings capacity.

Keywords: Mini-Job (search for similar items in EconPapers)
JEL-codes: J22 H31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec
Date: 2004
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