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The Causal Effects of the Minimum Wage Introduction in Germany: An Overview

Marco Caliendo (), Carsten Schröder () and Linda Wittbrodt

No 12043, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In 2015, Germany introduced a statutory hourly minimum wage that was not only universally binding but also set at a relatively high level. We discuss the short-run effects of this new minimum wage on a wide set of socio-economic outcomes, such as employment and working hours, earnings and wage inequality, dependent and self-employment, as well as reservation wages and satisfaction. We also discuss difficulties in the implementation of the minimum wage and the measurement of its effects related to non-compliance and suitability of data sources. Two years after the minimum wage introduction, the following conclusions can be drawn: while hourly wages increased for low-wage earners, some small negative employment effects are also identifiable. The effects on aspired goals, such as poverty and inequality reduction, have not materialized in the short run. Instead, a tendency to reduce working hours is found, which alleviates the desired positive impact on monthly income. Additionally, the level of non-compliance was substantial in the short run, thus drawing attention to problems when implementing such a wide reaching policy.

Keywords: minimum wage; evaluation; earnings; working hours; employment (search for similar items in EconPapers)
JEL-codes: J22 J23 J31 J38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur and nep-lma
Date: 2018-12
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Forthcoming in: German Economic Review, 2019

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Journal Article: The Causal Effects of the Minimum Wage Introduction in Germany – An Overview (2019) Downloads
Working Paper: The Causal Effects of the Minimum Wage Introduction in Germany - An Overview (2019) Downloads
Working Paper: The Causal Effects of the Minimum Wage Introduction in Germany: An Overview (2018) Downloads
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