Fiscal Effects of Minimum Wages: An Analysis for Germany

Thomas Bauer (), Jochen Kluve (), Sandra Schaffner and Christoph Schmidt

No 3875, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Against the background of the current discussion on the introduction of statutory minimum wages in Germany, this paper analyzes the potential employment and fiscal effects of such a policy. Based on estimated labor demand elasticities obtained from a structural labor demand model, the empirical results imply that the introduction of minimum wages in Germany will be associated with significant employment losses that are concentrated among marginal and low- and semi-skilled full-time workers. Even though minimum wages will lead to increased public revenues from income taxes and social security benefits, they will result in a significant fiscal burden, due to increased expenditures for unemployment benefits and decreased revenues from corporate taxes.

Keywords: fiscal effects; minimum wages; employment; public budget (search for similar items in EconPapers)
JEL-codes: H60 J31 J88 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2008-12
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (6)

Published - published in: German Economic Review, 2009, 10(2), 224-242

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Journal Article: Fiscal Effects of Minimum Wages: An Analysis for Germany (2009)
Journal Article: Fiscal Effects of Minimum Wages: An Analysis for Germany (2009)
Working Paper: Fiscal Effects of Minimum Wages – An Analysis for Germany (2008)
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