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The effects of Germany's new minimum wage on employment and welfare dependency

Sebastian Schmitz

No 2017/21, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: In January 2015, Germany introduced a federal, statutory minimum wage of 8.50 € per hour. This study evaluates the effects of this policy on regular and marginal employment and on welfare dependency. Based on county-level administrative data, this study uses the difference-in-differences technique, exploiting regional variation in the bite of the minimum wage, i.e. the county-specific share of employees paid less than 8.50 € before the introduction of the minimum wage. The minimum wage had a considerable negative effect on marginal employment. There is also some indication that regular employment was slightly reduced. Concerning welfare dependency, the minimum wage reduced the number of working welfare recipients, with some indication that about one half of them left welfare receipt due to the minimum wage.

Keywords: minimum wages; welfare dependency; labor supply; Germany (search for similar items in EconPapers)
JEL-codes: I38 J22 J30 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-eur and nep-lma
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