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Potential effects of a statutory minimum wage on the gender pay gap: A simulation-based study for Germany

Christina Boll (), Hendrik Hüning, Julian Leppin and Johannes Puckelwald

No 163, HWWI Research Papers from Hamburg Institute of International Economics (HWWI)

Abstract: In a simulation-based study with data from the German Socio-Economic Panel Study (SOEP), we analyze the effects of the newly introduced statutory minimum wage of 8.50 Euro per working hour in Germany on the gender wage gap. In our first scenario where we abstain from employment effects, the pay differential is reduced by 2.5 percentage points from 19.6 % to 17.1 %, due to a reduction of the sticky-floor effect at the bottom of the wage distribution. In more realistic scenarios where we incorporate minimum wage effects on labor demand, a further reduction of the pay gap by 0.2 pp (1.2 pp) in case of a monopsonistic (neoclassical) labor market is achieved. However, this comes at the cost of job losses by which women are more strongly affected than men. The magnitude of job losses ranges between 0.2 % and 3.0 % of all employees. It is higher in a neoclassical market setting and positively related to the assumed wage elasticity.

Keywords: minimum wage; labor demand; wage elasticity; gender pay gap; monopsony (search for similar items in EconPapers)
JEL-codes: J16 J23 J31 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cmp, nep-eur, nep-hme and nep-lab
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Working Paper: Potential Effects of Statutory Minimum Wage on the Gender Pay Gap: A Simulation-Based Study for Germany (2015) Downloads
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